Operational debt and default under insolvency law were upheld despite unsupported pre-existing dispute objections.

An application under section 9 of the Insolvency and Bankruptcy Code was found maintainable because the operational creditor established an operational debt and default, while the corporate debtor's allegations of non-receipt of goods, sub-standard quality, collusion, and notice defects were not supported by material evidence. The correspondence, including cheques and a letter indicating willingness to pay through RTGS, showed an admitted business relationship and acknowledgment of liability. On that basis, the pre-existing dispute objection failed, the petition was held complete, and CIRP was directed to commence with moratorium and appointment of the Interim Resolution Professional.

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Issues: Whether the operational creditor established an operational debt and default, and whether the alleged pre-existing disputes or objections as to maintainability barred admission of the petition under section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The dispute raised by the corporate debtor regarding non-receipt of goods, sub-standard quality, and alleged collusion was not substantiated by material evidence. The correspondence relied upon by the corporate debtor did not dislodge the admitted business relationship, the issuance of cheques, or the acknowledgement of liability, including the letter expressing willingness to make payment through RTGS. The objections regarding the addressee of notices and alleged defects in the petition were also not sufficient to defeat the claim when the petition was otherwise supported by the required affidavit and materials showing default. The Authority found that the petition was complete in all respects and that the corporate debtor had defaulted in payment of the operational debt.

Conclusion: The section 9 petition was maintainable and was admitted, with commencement of CIRP, moratorium, appointment of the Interim Resolution Professional, and other consequential directions.

Ratio Decidendi: A section 9 application is admissible where the operational debt and default are shown and alleged pre-existing disputes are unproved or merely asserted without supporting material, especially when the debtor's conduct evidences acknowledgment of liability.

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