Pre-existing dispute bars Section 9 insolvency admission, and the filing-date threshold test defeated maintainability under the Code.

A Section 9 Insolvency and Bankruptcy Code application is not maintainable where the record shows a genuine pre-existing dispute, including repeated correspondence about defects in work and unresolved rectification demands before payment. The Tribunal treated this dispute as sufficient to bar admission, noting that insolvency cannot be used as a recovery device for retention money. It also held that maintainability must be tested on the date of filing, so the enhanced default threshold under the 24 March 2020 notification applied; as the alleged default was below the revised one crore rupee limit, the application failed on that ground as well.

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Issues: (i) Whether there was a pre-existing dispute between the parties so as to bar admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the application was maintainable in view of the enhanced minimum threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 and the notification dated 24 March 2020.

Issue (i): Whether there was a pre-existing dispute between the parties so as to bar admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The record showed repeated correspondence regarding defects in the work, particularly the unresolved flooring issue, and the corporate debtor had consistently sought rectification before releasing the balance amount. The Tribunal treated this material as sufficient to show that the dispute was not illusory and that the operational creditor was attempting to use the insolvency process as a means of recovery of retention money.

Conclusion: The issue was decided against the applicant and in favour of the respondent, as a pre-existing dispute was held to exist.

Issue (ii): Whether the application was maintainable in view of the enhanced minimum threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 and the notification dated 24 March 2020.

Analysis: The Tribunal applied the view that the relevant date for testing maintainability against the revised threshold is the date of filing of the application. Since the application was filed after the notification enhancing the default threshold to one crore rupees and the alleged default was far below that amount, the statutory threshold was treated as not satisfied.

Conclusion: The issue was decided against the applicant and in favour of the respondent, and the application was held not maintainable on this ground as well.

Final Conclusion: The insolvency application did not merit admission because the Tribunal found both a pre-existing dispute and failure to satisfy the applicable threshold requirement under the Code.

Ratio Decidendi: An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is not maintainable where a genuine pre-existing dispute exists, and the maintainability threshold is determined with reference to the law applicable on the date of filing of the application.

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