Pre-existing dispute bars section 9 insolvency action where the defence is real and plausible, not illusory.

An application under section 9 of the Insolvency and Bankruptcy Code was found within limitation because Article 137 of the Limitation Act applied and time ran from the date of default, with the last payment falling within three years of the demand notice and filing. The Tribunal also applied the settled test that an operational creditor's claim must fail where there is a real and plausible pre-existing dispute, not a spurious defence. An admitted dispute over the debit note and a pending civil suit showed a pre-existing dispute, and the advance-payment nature of the claim did not justify commencement of CIRP. The section 9 application was therefore held not maintainable.

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Issues: (i) Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation; (ii) Whether the existence of a pre-existing dispute and the nature of the claimed advance payment rendered the section 9 application not maintainable.

Issue (i): Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The limitation question was examined with reference to the date of last payment, the demand notice, and the filing of the application. The relevant principle applied was that applications under the Code are governed by Article 137 of the Limitation Act, 1963, and limitation runs from the date of default. On the material considered, the last payment was made within three years of the demand notice and the filing of the application, so limitation was not a bar.

Conclusion: The application was held to be within limitation.

Issue (ii): Whether the existence of a pre-existing dispute and the nature of the claimed advance payment rendered the section 9 application not maintainable.

Analysis: The record showed an admitted dispute between the parties, including controversy regarding the debit note and a pending civil suit. The governing test applied was that an operational creditor's application must be rejected where there is a real and plausible dispute and not a spurious or illusory defence. The claim also arose from advance payment for supply of goods, and the Tribunal treated the dispute as sufficient to prevent initiation of CIRP.

Conclusion: The section 9 application was held to be not maintainable because a pre-existing dispute existed.

Final Conclusion: The appeal did not result in commencement of insolvency proceedings against the respondent, and the impugned dismissal of the section 9 application was effectively sustained.

Ratio Decidendi: An application under section 9 of the Insolvency and Bankruptcy Code, 2016 must be rejected where a real pre-existing dispute exists between the parties, and limitation under Article 137 of the Limitation Act, 1963 is computed from the date of default or last relevant payment.

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