Pre-existing dispute bars Section 9 insolvency proceedings where the debt claim was already contested before demand notice.

A Section 9 insolvency application cannot be used where a genuine pre-existing dispute existed before the demand notice. Prior correspondence, legal notice, a criminal complaint, and objections to the supply claim and the appellant's authority to deal in the branded products showed that the dispute had already surfaced. Applying the settled principle under the Insolvency and Bankruptcy Code, the Tribunal held that summary insolvency proceedings are not the forum for resolving contested claims. The application was therefore rightly rejected, and the dismissal of the insolvency petition was sustained.

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Issues: Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was not maintainable on account of a pre-existing dispute between the parties prior to issuance of the demand notice.

Analysis: The dispute arose from a supply arrangement and the record disclosed prior correspondence, legal notice, a criminal complaint, and objections questioning the very claim and the underlying licence/authority of the appellant to deal in the branded products. The existence of these materials showed that the dispute between the parties had surfaced before the demand notice. Applying the settled principle that, in proceedings under Section 9, the existence of a dispute must be genuine and pre-existing, the Tribunal held that once such prior dispute is shown, summary insolvency proceedings cannot be used to adjudicate contested claims.

Conclusion: The application under Section 9 was rightly rejected because a pre-existing dispute existed before the demand notice.

Final Conclusion: The appeal failed and the dismissal of the insolvency application was sustained.

Ratio Decidendi: Where a genuine dispute concerning the debt exists prior to the demand notice, an operational creditor cannot invoke Section 9 of the Insolvency and Bankruptcy Code, 2016 to trigger insolvency proceedings.

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