Appeal Dismissed: Pre-existing Dispute Bars Section 9 Application

The appeal was dismissed, affirming the Adjudicating Authority's decision to reject the Section 9 application due to the existence of a genuine pre-existing dispute. The Operational Creditor was advised to explore other legal remedies.

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Issues Involved:
1. Pre-existing dispute regarding the quality of goods supplied.
2. Validity of the demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC).
3. Admissibility of the Section 9 application for initiation of Corporate Insolvency Resolution Process (CIRP).

Summary:

1. Pre-existing dispute regarding the quality of goods supplied:
The appellant, an Operational Creditor, claimed that the Corporate Debtor had acknowledged the invoices and payments were made on a running account basis. However, the Corporate Debtor raised a dispute regarding the quality of the goods supplied on 23.08.2019, alleging that the fabric had 10% contraction instead of the required 18%, leading to losses. The Adjudicating Authority noted this dispute predated the Section 8 demand notice and was genuine, not fabricated to avoid liability.

2. Validity of the demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC):
The Operational Creditor issued a demand notice under Section 8 on 16.09.2019. The Corporate Debtor replied on 27.09.2019, asserting a pre-existing dispute and referencing a civil suit filed on 06.09.2019. The Adjudicating Authority observed that the civil suit, although initially dismissed, was restored and is still pending, validating the existence of a dispute.

3. Admissibility of the Section 9 application for initiation of Corporate Insolvency Resolution Process (CIRP):
The Adjudicating Authority found that the dispute raised by the Corporate Debtor was genuine and predated the demand notice. Under Section 9(5)(ii)(d) of the IBC, the existence of such a dispute precludes the initiation of CIRP. The application under Section 9 was therefore rejected. The Tribunal upheld this decision, noting that the defence raised was not spurious or illusory, and confirmed that the Operational Creditor could seek other remedies available under the law.

Conclusion:
The appeal was dismissed, affirming the Adjudicating Authority's decision to reject the Section 9 application due to the existence of a genuine pre-existing dispute. The Operational Creditor was advised to explore other legal remedies.

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