Pre-existing dispute bars Section 9 insolvency action where the creditor fails to specifically deny the dispute in pleadings.

A Section 9 Insolvency and Bankruptcy Code application is not maintainable where a genuine pre-existing dispute exists before the demand notice or insolvency filing. The commentary notes that a dispute letter dated 21.04.2021 raised objections over excess charges and non-issuance of credit notes, and the operational creditor did not specifically deny receipt of that letter in its pleadings. That omission was treated as an admission, and the record showed a real, not illusory or spurious, dispute. The section 9 admission was therefore unsustainable and the application ought to have been rejected on the ground of pre-existing dispute.

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Issues: Whether the corporate insolvency resolution process application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable despite the existence of a prior dispute raised by the corporate debtor.

Analysis: The dispute letter dated 21.04.2021 preceded the Section 9 application and specifically raised objections regarding excess charges and non-issuance of credit notes. Since the operational creditor did not specifically deny receipt of that letter in its pleadings, the omission was treated as an admission. Applying the settled test that an application under Section 9 must be rejected where a genuine pre-existing dispute exists, the record disclosed a dispute that was neither illusory nor spurious.

Conclusion: The Section 9 admission was unsustainable, and the application ought to have been rejected on the ground of pre-existing dispute.

Final Conclusion: The insolvency admission order was set aside, and the appeal succeeded with consequential refund of the deposited amount to the appellant.

Ratio Decidendi: Where a genuine pre-existing dispute is shown to have arisen before the Section 9 application and the operational creditor does not specifically deny the asserted dispute in its pleadings, the application is not maintainable under the Insolvency and Bankruptcy Code, 2016.

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