Pre-existing dispute bars section 9 insolvency admission where coal quality objections are real and properly supported.

A section 9 IBC application was held not admissible because a pre-existing dispute over the quality of coal supplied barred admission of the operational creditor's claim. The corporate debtor had raised the quality objection before the demand notice and supported it with email and lab-test material, showing a real and plausible dispute rather than a feeble defence. The adjudicating authority was required only to examine whether such a dispute existed, not to decide its merits. On that basis, the insolvency initiation request failed.

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Issues: Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be rejected for the existence of a pre-existing dispute regarding the quality of coal supplied and the consequent claim for operational debt.

Analysis: The record showed supply of coal under the purchase order, part-payment by the corporate debtor, and a subsequent objection based on inferior quality and GCV below the contractual threshold. The corporate debtor had raised the quality dispute in its reply to the demand notice and supported it with email and lab-test material. Applying the settled test that the adjudicating authority must see only whether there is a plausible contention and not a patently feeble or spurious defence, the dispute was found to be real and supported by contemporaneous material. In such circumstances, the application could not be admitted under section 9.

Conclusion: The existence of a pre-existing dispute was established and the application was not admissible in favour of the operational creditor.

Final Conclusion: The insolvency initiation request failed because the dispute between the parties was held to be genuine and sufficient to bar admission under the Code.

Ratio Decidendi: An application under section 9 must be rejected where, before demand notice, there exists a real and plausible dispute supported by material, and the adjudicating authority is not required to assess the merits of that dispute.

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