Bona fide pre-existing dispute under the Insolvency and Bankruptcy Code requires fresh merits review when not decided below.

A section 9 Insolvency and Bankruptcy Code application had been rejected below on the basis of an alleged absence of a valid board resolution, the existence of an arbitration clause, and a possible pre-existing dispute. The Supreme Court noted that the question whether there was a bona fide pre-existing dispute had not been substantively decided by the forums below, and that issue had to be examined first on the facts. It therefore set aside the impugned orders and remitted the application for fresh consideration on its own merits after hearing the parties.

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Issues: Whether the rejection of the section 9 application under the Insolvency and Bankruptcy Code, 2016 and the dismissal of the appeal required interference, and whether the matter should be reconsidered afresh on merits.

Analysis: The application had been rejected by the adjudicating authority and the appellate tribunal on grounds relating to the alleged absence of a valid board resolution and the existence of an arbitration clause. The record also indicated an issue regarding a possible pre-existing dispute between the parties, but that aspect had not been adjudicated on merits by the tribunals below. In these circumstances, the question whether there was a bona fide pre-existing dispute was one for the tribunals to examine in the first instance.

Conclusion: The appeal was allowed, the impugned orders were set aside, and the section 9 application was remitted for fresh consideration on its own merits after hearing the parties.

Ratio Decidendi: Where the core objection goes to a disputed factual issue such as the existence of a bona fide pre-existing dispute, and that issue has not been substantively decided by the forums below, the matter should be reconsidered afresh on merits.

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