Pre-existing dispute and running account limitation under the Insolvency Code barred admission of the Section 9 application.

A Section 9 application under the Insolvency and Bankruptcy Code, 2016 was treated as filed within limitation because the debt arose from a running account and the filing date fell within three years from the last payment. However, the record also showed email correspondence and a reply to the demand notice disputing liability and reconciliation of accounts before the Section 8 notice. That pre-existing dispute was sufficient to bar admission of the Section 9 application, so the corporate insolvency resolution process order was set aside.

---

---

Issues: (i) Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was within limitation; (ii) Whether a pre-existing dispute existed between the parties before issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was within limitation.

Analysis: The last payment was made on 19.10.2016 and the application was filed on 14.08.2019. On this basis, the period of three years was not exhausted. The debt arose from a running account and the application was filed within the prescribed limitation period.

Conclusion: The application was within limitation.

Issue (ii): Whether a pre-existing dispute existed between the parties before issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The record showed email correspondence and a reply to the demand notice disputing the liability and asserting that nothing was payable. The dispute regarding accounting entries and reconciliation existed before the demand notice. A dispute of this nature, arising prior to the notice, is sufficient to attract the bar against admission of a Section 9 application.

Conclusion: A pre-existing dispute existed, so admission of the Section 9 application was not justified.

Final Conclusion: The order admitting the corporate debtor into corporate insolvency resolution process was set aside and the appeal was allowed.

Ratio Decidendi: Where a credible dispute over liability and account reconciliation exists before the demand notice under Section 8, the operational creditor's application under Section 9 cannot be admitted.

---