Pre-existing contractual dispute bars Section 9 insolvency where payment is plausibly contingent on performance.

A plausible pre-existing contractual dispute can prevent a claim from qualifying as an operational debt under Section 9 of the Insolvency and Bankruptcy Code. On the plain terms of the endorsement agreement, the Tribunal found it arguable that the second instalment depended on actual utilisation of the second day of services, rather than becoming unconditionally due on a fixed date. Because the payment obligation was not clear-cut and the dispute was neither fanciful nor sham, insolvency proceedings were not the proper forum to resolve the contractual construction issue. Any remedy, if available, lay in a civil claim for damages, not in a Section 9 insolvency petition.

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Issues: Whether the unpaid second instalment under the endorsement agreement gave rise to an operational debt actionable under Section 9 of the Insolvency and Bankruptcy Code, or whether the dispute as to the contractual obligation showed a genuine pre-existing dispute and, at best, a claim for damages.

Analysis: The contractual arrangement required the artist to remain available for not more than two days during the contractual term, with payment structured in two instalments. The core controversy was whether the balance amount became unconditionally payable on the stated date, or whether it remained linked to actual utilisation of the second day of services. The Tribunal applied the settled principle that, for a Section 9 proceeding, debt and default must be clear and must not be clouded by a genuine pre-existing dispute. It examined the agreement on its plain terms and held that the wording supported the corporate debtor's construction as a plausible one. The clauses relating to payment, together with the clauses dealing with default consequences, did not conclusively show that the second instalment was payable irrespective of utilisation of the second day. The dispute was therefore not fanciful or sham, and the matter turned on contractual construction more appropriately left to a civil court. In that setting, the appellant's remedy, if any, was confined to a claim for damages and not an operational debt.

Conclusion: The existence of a plausible pre-existing dispute barred invocation of Section 9 of the Insolvency and Bankruptcy Code, and the appeal failed.

Final Conclusion: The Adjudicating Authority's dismissal of the insolvency petition was affirmed, as the controversy did not disclose an undisputed operational debt amenable to CIRP.

Ratio Decidendi: Where the plain reading of a contract leaves a plausible dispute as to whether payment is unconditional or contingent on performance, the claim does not mature into an operational debt for Section 9 purposes and insolvency proceedings cannot be used to resolve such contractual disputes.

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