Pre-existing dispute over debt veracity bars admissibility of a Section 9 petition when objections are plausible and non-spurious.

A pre-existing dispute over the existence and veracity of the claimed debt, raised by the corporate debtor before issuance of the demand notice, can render an application under insolvency law inadmissible. The tribunal applied the Mobilox plausibility standard-requiring a dispute that is not patently feeble or spurious-and found the debtor's contemporaneous objections about missing customer identities, delivery proof, service substantiation and absence of a contract amounted to a genuine dispute. Applying that principle, the Section 9 petition was held inadmissible and the appeal against the rejection of the petition was dismissed.

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Issues: Whether a pre-existing dispute regarding the existence and veracity of the claimed debt was raised by the corporate debtor prior to the issue of the demand notice so as to render the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 inadmissible.

Analysis: The petition under Section 9 was founded on four invoices and related correspondence. The corporate debtor, prior to receipt of the demand notice, communicated detailed objections disputing the existence of the claimed debt and sought substantiation of the alleged services, identities of customers, proof of delivery and related particulars. The invoices lacked particulars such as customer identities, specifications or delivery proof and no contemporaneous contract was placed on record. The legal standard from Mobilox Innovation Pvt. Ltd. requires only a plausible contention requiring investigation and not satisfaction of merits; subsequent Supreme Court decisions reinforce that a non-spurious pre-existing dispute raised before the demand notice bars admission of a Section 9 petition. Applying that standard to the materials on record yields a genuine dispute that is neither illusory nor patently feeble.

Conclusion: The existence of a pre-existing dispute prior to the demand notice renders the Section 9 application inadmissible and the appeal challenging the NCLT order rejecting the Section 9 petition is dismissed in favour of the respondent.

Ratio Decidendi: Where a corporate debtor raises a genuine dispute about the existence or veracity of the claimed debt prior to issuance of the demand notice, and the dispute is not patently feeble or spurious, the adjudicating authority must reject an application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

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