Pre-existing dispute with documentary indicia can bar an operational creditor's insolvency petition; application may be rejected.

Where documentary material (audit confirmations, audited balance sheet entries and ledger statements) demonstrated a dispute existing prior to or contemporaneous with the demand notice, the Section 9 application by an operational creditor should be rejected because the record discloses a pre-existing dispute or a plausible defence that is not patently feeble and requires adjudication outside the insolvency process; accordingly the insolvency petition was dismissed for lack of admissibility under the statutory tests governing operational debt and notice of dispute.

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Issues: Whether the Section 9 application filed by the operational creditor should be rejected on the ground that a pre-existing dispute and plausible defence existed between the parties.

Analysis: The record contained an earlier written communication and replies evidencing a dispute prior to or contemporaneous with the demand notice, including an audit confirmation and balance sheet entries showing amounts allegedly payable by the operational creditor to the corporate debtor. The adjudicating authority noted these materials and a prior proceeding in which overlapping invoices had been rejected. Relevant statutory tests require rejection of a Section 9 application if a notice of dispute exists or there is a plausible contention that requires further investigation (as reflected in Section 8 and Section 9(5) of the Insolvency and Bankruptcy Code, 2016 and the controlling authorities on operational debt). The materials on record raised a defence that was not patently feeble or illusory and included documentary indicia (audit confirmation, audited balance sheet entries and ledger statements) sufficient to constitute a pre-existing dispute or a plausible contention requiring adjudication outside the insolvency process.

Conclusion: The Section 9 application was rightly rejected because a pre-existing dispute and a plausible defence were shown on the record, warranting dismissal of the insolvency petition.

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