Pre-existing dispute bars insolvency admission where account reconciliation and liability were genuinely contested before the demand notice.

A Section 9 application under the Insolvency and Bankruptcy Code was held not maintainable because a genuine pre-existing dispute existed between the parties. Disputes over defective supplies, debit notes, account reconciliation, and liability had arisen before the demand notice, and the correspondence, police complaint, and inconsistent ledger entries showed contested accounts requiring reconciliation. The Court applied the settled test that the adjudicating authority need only see whether the dispute is plausible and not spurious, hypothetical, or illusory, and need not decide its merits. The appellate tribunal erred in treating the defence as moonshine and in relying on post-notice events to negate the dispute.

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Issues: Whether the respondent's application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by a pre-existing dispute between the parties, and whether the National Company Law Appellate Tribunal was justified in reversing the dismissal of the application.

Analysis: The dispute as to defective supplies, debit notes, reconciliation of accounts, and liability had arisen much before the demand notice. The correspondence exchanged before the notice, the police complaint, the inconsistent treatment of credits and debits in the parties' ledgers, and the respondent's own shifting demand figures showed that the accounts were contested and required reconciliation. The governing test is whether there exists a plausible pre-existing dispute that is not spurious, hypothetical, or illusory; the adjudicating authority is not required to determine the merits of the dispute or its likelihood of success. On that standard, the operational creditor's application did not merit admission, and the appellate tribunal erred in treating the defence as moonshine and in relying upon post-notice developments to negate the dispute.

Conclusion: The application under Section 9 was not maintainable in view of a pre-existing dispute, and the order of the National Company Law Appellate Tribunal was set aside.

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