Pre-existing wage dispute defeats Section 9 insolvency claim where entitlement and quantum remained genuinely contested.
A pre-existing dispute over workmen's wage and statutory dues barred admission of the Section 9 insolvency application, because the dispute had already been raised before the labour forum and remained pending before the Industrial Court and HC. The record showed substantial payments by the corporate debtor, a challenge to the balance claim based on reconciliation and wage-data mismatch, and a consistent stand that the remaining liability was uncrystallised. In Section 9 proceedings, the Adjudicating Authority need only see whether a plausible dispute exists and cannot decide the merits of the defence. As the materials disclosed a real dispute on entitlement and quantum, the insolvency process could not be used as a recovery tool, and rejection of the application was upheld.
Issues: Whether a genuine pre-existing dispute existed regarding the workmen's wage and statutory dues claims so as to justify rejection of the Section 9 application, and whether the insolvency process could be invoked for recovery of a disputed wage claim.
Analysis: The dispute regarding wages and statutory dues was raised before the specialised labour forum well before the demand notice and remained pending before the Industrial Court and the High Court. The record showed that the Corporate Debtor had made substantial payments, had disputed the balance amount on the ground of reconciliation and mismatch in wage data, and had taken a consistent stand that the remaining claim was not crystallised. In Section 9 proceedings, the Adjudicating Authority is required only to see whether a plausible dispute exists and is not to adjudicate the truth of the defence. The materials placed before it disclosed a real dispute concerning both the quantum of dues and entitlement, and the insolvency mechanism could not be used as a substitute for recovery of a disputed claim.
Conclusion: The rejection of the Section 9 application was upheld and the appeal failed.
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