Pre-existing dispute defeats Section 9 insolvency admission where invoice, work quality, and default records are genuinely contested.

A Section 9 insolvency application may be rejected where the corporate debtor has raised a genuine pre-existing dispute before the demand notice. The work order and invoices were specifically challenged on quality and performance, excess billing, supporting documents, set-offs, statutory compliance, and reconciliation of accounts, and the default reflected in the Information Utility record was also disputed. Applying Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority was required only to see whether a plausible contention needing further investigation existed. As the dispute was real and not spurious, hypothetical, or illusory, the operational debt was not treated as crystallised for admission purposes.

---

---

Issues: Whether the Section 9 insolvency application was liable to be rejected on account of a pre-existing dispute and a disputed Information Utility record.

Analysis: The work order and invoices were found to have been specifically disputed by the corporate debtor in its reply to the demand notice, including objections as to the quality and performance of work, excess billing, supporting documents, set-offs, statutory compliance, and reconciliation of accounts. The record also showed that the default reported in the Information Utility was disputed. Applying the statutory scheme under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016 and the principle that the adjudicating authority need only see whether a plausible contention requiring further investigation exists, the dispute was held to be real and not spurious, hypothetical, or illusory. In that view, the operational debt was not treated as having crystallised for the purpose of admission of the Section 9 application.

Conclusion: The Section 9 application was not maintainable in the presence of a genuine pre-existing dispute, and rejection of the insolvency petition was upheld.

---