Pre-existing dispute test under insolvency law failed where emails and cheques showed acknowledgment of debt, not a genuine dispute.

A Section 9 insolvency application was held not to be rejected for pre-existing dispute because the material did not show a genuine dispute before the demand notice under the Mobilox test. Emails after the 2021 invoices acknowledged the outstanding liability and sought settlement, and post-dated cheques further indicated admission of debt. The objections first raised in response to the Section 138 notice concerned older unsold inventory and backend discount, which were unrelated to the invoices in question. The Local Commissioner's report was not on record and, in any event, concerned a different inventory dispute. Arbitration material also related to disputes with another entity, not the operational creditor. The rejection of the application was therefore set aside.

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Issues: Whether the operational creditor's Section 9 application was liable to be rejected on the ground of a pre-existing dispute, and whether the material relied upon by the adjudicating authority showed a genuine dispute capable of defeating insolvency proceedings.

Analysis: The decisive question was whether any dispute existed before the demand notice so as to satisfy the Mobilox test. The contemporaneous emails after the 2021 invoices showed acknowledgement of the outstanding liability and a request for settlement, rather than a denial of the debt. The subsequent issuance of post-dated cheques for the balance amount was treated as further acknowledgment of liability. The dispute raised for the first time in the reply to the Section 138 notice concerned alleged claims over older unsold inventory and backend discount, which were found to be unrelated to the invoices forming the subject matter of the Section 9 application. The report of the Local Commissioner was not taken on record and, in any event, related to an older and different inventory dispute. The arbitration proceedings also concerned disputes between the respondent and Apple India, and the operational creditor had been deleted from those proceedings. The material relied upon by the adjudicating authority was therefore held insufficient to establish a pre-existing dispute within the meaning of Section 8 of the Code.

Conclusion: The existence of a pre-existing dispute was not established, and the rejection of the Section 9 application was set aside. The operational creditor was held entitled to admission of the application if the debt was not discharged within the time granted.

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