Pre-existing dispute under the Mobilox test defeats Section 9 insolvency admission where performance complaints and settlement records show a real contest.

Section 9 insolvency admission was treated as impermissible where the record disclosed a plausible pre-existing dispute under the Mobilox test. Contemporaneous letters alleging deficient performance, a subsequent penalty proposal, draft settlement discussions reflected in a memorandum of understanding, a disputed credit note, and rival positions on the work completion certificate were held sufficient to show that the operational debt was genuinely contested before the demand notice. The Adjudicating Authority was also said to lack power in summary Section 9 proceedings to determine the authenticity of the credit note or finally decide the contractual dispute. On that basis, the admission order commencing CIRP was unsustainable and the application ought to have been rejected.

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Issues: Whether the Section 9 insolvency application was liable to be admitted despite the corporate debtor's defence of pre-existing dispute based on contemporaneous performance complaints, settlement discussions, a memorandum of understanding, a disputed credit note, and a work completion certificate.

Analysis: The appeal turned on the Mobilox test under the Insolvency and Bankruptcy Code, 2016, namely whether there existed an operational debt due and payable and whether the record disclosed a real dispute raised before the demand notice. The Tribunal held that the contemporaneous letters from 2019 to 2020 complaining of deficient performance, the subsequent penalty proposal, the draft memorandum of understanding referring to ongoing business disputes, the disputed credit note, and the parties' rival stands on the work completion certificate together showed a plausible pre-existing dispute. It further held that the Adjudicating Authority could not decide the authenticity or fabrication of the credit note or conclusively determine the merits of the contractual controversy in summary proceedings under Section 9.

Conclusion: The Section 9 application ought to have been rejected because a plausible pre-existing dispute existed, and the admission order initiating CIRP was unsustainable.

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