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The NCLAT set aside the impugned order admitting the Section 9 application and initiating CIRP against the Corporate Debtor, finding a bona fide pre-existing dispute regarding the debt's existence and the quality of work performed. The Tribunal held that extensive communications and partial contract termination evidence genuine disputes predating the Section 8 notice, which the Adjudicating Authority erroneously overlooked. The Corporate Debtor's defense was not frivolous and warranted further inquiry, rendering the Operational Creditor's application premature under the established legal test for admitting Section 9 petitions. Consequently, the Adjudicating Authority's admission of the application was held to be a fundamental error, and the appeal was allowed with all consequential orders set aside.
The NCLAT set aside the impugned order admitting the Section 9 application and initiating CIRP against the Corporate Debtor, finding a bona fide pre-existing dispute regarding the debt's existence and the quality of work performed. The Tribunal held that extensive communications and partial contract termination evidence genuine disputes predating the Section 8 notice, which the Adjudicating Authority erroneously overlooked. The Corporate Debtor's defense was not frivolous and warranted further inquiry, rendering the Operational Creditor's application premature under the established legal test for admitting Section 9 petitions. Consequently, the Adjudicating Authority's admission of the application was held to be a fundamental error, and the appeal was allowed with all consequential orders set aside.
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