Existence of a pre-existing contractual dispute regarding debt apportionment precludes initiation of Corporate Insolvency Resolution Process.

The Appellant (Operational Creditor/OC) filed a Section 9 application under the IBC seeking to initiate CIRP against the Respondent (Corporate Debtor/CD) for unpaid rental dues totaling ₹24,34,59,787.

The dues arose from a Registered License Agreement dated 29.03.2019 for premises in Navi Mumbai.

The CD contended that the lease was part of a broader settlement framework involving the "Reliance Group Companies" (RCom, etc.), who owed the CD ₹32.86 Crores.

Under a prior Memorandum of Settlement (MoS) and MoU dated 20.08.2018, it was agreed that 80% of the rent would be paid by RCom to the Appellant to adjust RCom’s debts to the CD, and only 20% would be paid by the CD.

The Adjudicating Authority (NCLT) dismissed the application on 05.09.2024, citing a pre-existing dispute regarding the percentage of debt the CD was liable to pay.

The court applied Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, which requires the absence of a "pre-existing dispute" for the admission of an insolvency petition.

It relied on the principle from *Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.*, which mandates that a dispute must be genuine, real, and exist prior to the receipt of the demand notice.

The court also considered Section 94 of the Bharatiya Sakshya Adhiniyam, 2023 (formerly Section 91 of the Indian Evidence Act) regarding the exclusivity of documentary evidence for contracts.

The court balanced this against the principle that an Adjudicating Authority must not act as a "recovery forum" for complex contractual disputes.

The Court observed that while the 2019 License Agreement was a registered document, its commencement date was backdated to 28.11.2018, aligning with the earlier MoS and MoU.

This indicated that the lease was not an independent transaction but a mechanism to settle a ₹32.86 Crore debt owed to the CD by Reliance Group entities.

The NCLAT reasoned that the dispute was "deeply embedded" because the liability for 80% of the rent was shifted to RCom (now in CIRP), leaving a fundamental disagreement on whether the CD could be held liable for the full amount.

The Court rejected the Appellant's argument that the 20% "admitted" portion should trigger IBC, noting that the CD’s defense—that its larger receivable (₹32.86 Cr) must be settled before eviction or full rent payment—constituted a substantive, non-illusory pre-existing dispute.

Furthermore, the pendency of an eviction suit in a Civil Court evidenced the ongoing friction between the parties.

The Court held that the IBC cannot be invoked where the dispute is so "deeply embedded" in complex multi-party settlement agreements.

The appeal was dismissed, and the Appellant was granted liberty to pursue claims before an appropriate forum.

No costs were awarded.