### IBC Section 9 Application Inadmissible Where Pre-Existing Dispute Regarding Genuineness of Debt and Services Exists Summary: The NCLAT affirmed the rejection of a Section 9 petition, holding that a "pre-existing dispute" was established because the Corporate Debtor had questioned the veracity of the claim and requested substantiating evidence of the alleged services prior to the issuance of the statutory demand notice. The Tribunal reiterated that under the *Mobilox* standard, the Adjudicating Authority need only determine the existence of a plausible, non-spurious dispute and is not required to examine the merits or the likelihood of the defense's success. Significant factors included the absence of a written agreement, stereotype invoices lacking customer details, and the proximity of the invoices to a management takeover.

The Appellant (Operational Creditor/OC) claimed it entered into an oral agreement with the Respondent (Corporate Debtor/CD) on 01.04.2021 to introduce customers for a 3% commission.

The OC raised four invoices between 10.01.2022 and 07.02.2022 totaling ₹1,74,26,644.

During this period, the CD’s management changed via a Share Purchase Agreement dated 03.02.2022.

On 06.07.2022, prior to the Section 8 Demand Notice, the CD issued a letter to the OC disputing the debt as unsubstantiated and requesting details of services rendered, which the OC failed to provide.

The OC issued a Demand Notice on 02.08.2022.

The CD replied to the Demand Notice on 18.08.2022, alleging collusion between the OC and the erstwhile management to extract money.

The NCLT rejected the Section 9 petition on 05.12.2023, leading to this appeal.

Whether there existed a "pre-existing dispute" regarding the debt or services rendered before the issuance of the Section 8 Demand Notice.

Whether the Adjudicating Authority is required to examine the merits of the dispute or the likelihood of its success at the stage of admission.

The court primarily applied Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016 (IBC), which mandates the rejection of an application if a notice of dispute has been received by the operational creditor.

It relied on the landmark Supreme Court precedent Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., which established that the Adjudicating Authority only needs to verify a "plausible contention" of a dispute that is not "patently feeble" or "spurious".

It further applied principles from Rajratan Babulal Agarwal v. Solartex India (P) Ltd. and Sabarmati Gas Ltd. v. Shah Alloys Ltd., reinforcing that the court does not need to be satisfied that the defense will succeed, but only that a dispute truly exists in fact prior to the Section 8 notice.

The Appellate Tribunal observed that the CD had raised a dispute regarding the veracity of the claims on 06.07.2022, nearly a month before the OC issued the Demand Notice.

The court noted significant irregularities: the invoices were sequentially numbered despite being days apart, lacked details of specific customers or goods sold, and were raised precisely during the transition of management.

The CD’s communication prior to the Demand Notice sought evidence of discussions and service delivery, which the OC failed to provide.

Applying the Mobilox test, the court reasoned that these facts constitute a "plausible contention" requiring further investigation through a civil suit rather than summary insolvency proceedings.

The court emphasized that the standard for a pre-existing dispute under the IBC is not "preponderance of probability" but the mere existence of a non-illusory dispute.

The appeal was dismissed, and the rejection of the Section 9 application was upheld as the petition was hit by Section 9(5)(ii)(d) of the IBC.

No order as to costs was made.