The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application under IBC | The dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application – R.A.J. Krishna Construction Company Pvt. Ltd. Vs. Newera Solutions Pvt. Ltd. – NCLAT New Delhi
The Hon’ble NCLAT held that:
(i) The existence of dispute and its communication to the Operational Creditor is statutorily provided for in Section 8.
(ii) It is also a well settled proposition of law that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application.
(iii)The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application.
(iv) As an arbitration notice is a formal communication from one party to the other, initiating arbitration proceedings, the arbitration notice evidences a pre-existing dispute. This therefore constitutes sufficient ground for rejection of a Section 9 application.