Under Section 9 of the IBC, if an operational creditor's claim is subject to a pre-existing bona fide dispute regarding quality or performance, the petition must be dismissed as the insolvency process cannot be substituted for ordinary recovery or arbitration of disputed contractual claims.

ORDER

Orders pronounced recorded vide separate sheets. In the result, this Petition is dismissed.

VC AND PHYSICAL (HYBRID) MODE

ATTENDANCE CUM ORDER SHEET OF THE HEARING HELD ON 21.04.2026 AT 10:30 A.M.

IN THE MATTER OF:

Sri Balaji Associates …Petitioner

AND

Madhcon Projects Ltd …Respondent

I. Case of the Operational Creditor:

1. The present application has been filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) for the initiation of Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) against the Corporate Debtor (hereinafter referred to as “CD/petitioner”), namely M/s. Madhucon Projects Ltd., on account of default in payment of the operational debt owed to M/s. Balaji Associates (hereinafter referred to as “Operational Creditor/OC”).

2. The Operational Creditor and the Corporate Debtor entered into a subcontract agreement dated 12.01.2009, pursuant to which the Operational Creditor raised invoices in accordance with the purchase orders issued by the Corporate Debtor.

3. It is submitted that, an amount of Rs. 83,84,860/- (Rupees Eighty-Three Lakhs Eighty-Four Thousand Eight Hundred and Sixty only), remains due and payable by the Corporate Debtor to the Operational Creditor towards the unpaid invoices arising out of the aforesaid transactions.

4. It is submitted that, upon the Corporate Debtor's failure to discharge its liability, the Operational Creditor initiated proceedings by filing a company petition bearing No. 31/2016 before the Hon’ble High Court of Telangana, which is pending.

5. It is also contended that, the Operational Creditor had subsequently issued a Demand Notice dated 14.12.2017¹A copy of demand notice is at pages 65-72 of the application., under Section 8 of IBC, to the registered office of the Corporate Debtor situated at 70, Jublipura, Khammam-507003, Telangana. The said Demand Notice was duly received by the Corporate Debtor on 28.12.2017.

6. It is the case of the Operational Creditor that, the Corporate Debtor has neither replied to the said Demand Notice nor raised any dispute in relation to the unpaid operational debt within the statutory period of ten (10) days from the date of receipt of the Demand Notice, and has failed to make payment of the outstanding amount to date.

7. It is further submitted that, the Corporate Debtor, subsequent to receipt of the Demand Notice, vide its letter dated 06.02.2018, sought to initiate arbitration proceedings. In this regard, the Operational Creditor alleges that, the said attempt is an afterthought and is made only with a view to creating a false and illusory dispute. Also, the said invocation is not in accordance with the terms of the agreement entered into between the parties.

8. It is contended that, if any genuine dispute existed between the parties, the Corporate Debtor ought to have raised the same prior to issuance of the Demand Notice or initiated appropriate proceedings in accordance with law. The belated attempt to initiate arbitration proceedings clearly demonstrates that the alleged dispute is not bona fide and has been raised only to evade liability under IBC.

II. Case of the Corporate Debtor:

9. The Corporate Debtor submits that, the instant Petition has been filed despite the existence of pre-existing disputes between the parties, and the alleged claim has not crystallized into an admitted operational debt. Further, the