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CS Professional · Corporate Restructuring, Valuation and Insolvency · Application for Corporate Insolvency Resolution Process

Ganga Components Ltd, an operational creditor, files a Section 9 application against Yamuna Engines Ltd. Yamuna had, on day six after receiving the demand notice, sent Ganga a notice disputing the debt on quality grounds, and there was no pending suit. Ganga still files, with an affidavit stating no dispute notice was given. What is the correct position under the Code?

The application is to be rejected because the operational creditor received a notice of dispute within the ten-day window. Section 9(5)(ii)(d) mandates rejection in that case. A pending suit is not required, and the seven-day rectification opportunity applies only to incomplete applications.

  1. AThe application must be admitted because no suit was pending before the notice
  2. BThe application must be admitted because the affidavit is on record
  3. CThe application is to be rejected because a notice of dispute has been received by the operational creditorCorrect
  4. DThe application is to be returned for rectification within seven days and then admitted

Explanation

Section 9(5)(ii)(d) requires rejection where notice of dispute has been received by the operational creditor. Section 8(2)(a) lets the debtor raise a dispute, and a pending suit is a separate alternative, not a precondition. The affidavit is untrue, and the seven-day rectification proviso covers only incomplete applications.

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