The Supreme Court, in Mobilox Innovations Private Limited v. Kirusa Software Private Limited [hereinafter referred to as “Mobilox Case”], clarified that a “dispute” must rest on substantial grounds which would not include a roving enquiry. It was held that the Adjudicating Authority is not to conduct a detailed analysis of the merits but must ascertain whether there is a plausible contention that merits further examination and that the dispute is not merely a feeble argument or an assertion of fact unsubstantiated by evidence.
It was also observed that a mere assertion unsupported by evidence is insufficient to prevent admission. However, a plausible contention supported by material facts and proof would suffice. Additionally, the Hon’ble Supreme Court relied upon the Australian case of Spencer Construction Pty Ltd v. G&M Aldrige Pty Ltd, wherein the Hon’ble Australian High Court elaborated on the aspect of “genuine dispute” stating that it requires that the dispute must be bona fide, truly exist in fact and the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived. This ensures the insolvency process is not misused as a coercive recovery tool.