The compost left after the completion of the mushroom cropping cycle better known as “spent mushroom substrate” (SMS). Disposal of SMS is a matter of great concern particularly in urban agriculture where land area is limited. The use of SMS as a bio fertilizer and bio pesticide is an alternative for this disposal SMS. Therefore, this research has been conducted to find out the reutilization potential of SMS of Pleurotus ostreatus mushroom for subsequent mushroom cultivation and its’ dual utility as a bio-fertilizer and bio-pesticide in leafy vegetable cultivation. Further to find out the most effective micro-organisms in the SMS having antagonistic effect. An in vitro experiment was carried out to study the antagonistic effect of microbes residing in SMS to evaluate its efficacy in managing red leaf spot disease in Mukunuwenna (Alternanthera sessilis). A sample of newly disposed SMS was obtained to isolate SMS associated single bacterial colonies. Each of the unidentified bacterial isolate was tested in vitro to determine its growth suppressive ability against Cercospora leaf pathogen isolated from infected Mukunuwenna leaves. Different bacteria of SMS were isolated in the screening process to test their antagonistic effect individually. The antagonistic activity of SMS associated bacteria against Cercospora was studied via co cultivation method and degree of suppression was determined as percent inhibition of radial growth relative to a control. Ten treatments (10 bacteria samples from SMS), 03 replicates used in CRD design. Inhibition zone of each treatment has measured. Sequence of the two bacterial samples with high inhibition/suppression rate – (Bacteria 07-/T7) were tested by sending samples to Genetech, Sri Lanka. According to the blast results given, bacteria in those two samples were Klebsiella pneumoniae strain OKF08 and Klebsiella pneumoniae strain 211. It can be concluded that SMS is having an antagonistic effect and it can be used to control red leaf spot disease in Mukunuwenna. Therefore, this can be used as biological control method for controlling diseases in leafy vegetable cultivation. The bacteria in SMS which is having this bio control effect is Klebsiella pneumonia.