Akhilesh Kulshrestha vs M/S Saab India Technologies Pvt Ltd

For Appellant: Mr. Virendra Ganda, Sr. Adv. with Mr. Vishal Ganda, Ms. Akanksha Mathur, Ms. Tanya H and Mr. Anand Singh Sengar, Advocates

For Respondent: Ms. Vatsala Kumari, Mr. Shankh Sengupta, Mr. Sujoy Sur, Advocates

Judgment (Date: 25.08.2022)

(Per: Dr. Alok Srivastava)

This appeal has been preferred by the Appellant under Section

61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter called

'IBC') aggrieved by the Order dated 29.1.2020 passed by the

National Company Law Tribunal New Delhi (Adjudicating Authority)

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 1 of 12 in CP(IB) No. 1972 (ND) of 2019 (hereinafter called 'Impugned

Order') whereby the Adjudicating Authority dismissed the

insolvency petition.

2. Stated in brief, the case of the Appellant is that he was

appointed as a Whole Time Director (in short 'WTD') in the corporate

debtor-company vide a Board Resolution dated 28.9.2015 which

was ratified in the Annual General Meeting (AGM) of the corporate

debtor on 29.9.2015. Subsequently the corporate debtor filed form

MR-1 along with the Board Resolution dated 28.9.2015 on the portal

of Ministry of Corporate Affairs stating the fact and terms of

appointment of the Appellant as a WTD of the corporate debtor. The

Appellant has further stated that before his appointment as a WTD

of the corporate debtor, he was appointed as Chief Financial Officer

(in short 'CFO') of the corporate debtor vide appointment letter dated

10.3.2014, and later as an Additional Director of the corporate

debtor in March, 2015. The appellant has further stated that on the

reason of redundancy of the position of CFO, he was served a notice

for termination of his employment vide letter dated 1.3.2019 and a

formal letter of termination was issued by the corporate debtor on

20.3.2019, which was in regard to his employment as CFO of the

corporate debtor.

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 2 of 12

3. The Appellant has further stated that after termination of his

employment as CFO, he continued to function as a WTD of the

corporate debtor, and in apprehension that he might be removed

from the position of WTD, he filed a Writ Petition bearing WP(C) No.

4407/2019 in the Hon'ble High Court of Delhi, which was dismissed

as being pre-mature as the counsel for respondent No. 4 (corporate

debtor) admitted before the High Court that the Appellant was a

Director as on date of hearing, i.e. 26.4.2019 and no process had

been started for removing him from the position of WTD and

whenever it may be done in the future, it would be done in

accordance with the provisions of the Companies Act. The

appellant has, therefore, claimed that he has not disputed his

termination as CFO of the corporate debtor and the aforementioned

writ petition was dismissed as being pre-mature and not on the

basis of any dispute between the Appellant and Respondent. The

Appellant has claimed that the Adjudicating Authority has,

therefore, erred in presuming the action through WP No. WP(C)

4407/2019 was in relation to some dispute prior to delivery of

demand notice, and rejected the section 9 application on such basis.

4. We heard the arguments advanced by learned counsels of

both the parties and perused the record.

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 3 of 12

5. The learned counsel for appellant has submitted that he was

appointed as CFO of the corporate debtor on 10.3.2014 and later as

Additional Director of the company in March, 2015, and also as a

WTD after approval in the AGM on 29.9.2015. She has claimed that

in such a situation, the appellant started to function as WTD from

29.9.2015 in addition to already working as CFO. She has further

submitted that the appointment letter dated March 10, 2014

(attached at pp. 138-146 of the appeal paperbook) relates to

Appellant's appointment as CFO and the letter of termination dated

March 20, 2019 (attached at pg. 149 of the appeal paperbook)

relates to termination of his appointment only as CFO of the

corporate debtor-company, and there is no mention in the

termination letter of the Appellant's work as a WTD. She has further

argued that the Writ Petition bearing WP (C) No. 4407/2019 was

filed by the appellant apprehending termination of his services as

WTD, and when both the parties (the respondent and the appellant

in this appeal) appeared before the Hon'ble Delhi High Court on

26.4.2019, the counsel of respondent no. 4 (respondent in this

appeal) admitted that the 'appellant was a Director as on date and

continues to be so and he shall be removed from the post of Director

after following the due process under the Companies Act, if in future

it decides so', and on this basis the petition was found to be pre-

mature and dismissed accordingly.

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 4 of 12

6. The Learned Counsel for appellant has further submitted that

the Appellant had started working as WTD from 29.9.2015 as is

evident in Form MR-1 (attached at pp. 75-77 of the appeal

paperbook) filed by the corporate debtor on the portal of the Ministry

of Corporate Affairs with his total remuneration fixed as

Rs.86,49,600 p.a which is mentioned in Form MR-1. She has

further submitted that vide letter dated 2.7.2018, an annual salary

increment for the year 2018-19 was given to the Appellant, with his

revised salary fixed at Rs. 9,50,000 p.m. for the period 2018-19. It

is her contention that the appellant was paid his due salary and

termination benefits for his work as CFO till March 2019 whereas

he continued to work as WTD till 20.5.2019, when he was removed

as WTD through a board resolution in an Extraordinary General

Meeting of the corporate debtor. She has argued that the appellant

was not paid any remuneration of working as WTD for the period

1.4.2019 till 20.5.2019, and a total amount of Rs. 30,01,999 is due

for payment to him which is in default as per particulars in page 90

of the appeal paperbook, vol. I.

7. The learned counsel for appellant has referred to clauses 48

and 49 of the Articles of Association of the corporate debtor (at page

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 5 of 12 227 of the appeal paperbook, vol.II) to claim that a WTD is entitled

to remuneration for his services.

8. The learned counsel for Respondent has explained the context

of the case, and argued that the appellant was first appointed as

CFO, and later appointed as Additional Director and WTD, which

was on the basis of his employment as CFO of the corporate debtor.

He has further argued that though the Articles of Association (in

clauses 48 and 49) of the company provide for payment of

remuneration, the Appellant has not shown any record in support

of his claim that he was to be provided extra remuneration for his

work as WTD. He has submitted that the Appellant's services as

WTD could be terminated on 20.5.2019 as due procedure had to be

followed as provided in the Companies Act for his removal, but all

his dues for services rendered as a WTD has also been paid by the

corporate debtor.

9. In rejoinder, the learned counsel for appellant has referred to

the salary slip (attached at page 102 of the appeal paperbook, vol.I)

to emphasize that the appellant was given his full and final payment

alongwith gratuity, leave encashment, notice pay and other benefits

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 6 of 12 in March, 2019 only after termination of his services as CFO,

whereas no payment has been made for the period 1.4.2019 till

20.5.2019 when the Appellant continued to work as WTD. She has

clarified that the emoluments of the WTD are included in the form

MR-1 which was filed by the corporate debtor after Appellant's

appointment as WTD, and the calculation for the debt due for

payment is given in the calculation sheet (attached on page 113 of

the appeal paperbook, vol.I.)

10. It is noted that the appellant was employed as CFO of the

corporate debtor vide appointment letter dated 10.3.2014 (attached

at pp.138-146 of the appeal paperbook, Vol.I). A perusal of this

letter of appointment makes it clear that it does not include any

duties to be rendered by the Appellant as WTD. Hence this letter of

appointment pertains to appellant's employment as CFO of the

corporate debtor. Later the appellant was appointed as WTD of the

company vide a resolution of the Board of Directors in meeting held

on 28.9.2015, which was subsequently ratified by the AGM on

29.9.2015. The effective date of appointment as WTD i.e. 29.9.2015

is contained in form MR-1 (attached at pp. 75-77 of the appeal

paperbook, vol.1).

Company Appeal (AT) (Insolvency) No. 353 of 2020

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11. We also note that the appellant's services as CFO were

terminated vide letter dated 20.3.2019 (attached at pg. 101 of the

appeal paperbook, vol.I) and his termination payout was calculated

and paid to him in March 2019. The details of the full and final

payment after termination as CFO is given in pay slip for March,

2019 (attached at pg. 102 of appeal paperbook, Vol.I). The appellant

continued to provide services as WTD to the corporate debtor, a fact

admitted by the corporate debtor before Hon'ble High Court of Delhi,

and he continued to work as a WTD till 20.5.2019, whereafter his

services as WTD were terminated consequent to a resolution of the

Board of Directors vide minutes of the Extraordinary General Body

meeting dated 20.5.2019 (attached at page 194 of the appeal

paperbook, vol. I). Thus, it becomes quite clear that the Appellant

continued to work as WTD till 20.5.2019 even after his termination

as CFO, whereas he received payment till the month of March, 2019

which was for his work as CFO of the company.

12. In the order in WP (C) 4407/2019, the Hon'ble High Court of

Delhi has held as follows:-

"W.P.(C) 4407/2019 & CM APPL. 19626/2019 & 19628/2019

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 8 of 12 Vide the present petition, the petitioner seeks restraining the respondent no. 2 from accepting or admitting Form DIR-12 or any other forms, that might be filed with the respondent no. 2, by the respondent no. 4-Company, pursuant to the illegal termination of the petitioner, who has been a whole time director of the respondent no.4-Company.

Counsel for respondent no. 4, who appears on advance notice, admitted that the petitioner is a Director as on date and there is no process started for removing him as a whole time Director from respondent no.4-company. He further submits that if in future, the respondent no.4 decides that the petitioner shall be removed from the post of Director, the due process under the Companies act shall be taken. Since the petition is at pre- mature stage, the same is not maintainable and dismissed accordingly.

Pending applications are also stand disposed of."

13. It is clear from reading of the order of the Hon'ble Delhi High

Court (supra) that there is no reference to any dispute between the

parties and the writ petition is dismissed as being at pre-mature

stage. Further, the order records the statement of the Counsel for

respondent 4-company that the petitioner is a Director as on

26.4.2019, and he shall be removed only after adopting the due

process under the Companies Act from the post of WTD.

14. We follow the dictum laid down by Hon'ble Supreme Court in

the matter of Mobilox Innovations Pvt. Ltd. v. Kirusa Software

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 9 of 12 Private Limited [Civil Appeal No. 9405 of 2017, (2018) 1 SCC

353] that the pre-existing dispute must be a real one, and not a

spurious, hypothetical or illusory one. The relevant extract from

this judgment is reproduced below:-

"40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."

15. From the record of the EGM dated 20.5.2019, we note that

the Appellant continued to function as a WTD and was entitled to a

remuneration as stipulated in the clauses 48 and 49 of the Articles

of Association, and the figure of remuneration of the Appellant as

Company Appeal (AT) (Insolvency) No. 353 of 2020

Page 10 of 12 WTD can be seen from the Form MR-1 filed by the corporate debtor

wherein a remuneration of Rs.86,49,600 p.a. is shown as

Appellant's remuneration (attached at pp.75-77 of appeal

paperbook, vol. I). Further an increment was given to the Appellant

as CFO and WTD vide letter dated 2.7.2018 (attached at pg. 81 of

appeal paperbook, vol.I).

16. We, thus, reach the conclusion that the Adjudicating

Authority has erroneously inferred the existence of a dispute merely

because a Writ Petition bearing WP (C) 4407/2019 was filed by the

appellant, even though there is no such reference or mention is

made in the order dismissing the writ petition and no inference of

dispute can be drawn from what is stated in the said order. We also

find that the Appellant was appointed as a WTD of the corporate

debtor on 29.9.2015 while he was already working as CFO, and

continued as WTD till 20.5.2019. Since he was paid his total

emoluments and termination benefits till 31.3.2019 for his work as

CFO, he is entitled to receive payment for the period 1.4.2019 till

20.5.2019 for his work as WTD, which is an operational debt in

default and payable by the corporate debtor.

Company Appeal (AT) (Insolvency) No. 353 of 2020

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17. On the basis of aforementioned detailed discussion, we are of

the view that the Adjudicating Authority has erroneously dismissed

Appellant's application under section 9. We, therefore, set aside

the Impugned Order and order admission of the section 9

application. The case is sent to the Adjudicating Authority for

passing necessary order after the admission of section 9 application.

The appeal is accordingly disposed of with these directions.

18. There is no order as to costs.

(Justice M. Satyanarayana Murthy) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) New Delhi 25th August, 2022

/aks/

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