Ashit Dhirajlal Doshi vs Bijay Murmuria

Ashit Dhirajlal Doshi ...Appellant

Versus

Bijay Murmuria-Liquidator of Doshion Pvt. Ltd. ...Respondent

With

Company Appeal (AT) (Insolvency) No. 1052 of 2024

IN THE MATTER OF:

Rakshit Dhirajlal Doshi ...Appellant

Versus

Bijay Murmuria-Liquidator of Doshion Pvt. Ltd. ...Respondent

Present: For Appellant : Ms. Vaishnavi, Advocate.

For Respondents : Mr. Gaurav H. Sethi, Mr. Deeptanshu Chandra, Mr. Rahul Pawar, Advocates.

ORDER

(Hybrid Mode)

04.07.2024: Heard learned counsel for the parties. These two Appeals

have been filed by the Suspended Directors of the Corporate Debtor

challenging order of the Adjudicating Authority by which the Adjudicating

Cont'd.../ 2

Authority has upheld the order of the Liquidator rejecting the claim filed by

the Appellant. Both the appeals arise out of similar set of facts and issues

and it shall be suffice to refer to facts in Company Appeal (AT) (Insolvency)

No. 1051 of 2024 for deciding both the appeals.

2. CIRP against the Corporate Debtor commenced on 31.08.2021. The

Adjudicating Authority directed for liquidation. Before the Liquidator,

Appellants filed the claim in Form E claiming their salary during the CIRP

period, which according to the Appellants was in lieu of the work done as

Executive Director. The Liquidator rejected their claim and communicated

the same through email dated 11.12.2023. Aggrieved by the said order, I.A.

No.144 of 2024 was filed by the Appellant - Akshit Dhirajlal Doshi, which

came to be rejected by the impugned order.

3. Learned counsel for the Appellants challenging the order submit that

consequent to the initiation of CIRP is only to suspend the functions of the

Directors as part of the Board of Directors, however, they are entitled to

function as Directors after initiation of CIRP and receive emoluments which

they were receiving prior to CIRP period. It is submitted that the Appellants

have rendered their services and assisted the IRP/RP in carrying out the

functions of the Corporate Debtor, hence, they are entitled for salary.

4. Learned counsel for the Respondent refuting the submission of the

Appellants submits that the Appellants being Ex-Director were not entitled

for any salary after commencement of CIRP and the IRP/RP at no point of

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024 3

time directed the Appellants to carry any work. It is submitted that the

Appellants' claim was submitted before the Liquidator and there was no

material to indicate any direction of IRP/RP to carry on work. It is submitted

that under Section 19, Ex-Director are obliged to render cooperation to

IRP/RP and it was statutory obligation of the Appellants and they cannot

claim emoluments.

5. Learned counsel for the parties have relied on judgments of this

Appellate Tribunal as well as Hon'ble Supreme Court in support of their

submissions.

6. We have considered the submissions of learned counsel for the parties

and perused the record.

7. Present is a case where claim was filed by the Appellant in Form E

before the Liquidator. The copy of the claim form has been brought on the

record as Annexure A-6 which is form for proof of claim by workman or

employee. When we look into the claim, it is clear that the claim is from the

date 01.09.2021 i.e. from the next date of CIRP commencement to 15.07.2022

and under Column 10 document relied were appointment letter, ledger and

PF TRF Form. The appointment letter which is relied by the Appellant was

appointment letter issued prior to commencement of CIRP in favour of the

Appellant. In the entire claim form there is no assertion or any material to

prove appointment after commencement of CIRP or order issued by IRP/RP

to permit them to work on emoluments.

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024 4

8. After commencement of CIRP, the management of the Corporate Debtor

is vested in IRP/RP and it is IRP/RP who has to take steps to engage the

employees and workmen who will work after commencement of CIRP. The

Appellant may be right in his submission that in event Ex-Directors are

permitted to work, they may claim their emoluments but in the present case

the Appellants at no point of time were appointed on payment of emoluments

by the IRP or RP, which is clear from their claim form. The mere fact that

they were getting salaries prior to commencement of CIRP is no ground to

claim same salary after commencement to CIRP.

9. We, thus are of the view that no error has been made by the Liquidator

in rejecting claim filed by the Appellant for payment of salary after

commencement of the CIRP.

10. Now coming to the judgment which has been relied by the learned

counsel for the Appellant i.e. judgment of this Tribunal in "Company Appeal

(AT) (Ins.) No. 290 of 2017, Subasri Realty Private Limited vs. Mr. N.

Subramanian & Anr." where this Tribunal has made following observations:

"In this regard we may clarify that after appointment of the Resolution Professional and declaration of moratorium, the Board of Director stands suspended, but that does not amount to suspension of Managing Director or any of the Director or officer or employee of the Corporate Debtor. To ensure that the Corporate Debtor remains on going concern, all the Director/ employees are required to function and to assist the Resolution Professional who manages the affairs of the Corporate Debtor during the period of

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024 5

moratorium. If one or other officer or employee had the power to sign a cheque on behalf of the Corporate Debtor prior to the order of moratorium, such power does not stand suspended on suspension of the Board of Directors nor can be taken away by the Resolution Professional. If, the person empowered to sign cheque refuse to function on the direction of the Resolution Professional or misuse the power, in such case it is always open to the Resolution Professional to take away such power after notice to the person concerned.

Post the case for hearing on 12th March, 2018. Case may be disposed of on the next date."

11. The above observation was not in case where payment to suspended

directors was claimed after commencement of the CIRP and such issue which

was not under consideration before this Tribunal in the said case, hence, the

judgment in the above case does not render any assistance to the Appellant.

12. The next judgment relied by learned counsel for the Appellant is

judgment of Hon'ble Supreme Court in "(2022) 7 SCC 540, Sunil Kumar

Jain and Others vs. Sundaresh Bhatt and Others". The Hon'ble Supreme

Court in the said judgment has clearly held that those workmen who were

directed to actually worked during CIRP were entitled for wages. Reliance has

been placed on Para 18 of the judgment, which is as follows:

"18. It cannot be disputed that as per Section 5(13) IBC, "insolvency resolution process costs" shall include any costs incurred by the resolution c professional in running the business of the corporate debtor as a going

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024 6

concern. It is also true that Section 20 IBC mandates that the interim resolution professional/resolution professional is to manage the operations of the corporate debtor as a going concern and in case during the CIRP the corporate debtor was a going concern, the wages/salaries of such workmen/ employees who actually worked, shall be included in the CIRP costs and in case of liquidation of the corporate debtor, dues towards the wages and salaries of such workmen/employees who actually worked when the corporate debtor was a going concern during the CIRP, being a part of the CIRP costs are entitled to have the first priority and they have to be paid in full first as per Section 53(1)(a) IBC."

13. There is no dispute to the proposition laid down in the above case. The

issue remains as to whether those workmen who has actually worked when

the corporate debtor was a going concern during the CIRP are entitled for

salary. As observed above, in the present case there is no material to indicate

that the Appellants - Ex-Directors were directed to work on payment of

emoluments during the CIRP, hence, the said judgment cannot render any

help in the present case.

14. Learned counsel for the Appellant has lastly referred to letter dated

18.10.2021, where it appears that it has referred to various works carried out

by the Appellant. Be that as it may. The said letter was issued by the

Appellant himself and cannot be treated to be any order of the IRP/RP

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024 7

directing the Appellant to work on payment of emoluments. Thus, the said

letter also does not render any aid to the Appellant.

15. We, thus, are of the view that no error has been committed by the

Adjudicating Authority in rejecting the IA filed by the Appellant. There is no

merit in the Appeal. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No.1051 of 2024 & 1052 of 2024