Captain S.P. Singh vs Himalayan Heli Services Pvt. Ltd

[Arising out of Order dated 17.09.2020 passed by the Adjudicating Authority/National Company Law Tribunal, New Delhi Bench, Court No. IV in CP (IB) No. 699/ND/2018]

IN THE MATTER OF: Captain S.P. Singh S/O Late Shri Sham Singh R/O 166, Army Enclave Dheena, P.O. Jallandhar Cantt., Punjab-144005 ...Appellant

Versus

Himalayan Heli Services Pvt. Ltd. Through its Director 203, Allied Chamber 9, Local Shopping Centre Lal, Bhahadur Shastri Marg, Madangir, New Delhi- 110062 ...Respondent

Present: For Appellant : Mr. Soayib Qureshi & Ms. Dilsheen Kaur, Advocates

For Respondent : Mr. Vivek Malik, Advocate.

(23.08.2022)

NARESH SALECHA, MEMBER (TECHNICAL)

Preamble:

The Present Appeal is filed against the Impugned Order dated

17th September, 2020 passed in IB No. 699/ND/2018 by the National

Company Law Tribunal, Delhi Bench, Court No. IV (Adjudicating Authority)

whereby the Adjudicating Authority has dismissed the petition of the

Appellant- Captain S.P. Singh i.e. Operational Creditor (in short OC), filed

Company Appeal (AT) (Ins.) No. 955 of 2020 1 of 15 under Section 9 of Insolvency & Bankruptcy Code, 2016 (in short IBC) read

with Rule 6 of IBC to initiate CIRP Proceedings against the Respondent M/s

Himalayan Heli Services Pvt. Ltd., which is the Corporate Debtor (in short

CD).

Brief Facts:

2. Appellant- Captain S.P. Singh is a certified Pilot and was engaged by

Respondent to fly helicopter for BSF. Appellant was offered employment by

the Respondent, a private limited company, engaged in the business of

Aviation Consultancy and Helicopter Services. On 27.11.2012 the

appointment letter was issued to the Appellant. The appointment letter is

annexed as A-4 in the 'Memo of Appeal'. The said appointment letter contains

the terms and conditions, mainly consolidated salary of Rs. 2,50,000/- per

month with mediclaim policy for Rs. 2.50 Lakhs. The Appellant has claimed

that in addition to salary, the Appellant is also entitled for benefits like leave

encashment, reimbursement of mess bill, telephone bills, travel bill, journey

expenditure etc. It is further mentioned that he has worked sincerely during

the period 2012-2014. The Appellant also states that the Respondent, vide

letter dated 22nd March, 2014 'letter of offer for the post of Pilot' has altered

the terms of his employment and salary was revised to Rs. 1,70,000/- per

month with mediclaim policy of Rs. 1.5 Lakh. This letter also mentions about

payment of extra amount of Rs. 15,000/- per day if the Appellant is required

to fly more than the day mentioned i.e. 15th or 16th consecutive days

(depending upon the days) in a given month. The Appellant further stated

Company Appeal (AT) (Ins.) No. 955 of 2020 2 of 15 that the Respondent, vide email dated 09.06.2018, again revised his salary to

Rs. 2.5 Lakh per month which was in response of his email dated 12.06.2014

asking hike of salary to Rs. 3 lakh per month along with leave encashment.

The Appellant has mentioned that it is evident from the reply i.e. e-mail dated

12.06.2014 (annexure A-7) that his salary was raised to Rs. 2,50,000/- per

month and given leave encashment of 25 days @15,000/- per day against his

claim of salary of Rs. 3 lakh per month.

3. The MoU to provide helicopter services dated 27th November, 2012,

between the BSF & the Respondent had expired on 27th November, 2014. The

Appellant claims to have continuously provide services to the Respondent

even after expiry of MoU between, the BSF & the Respondent. However, the

services of the Appellant came to an end vide termination letter dated

30.06.2015. After giving two months' notice. The Appellant claimed his

outstanding dues of Rs. 1,66,268/- against monthly salary of notice period

and Rs. 1,16,691/- against imprest amount, Rs. 855000/- against leave

encashment for year 2014 and Rs. 1,80,000/- against leave encashment for

the year 2015. Thus, total amount of Rs. 13,17,959/- claimed but due to

non-response by Respondent, legal notice was issued on 3rd August, 2017

(Annexure A-13) and subsequently demand notice was issued dated

16th March, 2018 (Annexure A-14) Respondent denied the statement of claims

of Appellant (Annexure A-16).

Company Appeal (AT) (Ins.) No. 955 of 2020 3 of 15

4. The Appellant filed the petition with the Adjudicating Authority on

7th May, 2019 but the Learned Adjudicating Authority, vide Impugned Order

dated 17th September, 2020, dismissed the petition on ground of pre-existing

disputes and hence the Appellant has filed this Appeal.

Appellant's Submissions:

5. The Learned Counsel for Appellant has briefly apprised all the facts of

the employment, contractual history and outstanding debt amount of

Rs. 13,17,959/- along with various correspondence between him and the

Respondent. It is submitted that there was no dispute whatsoever about the

quality of service of the Appellant but the Adjudicating Authority has erred in

dismissing the petition of the Appellant. It is also stated that the Adjudicating

Authority did not consider the leave encashment entitlement of the Appellant

and the termination letter was only an afterthought which has been done

despite his clean record. It is argued that the termination of service was due

to the termination of contract of Respondent with BSF and not due to poor

quality of services of Appellant.

6. Learned Counsel has accepted the receipt of the emails dated 22nd

March, 2014 and up to 7th May, 2016 which were referred to by the

Adjudicating Authority as a pre-existing dispute but stated that only due to

ill health, the Appellant could not fly. Learned Counsel has stated that the

e-mail of the Respondent dated 12.06.2014 clearly mentions about the

Appellants entitlement for leave encashment. Learned Counsel has assailed

Company Appeal (AT) (Ins.) No. 955 of 2020 4 of 15 the Impugned Order dated 17.09.2020 citing the case of Hon'ble Supreme

Court in Mobilox Innovation Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. (2018

1 SCC 253) on the issue that the dispute need to exist prior to the issuance of

demand notice.

7. Learned Counsel has cited the cases of Pedersen Consultants India

Pvt. Ltd. vs. Nitesh Estates Limited 2019 SCC OnLine NCLAT 422 and

Ahluwalia Contracts (India) Limited Raheja Developers Limited 2019

SCC OnLine NCLAT 942 to buttress the point that the dispute needs to exist

prior to issuance of demand notice and not otherwise. Learned Counsel has

also alleged that the Respondents correspondence is merely to frustrate

legitimate claims and to deny the debt dues and has requested to set aside

the Impugned Order passed by the Adjudicating Authority.

Respondent's Submissions:

8. Learned Counsel for Respondent has stated that the present appeal is

completely devoid of any ground and not maintainable. Learned Counsel has

alleged that the Appellant has not come with clean hands and is not entitled

to any relief. He assailed the demand notice dated 16.03.2018 and the

petition filed under Section 9 of IBC. Learned Counsel has further stated that

the Respondent has always disputed the frivolous claims of the Appellant. In

fact, the Respondent used to request the Appellant to reconcile various claims

and statement on several occasions. However, since the Appellant allegedly

himself owed money to the Respondent hence, the Appellant never came

Company Appeal (AT) (Ins.) No. 955 of 2020 5 of 15 forward. Learned Counsel has mentioned that the basic requirement of

petition under Section 9 of IBC is debt due and default thereafter. He

mentioned that there was no debt due as such the Appellant cannot be

classified as Operational Creditor under Section 9 of the IBC.

9. Learned Counsel for Respondent has stated that the demand notice was

issued on 16.03.2018 and the Appellant had raised all his claims subsequent

to his termination from employment on 30th August, 2015 (Annexure A-10).

The Appellant for the first time, raised claims on 7th May, 2016 and the

Respondent replied to it immediately on 10th May, 2016.

10. As regards the Appellant's claim regarding leave encashment, Learned

Counsel has stated that there was no stipulation of alleged leave encashment

clause in the employment letter. The Respondent has also dismissed the claim

of Appellant wherein it was alleged that the Respondent had paid leave

encashment for the year 2013 at the rate of Rs. 15,000/- (per day) for

unavailed leave. The Respondent has categorically stated that no such

payment was even made.

11. The Respondent also refuted the claims of the Appellant, being informed

about leave regulation of company, according to which 30 days of earned

leave and 12 days of Casual leave were admissible. Learned Counsel for the

Respondent also mentioned that this averment was not there in Insolvency

Petition and has been raised for the first time in the present appeal. Various

Company Appeal (AT) (Ins.) No. 955 of 2020 6 of 15 claims of the Appellant of Rs. 1,66,268/- of salary dues Rs. 66,000/- for ferry

flight payment and Rs. 1,16,691/- towards imprest amount were not even

claimed in Appellant's own email dated 10.05.2017 and these claims were

raised only after termination. As regards Appellants claim regarding no

deficiency of services, the Learned Counsel has mentioned that the Appellant

did not disclose that he was not flying for a period of two years prior to joining.

According to Learned Counsel, Appellant did not follow the instructions of

Respondent and also taken many unsanctioned leaves. Learned Counsel also

brought out that Appellant did not vacate additional accommodation taken

which caused problem to fellow pilots who were employed as substitute for

the Appellant due to Appellant's non availability for flying. Learned Counsel

also highlighted the Appellant unprofessional attitude while referring to the

e-mail dated 18.03.2014 and 22.03.2014 of the Respondent. It is also

claimed that Appellant was declared medically unfit for flying via medical

certificate dated 07.03.2014 for four weeks.

12. Learned Counsel stated that demand notice dated 16.03.2018 was

replied refuting claims of Appellant. Learned Counsel also mentioned that

there was no default as defined under Section 3(12) of IBC and therefore,

appellant do not fall within the definition of Operational Creditor in terms of

Section 5(20) of IBC. Finally, Learned Counsel requested that the present

appeal may be dismissed.

Company Appeal (AT) (Ins.) No. 955 of 2020 7 of 15 Analysis

13. We have heard Learned Counsel for the Parties and perused the record

made available. We have also gone through the relevant provisions of IBC and

the precedents. The following issues are required to be addressed to come to

the final conclusions about the case.

a. Whether any debt was due and not paid by Respondent to

Appellant .

b. Whether any pre-existing disputes were pending before issue of

demand notice.

Issue No. a)- Whether any debt was due and not paid by Respondent

to the Appellant.

Appellant has claimed total outstanding amount of

Rs. 13,17,959/- as debt due which was not paid and therefore, default

had occurred.

The debt has been defined in Section 3 (11) of IBC which is as

hereunder:-

"3(11). "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;"

Since, the term claim is mentioned in the above definition of debt,

we need to refer to definition of claim under Section 3(6) of IBC which

as under:-

"3(6). "claim" means-

Company Appeal (AT) (Ins.) No. 955 of 2020 8 of 15

(a) A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;

(b) Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;"

The other relevant definition of IBC with reference to this Appeal are

'Operational Debt' and 'Operational Creditor' which are as under:-

"operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the [payment] of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;

"operational creditors" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;"

Similarly, default is also define under Section 3(12) of IBC which as

under:-

"3(12). "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;

14. The Appellant has claimed an outstanding amount of Rs. 1,66,268/-

against monthly salary of notice period and Rs. 1,16,691/- against imprest

Company Appeal (AT) (Ins.) No. 955 of 2020 9 of 15 amount, Rs. 8,55,000/- against leave encashment for year 2014 and Rs.

1,80,000/- against leave encashment for year 2015. Thus, total dues claimed

by the Appellant against respondent was Rs. 13,17,959/-. We have perused

the appointment letters dated 27.12.2012 & 22.03.2014 by which the

Appellant was offered the post of pilot by the Respondent. The appointment

letter dated 27.12.2012 mentions the emolument of Rs. 2,50,000/- per month

and provision of mediclaim policy for the Appellant for Rs. 2.50 Lakh along

with insurance. This appointment letter also includes the clauses related to

place of posting, flying duties, duty and responsibility, medical examination

and termination. Thus, there are no mention of leave encashment and

imprest account as claimed by the Appellant.

15. We have also perused the appointment letter dated 22.03.2014 which

has mentioned a consolidated fee of Rs. 1,70,000/- per month for flying 15 or

16 consecutive days (depending on the days in a given month). This letter

also mentions that in addition the Appellant will be entitled to extra amount

of Rs. 15000/- per day in case the Appellant fly more than 15/16 days in a

month. The said appointment letter further mentions about medical expenses

limit of Rs. 1200/- per month on reimbursement basis on production of actual

bills. This offer letter further include clause like place of posting, duties and

responsibilities, medical examination, termination. We do not find any

provisions or clause which entitle the Appellant for claims like leave

encashment and imprest account.

Company Appeal (AT) (Ins.) No. 955 of 2020 10 of 15

16. We have also taken note of the Respondent email dated 09.06.2014

wherein the Appellant wages were revised as per previous wage structure of

Rs. 2,50,000/- per month. We note that this communication of Respondent

also does not mention various types of emoluments claimed by Appellant

including leave encashment.

17. We have further perused the subsequent correspondence between

Appellant and Respondent and noted that for the first time on 12.06.2014 the

Appellant had asked for the salary hike to Rs. 3 Lakh per month and

encashment of leave and the same was replied by the Respondent for not

agreeing to hike in salary. However, the Respondent vide his reply to email

dated 12.06.2014 gave a counter offer for leave encashment for 25 days at the

rate of Rs. 15,000/- per day subject to not availing any leave along with the

then existing emolument structure. Appellant further claimed on his own for

leave encashment of 57 days in a year rejecting the counter offer of

Respondent contained in email dated 12.06.2014 and as such there was no

consensus or agreement on leave encashment at all. On perusal of records

available with us, we do not find any letter of appointment or communication

which establishes the claims made by the Appellant for leave encashment and

imprest account, etc.

18. Admittedly, all other dues have been settled between the parties. We

also note that Respondent has made a counter claims of Rs. 88,000/-

regarding accommodation dispute and Rs. 2,25,000/- for excess leave availed.

Company Appeal (AT) (Ins.) No. 955 of 2020 11 of 15 On this issue, we find that the Adjudicating Authority is right in rejecting the

claims of appellant for any debt due which has been defaulted.

Issue No. b):- Whether any pre-existing disputes were pending before

issue of demand notice.

The Respondent has mentioned that there were pre-existing disputes

prior to issue of demand notice by Appellant on 16.03.2018. The Appellant,

however, has denied any such pre-existing disputes.

We need to see the definition of dispute as given in Section 5 (6) of IBC

which is as under:-

"5(6) "dispute" includes a suit or arbitration proceedings relating to-

(a) The existence of the amount of debt;

(b) The quality of goods or service; or

(c) The breach of a representation or warranty;"

(d) The Hon'ble Supreme Court in Mobilox Innovations Private Limited

vs. KirusaSortware Private Limited has settled the law regarding pre-

existing dispute very clearly. The relevant portion is as under:-

"The adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

(i) Whether there is an "operational debt" as defined exceeding Rs. 1 Lakh ? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or

Company Appeal (AT) (Ins.) No. 955 of 2020 12 of 15 arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

If any one of the aforesaid conditions is lacking, the application would have to be rejected.

Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act."

19. We find that the Appellant has claimed the amount for leave

encashment, imprest account etc. which were not forming part of

appointment letter as discussed earlier. We also note that such claims were

denied by Respondent.

20. We have perused the demand notice in Form-3 for Rs. 13,17,959/-

dated 16.3.2018. Hence, it is prudent to refer to the correspondence between

the parties regarding any pre-existing dispute with reference to the amount of

debt or quality of services as elaborated in Section 5(6) of IBC (Supra).

21. We have already discussed earlier about the claims made by the

Appellant and denial of such claims by the Respondent. We have also seen

that counter offer of Respondent and correspondence between the parties for

the same which were not agreed mutually on common grounds. We observe

that all such correspondence were prior to demand notice dated 16.03.2018.

Company Appeal (AT) (Ins.) No. 955 of 2020 13 of 15

22. We also note the pre-existing disputes regarding quality of service from

communication between respondent and the Appellant. From email dated

10.05.2016 of the Respondent to the Appellant, we observe that there were

disputes. The email mentions "The main dispute is due to the sudden

levying of leave encashment dues which as per our record are neither

valid nor justified". This clearly demonstrate existence of pre-existing

dispute prior to issue of demand notice on 16.03.2018. Similarly, we observe

from the record regarding non availability of the Appellant for flying due to

medical fitness. We have also taken note of Respondent email dated

30.06.2015 regarding accommodation issues for which subsequently, counter

claim of Rs. 88,000/- was made by Respondent against Appellant. It is

significant to observe that vide Respondent email dated 22.03.2014, Appellant

was reminded to become responsible. The relevant line of the said emails

reads as "Your becoming unreachable is not professional therefore is not

acceptable".

23. We observe from the Impugned Order where the Learned Adjudicating

Authority came to conclusion that Respondent's claims regarding pre-existing

dispute prior to issue of demand notice dated 16.03.2018 did exist and

accordingly, the petition of application under Section 9 was rejected. We do

not find any error in the Impugned Order.

Company Appeal (AT) (Ins.) No. 955 of 2020 14 of 15

24. Based on above discussions, we are of considered view that there is no

ground for any interference with Impugned Order dated 17.09.2020 passed

by the Adjudicating Authority.

Thus, we do not find any merit in the appeal and have the same is

dismissed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

[Mr. Naresh Salecha] Member (Technical) Sim

Company Appeal (AT) (Ins.) No. 955 of 2020 15 of 15