Gourav Kishor Shinde vs Uday Yashwant Nayak & Ors

[Arising out of Order dated 10.10.2019 passed by National Company Law Tribunal, Mumbai Bench in CP 4538 (IB)/MB/2018]

IN THE MATTER OF: Before NCLT Before NCLAT

Gourav Kishor Shinde .... Appellant GAT no.612613, Post. Chipri - 416 101, Tal - Shirol, Dist - Kolhapur, Maharashtra, India

Versus

1. Uday Yashwant Nayak, Operational Creditor/ Respondent No.1 Flat No. A-1404, Applicant Exotica, Casa Rio Gold, Kalyan - Shil Road, Palava, Dombivali - 421204

2. Godawat Consumer Corporate Debtor/ Respondent No.2 Product LLP, Respondent Through Mr. Anurag Jain, Plot No.438, A/P - Chipri, Via - Jaysinghpur, Kolhapur, MH 416101

For Appellant: Shri Sourabh Kalia, Ms. Syheena Taqui and Ms. Bina Gupta, Advocates

For Respondents: Ms. Udit Singh, Advocate (R-1) Ms. Sowmya Saikumar, Advocate (R-2) CA Vishal Jain, Representative of RP 2

JUDGEMENT

(16th March, 2020) A.I.S. Cheema, J. :

1. This Appeal has been filed by the Appellant against Impugned Order

dated 10th October, 2019 passed by the Adjudicating Authority (National

Company Law Tribunal, Mumbai Bench in CP 4538 (IB)/MB/2018. The

Application under Section 9 of Insolvency and Bankruptcy Code, 2016 (IBC

- in short) was filed by Respondent No.1 - Uday Yashwant Nayak -

Operational Creditor (hereafter referred as 'Operational Creditor') against

Respondent No.2 - Godawat Consumer Product LLP (hereafter referred as

'Corporate Debtor'). The Corporate Debtor is now arrayed through the IRP.

2. In short, the claim of the Operational Creditor before the

Adjudicating Authority was that he was appointed Head of Sales and

Marketing - Rice Division (Grade - National Sales Head B-1) on a pay scale

of Rs.36,00,000/- per annum, split up of which is with the Appointment

Order dated 11th April, 2016 (Annexure A-2 - Page 36 at Page 41). The

Operational Creditor claimed to have resigned vide e-mail dated 11th

March, 2017 (Annexure A-5 - Page 44). The resignation was accepted vide

reply e-mail from the Corporate Debtor dated 4th March, 2017 (Annexure

A-6 - Page 46). The Operational Creditor claimed before the Adjudicating

Authority that in the Reply e-mail dated 14th March, 2017, the Company

had put conditions which were not possible to perform. The Appellant

Company Appeal (AT) (Ins) No.1107 of 2019 3

worked out his dues as under:-

"

Gross salary for March 2017, ₹ 2,50,000/- dues on 10.04.2017

Gross Salary for April 2017 due 1,25,000/- on 10.05.2017

Annual performance Incentive 6,00,000/- due on 10.05.2017

Liquidated Damages, 3 months 70,000/- basic pay @ 1,00,000/- or part thereof. (Part= Ratio of 14 days short served to 60 days notice period (25 days short served less 11 days PL)

Total amount in default 9,05,000/-

"

3. The Operational Creditor claimed that he had sent various reminders

and then a Notice under Section 8 was sent on 12th November, 2018

(Annexure A-10 - Page 59). It was claimed that the Corporate Debtor sent

Reply dated 23rd November, 2018 (Annexure A-11 - Page 63). The

Operational Creditor claimed that the Reply was invalid. It was claimed

that the Corporate Debtor raised flimsy and spurious grounds in the Reply.

4. Before the Adjudicating Authority, the Corporate Debtor claimed that

the Notice period was required to be of two months and the Operational

Creditor served only 1 month 5 days period and that Corporate Debtor was

not liable to make payments as claimed. The Corporate Debtor claimed

that because of the Operational Creditor, it had rather suffered losses.

Company Appeal (AT) (Ins) No.1107 of 2019 4

5. The Adjudicating Authority heard the parties and on 10th October,

2019 passed following Order:-

"Heard the argument of the Ld. Counsel for the parties.

The petition is admitted. Detailed Judgement later on."

6. Later on, it appears that reasoned Order was passed, copy of which

has been filed at Page - 30 of the Appeal. The Appeal claims that such

Order came to be uploaded only on 18th October, 2019 when the IRP

(Interim Resolution Professional) came to be appointed and who started

taking actions thereafter. It is stated that before this, the Corporate Debtor

on 14th October, 2019 authorised the Appellant who is employed as

"Service (Manager Operations)" with the Corporate Debtor. Copy of the

Resolution adopted by the Corporate Debtor is filed with the Appeal at

Page - 115.

7. This Appeal has been filed raising various grounds to show that there

was already pre-existing dispute which according to the Appellant, was

brought to the notice of the Adjudicating Authority but the Adjudicating

Authority did not discuss anything and simply admitted the Application of

individual employee putting into jeopardy the profit making Corporate

Debtor whose turnover in the earlier year was of Rs.90 Crores. The Appeal

claims that the Operational Creditor was in a Senior Post and within a year

of joining the service, the resignation was tendered and as per the

requirements of the Corporate Debtor, certain formalities were required to

Company Appeal (AT) (Ins) No.1107 of 2019 5

be completed which were not complied and there were disputes and the

Operational Creditor who had tendered the resignation on 11th March,

2017 walked away before completing 60 days period as required by the

service conditions by sending e-mail dated 15th April, 2017 (Annexure A-7

- Page 47).

8. We have heard Counsel for both sides and perused the Appeal and

its Reply.

9. One objection raised to the Appeal by the Operational Creditor, is

that the Appellant has no authority to file the Appeal as the Appellant is

only an employee of the Corporate Debtor. The Appellant has pointed out

that the authority was given to him by the Corporate Debtor. The authority

is questioned by the Operational Creditor on the basis that it was a

decision taken on 14th October, 2019 by Corporate Debtor and the

Application under Section 9 was admitted on 10th October, 2019. The

Order reproduced by us above, shows that on 10th October, 2019, a brief

Order was passed without detailing the Judgement. The reasoned

Judgement appears to have come only subsequently which the Appellant

claims was of 18th October, 2019 which, before us, is not disputed as such

by the Operational Creditor. In our view, admission of an Application under

Section 7, 9 or 10 entails serious trigger of the provisions of IBC and it is

improper for the Adjudicating Authority to pass such cryptic Order like

"The Petition is admitted. Detailed judgement later on." It is another thing

if the complete Judgement is dictated in open Court which can be

Company Appeal (AT) (Ins) No.1107 of 2019 6

transcribed and signed later but not to dictate the Judgement itself and

admit the Petition like one under Section 9 proceeding under the IBC,

should not have been done. On 10.10.2019 when the two line Order was

passed, no IRP had been appointed and no directions were issued. Learned

Counsel for the Corporate Debtor referred to Section 5(12) to submit that

where Interim Resolution Professional (IRP) is not yet appointed while

admitting the Application, the commencement date gets scheduled to the

date on which Interim Resolution Professional is appointed. This is yet

another reason why we have just observed that it is quite inappropriate to

pass cryptic Order as was done in this matter and then a subsequent

Judgement giving reasons is passed. We, however, do not enter into this

technicality as in our view even if on day one, even if IRP was to have been

appointed, the suspended Board of Directors would have a right to

challenge the Order of admission in the capacity of Directors. They

naturally have capacity to give power of authority to employee like

Appellant to represent them in an Appeal.

10. If the Impugned Order is perused, as far as reasons are concerned

for admitting the Application, it is brief as can be seen from Para - 12 of

the Impugned Order which reads as under:-

"12. On perusal of the appointment Letter of the Applicant along with the Salary Structure; the Resignation relating Email; the Reply Email and the Email reminders issued by the Applicant seeking his dues; it appears that the Corporate Debtor has spurious defence to show an existing dispute, which

Company Appeal (AT) (Ins) No.1107 of 2019 7

is an attempt to deny an employee his legitimate dues."

Thus without discussing the defence, it was branded as spurious.

11. The Adjudicating Authority then referred to Judgement in the matter

of "Mobilox Innovations Private Limited v. Kirusa Software Private

Limited" reported as (2018) 1 SCC 353, reproduced a paragraph from

therein and observed that there was no dispute in existence before receipt

of admission Notice.

12. The Counsel for the Appellant has pointed out that the Operational

Creditor was in a senior position working as employee of the Corporate

Debtor and was given handsome pay which was for a purpose. The

Appointment Order (Annexure A-2) shows that if the Operational Creditor

wanted to resign, he had to give a notice of 60 days and in default a sum

equivalent to 3 months' basic pay was to be given by the employee, by way

of liquidated damages which the Company could appropriate against dues

payable to the employee. The learned Counsel states that the Corporate

Debtor had on 11th January, 2017 sent e-mail (Annexure A-4 - Page 43) to

the Operational Creditor and others which is in the nature of "standard

operating procedure" relating to Left/Resigned/Terminated Employees'

Full and Final Settlement. It was informed that one of the requirements

was that for Sales employees, it is mandatory to obtain field NOC from all

Superstockists, Dealer distributors towards no payable/receivable

transactions. It is stated that the standard operating procedure was

Company Appeal (AT) (Ins) No.1107 of 2019 8

required to be issued so as to have security with regard to making full and

final payments to employees when they Leave, Resign or are Terminated.

The argument is that the Operational Creditor was aware of such operating

procedure which was sent to senior officials like Appellant for

implementation. Record shows, that when the Operational Creditor sent e-

mail at 8.21 P.M. tendering his resignation on 11th March, 2017 (as at Page

- 45), the partner of the Corporate Debtor sent reverse e-mail at 11.32 P.M.

and sought reasons for the same and at the same time called upon the

Operational Creditor (see Page 44) as under:-

"1) Clear all the outstanding from all distributors

2) Clear all the communication with MT's and hand over to Rakesh Somaya on his joining

3) Complete the tasks in hand like listing with Spar/ Reliance/Walmart/DMart

4) Please close the pending issues with Grofers

5) Please clear all issues and grievances of existing Distributors

6) Need to clear all the formalities of CPC/CSD and handover to new joinee

7) Please continue till appropriate replacement has been found"

13. On 14th March, 2017, the management conveyed formal acceptance

vide Annexure A-6 repeating the above and informing the Operational

Creditor that he will be relieved from organization post clearing above

points after proper handover and settlement of dues, if any.

Company Appeal (AT) (Ins) No.1107 of 2019 9

14. On behalf of the Corporate Debtor, Counsel pointed out Annexure A-

7 (Page - 47) (which are trial of) e-mails dated 15th April, 2017 exchanged

between the Operational Creditor and the Corporate Debtor. In the e-mail

dated 15th April, 2017 at 3.43 P.M., it was conveyed to Operational

Creditor:-

"With reference to our talk and your discussion with management at Rice Plant about your relieving I would want to bring to your notice that for the Level & Designation you hold, officially you have to serve the Notice Period of two months. You have submitted your resignation on 11th of Mar 2017 hence you need to stay back in operation till 11th of May 2017. It is expected from your end during this tenure to obtain field NOCs from all the parties you have dealt with and also seek clarities from your reporting team ZSM, RSM, ASM level. This is in line to set off all the accounts with parties and F&A Dept.

Failing to serve the notice period in full you need to pay to the company the difference amount of Salary for number of days of shortfall in Notice Period.

Apart earlier referred pending cases you are directed to obtain clearance from all the concerned departments, field-Clients, Parties, Sales force & submission of all office assets issued to you to be returned to concerned authorities and only after that the management will then take a call of your relieving from the system."

The Operational Creditor replied at 4.05 P.M. as under:-

"This reference to my discussions with the management in the afternoon regarding my relieving on 15th April 2017. As per my appointment letter, I need to serve 2 months' notice and as on date I served one month and 5 days. I do have 11 days of PL with me which can be adjusted against my notice period. The difference of 14 days, you may adjust against my basic salaries. As on today, I still need to get March

Company Appeal (AT) (Ins) No.1107 of 2019 10

2017 salary and 1st to 15th April 2017. As it was committed by you and the management, Rs.6 Lakhs is also pending towards my Variable Pay. Please do my full & final settlement adjusting the notice period difference. If at all I need to pay, I will pay the same to the company without any delay.

The clarity was already given to the management regarding during ZSMs meeting on 7th & 8th April 2017. I wish to inform you that I am available on 9619997006 for any further clarification and also assure you and the management that will provide all the possible support & help if required at any time.

As discussed, I will hand over all the company's asset to Mr. Prashant Mane and will obtain his acknowledgement and send you all the details."

In another e-mail of the same date of 15th April, 2017 at 6.32 P.M.,

the Corporate Debtor informed the Operational Creditor that his relieving

from the system and F&F is subject to clearance from all concerned

departments on realisation to settlement of all due recoveries. Referring to

all this, the learned Counsel for the Appellant submitted that apparently

and clearly there were responsibilities to be discharged by the Operational

Creditor before he could really walk away after the resignation. The learned

Counsel further referred to e-mails exchanged between the Operational

Creditor and Corporate Debtor, copies of which are at Pages - 68 to 71 of

the Reply (Diary No.16834). This exchange of e-mails appears to be

between 24th January, 2017 to 2nd October, 2017 with the parties making

averments against each other. Although Operational Creditor claims that

the conditions put to relieve were not possible to perform, fact remains that

Operational Creditor was no ordinary employee. He was Head of Sales and

Company Appeal (AT) (Ins) No.1107 of 2019 11

Marketing. Record shows disputes regarding requirement and need to

hand over detail charge to save Company from losses. Even articles were

to be handed back.

15. Apart from the above, record shows that the Operational Creditor

had earlier sent a Notice under Section 8 of IBC on 26th March, 2018

(Annexure A-8) and the Corporate Debtor had raised similar disputes in

Reply dated 24th April, 2018 (Annexure A-9). Various disputes had been

raised already till 24th April, 2018. The Operational Creditor gave up the

earlier Notice sent under Section 8 and on 26th March, 2018, the

Operational Creditor sent yet another Notice under Section 8 of IBC on 12th

November, 2018 (Annexure A-10) and on basis of that Notice filed

Application under Section 9 before the Adjudicating Authority. Reason

stated in the synopsis of that Application for not acting on the earlier

Notice, was that the Operational Creditor is a person with limited means.

16. The Application under Section 9 of IBC based on Notice under

Section 8 dated 12th November, 2018 was thus instituted. There is more

than sufficient record that there were pre-existing disputes regarding

handing over of the charge and the entitlements before the Notice dated

12.11.2018 was sent. The learned Counsel for the Appellant has pointed

out Leave Policy (Page - 68 of the Appeal) to say that the employee is not

allowed to use balance unutilised leave while serving the Notice period.

Disputes were raised even regarding performance incentive. The Appellant

himself in the Notice (Annexure A-10) dated 12th November, 2018 stated

Company Appeal (AT) (Ins) No.1107 of 2019 12

that the Annual Performance Incentive was due on 10th May, 2017. He

having resigned by Notice dated 11th March, 2017 and admittedly stopped

attending after 15th April, 2017, has claimed Rs.6 Lakhs against this head,

without showing that the performance was found to be up to the mark.

These are service disputes and we cannot enter into settling these

disputes.

17. The record shows that there were pre-existing disputes between the

parties when Notice (Annexure A-10) was sent and Application under

Section 9 of IBC was filed. In this view of the matter, the Application under

Section 9 should not have been admitted as the disputes are service

disputes which do not appear to be mere bluster.

18.(A) For above reasons, the Appeal is allowed. The Application under

Section 9 of IBC filed by Respondent No.1 - Operational Creditor before

the Adjudicating Authority is dismissed.

(B) The Impugned Order is quashed and set aside. Actions taken by IRP/RP

in consequence of the Impugned Order are quashed and set aside. The

Corporate Debtor is released from the rigour of law and is allowed to function

independently through its Board of Directors. The IRP/RP will hand back the

records and management of the affairs of Corporate Debtor, to the Board of

Directors.

(C) The IRP/RP will place particulars regarding CIRP costs and fees before

the Adjudicating Authority and the Adjudicating Authority after examining

Company Appeal (AT) (Ins) No.1107 of 2019 13

the correctness of the same, will direct the Operational Creditor to pay the

same in time to be specified by the Adjudicating Authority.

The Appeal is disposed accordingly. No costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical) /rs/md

Company Appeal (AT) (Ins) No.1107 of 2019