Satyendra Singh vs Rama Subramanian & Anr

[Arising out of order dated 9th October, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, in C. P. No. 587/I&BP/2018]

IN THE MATTER OF:

Mr. Satyendra Singh M/s Sixth Dimension Project Solutions Ltd., 269, Sihora, Mathura - 281 305 Uttar Pradesh. ....Appellant

Vs

1. Ms. Rama Subramanian, B-501, Vasundhara CHS Ltd. Krishna Vatika, Gokhuldham, Goregaon (East) Mumbai - 400 088.

2. M/s Sixth Dimension Project Solutions Ltd. Through Mr. S. Gopalakrishnan, Interim Resolution Professional, CIN U74900MH1998PLC116838 Having its Registered office at Shop No.9, Ground Floor, Shree Anant Bhuvan CHS Ltd., Veer Savarkar Road, Near Teen Petrol Pump, Thane - 400 601, Maharashtra. ....Respondents

Present:

For Appellant: Mr. Mohit Jolly and Mr. Vikas Malhotra, Advocates.

For Respondents: Ms. Rama Subramanian, party in person. Mr. Udita Singh, Advocate for IRP (R-2). -2-

BANSI LAL BHAT, J.

This appeal has been preferred by 'Mr. Satyendra Singh', Director of

Respondent No.2 - 'M/s Sixth Dimension Project Solutions Ltd.' (Corporate

Debtor) assailing the order dated 9th October, 2018 passed by the

Adjudicating Authority (National Company Law Tribunal), Mumbai Bench,

whereby and whereunder the application of Respondent No. 1 - 'Ms. Rama

Subramanian' under Section 9 of the Insolvency and Bankruptcy Code,

2016 (hereinafter referred to as 'I&B Code') seeking initiation of Corporate

Insolvency Resolution Process has been admitted, Interim Resolution

Professional appointed and moratorium slapped on the Corporate Debtor.

The impugned order is assailed on the grounds of non-conformity with the

provisions of Section 8 and 9 of I&B Code and failure on the part of

Respondent No. 1 (Operational Creditor) to substantiate her claim.

2. The factual matrix, in so far as the same is relevant for deciding this

appeal, may briefly be noticed. Corporate Debtor - 'M/s Sixth Dimension

Project Solutions Ltd.' - a company incorporated on 13th October, 1998, is

stated to be a leading provider of project management consultancy services.

Respondent No. 1 was appointed by the Corporate Debtor as Assistant

General Manager (Legal) on annual salary of Rs.10 Lakhs with other benefits

Company Appeal (AT) (Insolvency) No. 708 of 2018 -3-

in terms of offer letter dated 10th January, 2014. Respondent No. 1 claimed

to have worked till 31st December, 2016. She tendered her resignation in

terms of her letter dated 23rd December, 2016 with a request letter for

release of her outstanding dues of Rs.24,07,880/-. Since the Corporate

Debtor failed to clear her outstanding dues, Respondent No. 1 served

demand notice dated 15th March, 2018 on the Corporate Debtor demanding

payment of salary dues of Rs.24,07,880/-. According to Respondent No. 1

there was no response to the demand notice from the Corporate Debtor and

the demand in respect of outstanding salary dues not being complied with

and the claim remaining unsatisfied, Respondent No. 1 filed application

under Section 9 of I&B Code before the Adjudicating Authority seeking

commencement of Insolvency Resolution Process. The Adjudicating

Authority after putting the Corporate Debtor on notice and according

consideration to the mutually exclusive versions put forth by the parties qua

the material aspects bearing upon initiation of Corporate Insolvency

Resolution Process admitted the application seeking triggering of Corporate

Insolvency Resolution Process at the instance of Respondent No. 1. The

Adjudicating Authority found that the defence set up by the Corporate

Debtor was spurious designed to avoid Corporate Insolvency Resolution

Process and that such disputes were never raised prior to issuance of

demand notice by the Respondent No.1. In arriving at such finding learned

Adjudicating Authority appears to have been influenced by the admission in

the letter dated 27th December, 2016 written by the Director of the

Company Appeal (AT) (Insolvency) No. 708 of 2018 -4-

Corporate Debtor to Respondent No. 1 in response to her request for release

of outstanding salary dues. Since this letter emanating from the Corporate

Debtor has been written within four days of tendering of resignation by

Respondent No. 1 and making request for payment of outstanding salary

dues of Rs.24,07,659/- and forms the immediate response to claim of

Respondent No.1, same is relevant to determine whether the defence set up

before the Adjudicating Authority is probable or spurious. The letter is

extracted herein below:-

"December 27th, 2016

Dear Ms. Rama Subramanian,

I am in receipt of your letter, requesting for immediate

release of your outstanding salary dues. Being familiar

with all the legal cases, we face as of date, I hope that you

will be in a better position to gauge our financial situation,

without any explanation. I know you had put in your

heart and soul to discharge your duties. Though I desire

to release your dues immediately, our financial position

does not permit me to do so. I can only promise at this

juncture that your claim towards unpaid salary, as

claimed in your letter dated 23.12.2016 will be settled in

due course of time, in any case, within one year."

Company Appeal (AT) (Insolvency) No. 708 of 2018 -5-

3. Learned counsel for Appellant submits that pursuant to the offer letter

dated 10th January, 2014 in terms whereof Respondent No. 2 offered

Respondent No. 1 the position of Assistant General Manager (Legal),

Respondent No. 1 was required to fulfil specific conditions set out in the

offer letter but since Respondent No. 1 did not comply with such conditions,

no formal employment letter was issued in her favour. However, as an

alternative to full time employment, Respondent No. 1 was engaged as a

Retainer/ Legal Consultant and paid on an adhoc basis from time to time for

the matters in which she was engaged. Subsequently, in July, 2015, several

deficiencies were noticed in performance of Respondent No. 1. Same were

communicated to her during various meetings and discussions. It is

submitted that in a meeting held in September, 2015 concerns of

Respondent No. 1 over unpaid arrears were addressed and the Corporate

Debtor paid an amount of Rs.3 Lakhs to Respondent No. 1 in terms of the

agreement arrived at between them. It is further submitted that since

Respondent No. 1 failed to make any improvement in performance, it was

decided to terminate her services. Respondent No. 1 accepted termination of

her services w.e.f. November, 2015 but strangely she shot two letters in

December, 2016, one in regard to tendering of resignation and the other

claiming the outstanding salary dues. Admitting that Respondent No. 1 has

served the statutory demand notice dated 15th March, 2018 upon Corporate

Debtor, it is contended that in response to the demand notice the Corporate

Debtor has raised the dispute in regard to the alleged outstanding salary

Company Appeal (AT) (Insolvency) No. 708 of 2018 -6-

dues. It is contended that Respondent No. 1 initiated the Corporate

Insolvency Resolution Process seeking payment of alleged Operational Debt

despite existence of dispute with regard to the alleged Operational Debt.

The impugned order is assailed on the grounds of non-conformity with the

provisions of Section 8 and 9 of I&B Code and failure on the part of

Respondent No. 1 (Operational Creditor) to substantiate her claim.

4. Per contra, it is submitted on behalf of Respondent No. 1 that

Respondent No. 1 had been appointed in terms of the Offer Letter at a gross

annual salary of Rs.10 Lakhs and she worked as AGM (Legal) till 31st

December, 2016. Since her salaries were not paid, she tendered resignation

on 23rd December, 2016 and also claimed her outstanding salary dues of

Rs.24,07,880/- for the period spanning August, 2014 to December, 2016.

Refuting the arguments of Appellant that she worked only as a Retainer and

was paid on adhoc basis for the work assigned, Respondent No. 1 submitted

that the Corporate Debtor through its Director assured to arrange payment

of her outstanding salary dues within a year as the Corporate Debtor was

facing financial crunch but the Corporate Debtor failed to honour its

commitment. Respondent No. 1 further submitted that the application

under Section 9 of I&B Code was filed as there was non-compliance with the

demand notice and no notice of dispute was received by the Respondent

No.1. It is submitted that the reply to the demand notice posted on 9th

April, 2018 was received by her on 12th April, 2018 whereas application

Company Appeal (AT) (Insolvency) No. 708 of 2018 -7-

under Section 9 was filed on 6th April, 2018. Thus the demand notice was

not responded to by the Corporate Debtor and no notice of dispute was

served upon the Respondent No.1 within the statutory period. Lastly it is

submitted that the defense raised is a mere eyewash designed to defeat the

Corporate Insolvency Resolution Process and the spurious defense raised by

the Corporate Debtor has rightly been frowned upon and rejected by the

Adjudicating Authority.

5. Heard learned counsel for the parties and fathomed through the

depths of the factual matrix as emerging from record.

6. Initiation of Corporate Insolvency Resolution Process at the instance

of an Operational Creditor is provided for under the provision engrafted in

Section 9 of the I&B Code, whereunder an 'Operational Creditor' may file an

application before the Adjudicating Authority for initiating a Corporate

Insolvency Resolution Process after complying with the statutory

requirements of Section 8. Dwelling on the scope of this provision in

"Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407", the

Hon'ble Apex Court observed as under:

"29. The scheme of Section 7 stands in contrast with the

scheme under Section 8 where an operational creditor is,

on the occurrence of a default, to first deliver a demand

notice of the unpaid debt to the operational debtor in the

Company Appeal (AT) (Insolvency) No. 708 of 2018 -8-

manner provided in Section 8(1) of the Code. Under Section

8(2), the corporate debtor can, within a period of 10 days

of receipt of the demand notice or copy of the invoice

mentioned in sub-section (1), bring to the notice of the

operational creditor the existence of a dispute or the record

of the pendency of a suit or arbitration proceedings, which

is pre-existing--i.e. before such notice or invoice was

received by the corporate debtor. The moment there is

existence of such a dispute, the operational creditor gets

out of the clutches of the Code."

In a later judgment titled in "Mobilox Innovations (P) Ltd. v. Kirusa

Software (P) Ltd., (2018) 1 SCC 353", the Hon'ble Apex Court further

observed as under:-

51. 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

Company Appeal (AT) (Insolvency) No. 708 of 2018 -9-

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."

7. Adverting to the facts of the case in hand be it seen that the factum of

Respondent No. 1 being appointed by Corporate Debtor as Assistant General

Manager (Legal) on mutually agreed terms on a gross annual salary of Rs.10

Lakhs in terms of Letter of Offer dated 10th January, 2014 is an admitted

position in the case. Respondent No. 1 was required to join within seven

days and letter of employment was to be issued subsequent to her joining.

Though no such letter of employment required to be issued by the Corporate

Company Appeal (AT) (Insolvency) No. 708 of 2018 -10-

Debtor is on record, it is the admitted position that Respondent No. 1 joined

the organization viz. Corporate Debtor and rendered meritorious services in

her capacity as AGM (Legal). This factual position emerges from letter dated

27th December, 2016, written by Shri R. Subramaniam, Director of

Corporate Debtor marked 'Exhibit J' at page No. 97 of the paper book, which

eloquently speaks of the qualitative performance of Respondent No. 1.

Appellant has not placed on record any documentary proof of cancellation of

the offer letter with regard to appointment of Respondent No. 1 as AGM

(Legal) and her engagement as Retainer. No proof has also been educed to

substantiate the contention that she was paid on an adhoc basis from time

to time for the matters in which she was engaged and that such engagement

was terminated w.e.f. November, 2015. In absence of proof of recall of letter

of offer of employment to Respondent No. 1, and subsequent engagement as

Retainer, the contention raised by the Appellant on this score deserves to be

outrightly dismissed as a pure concoction, more so as the documents on

record in general and the Letter dated 27th December, 2016 emanating from

the Director of Corporate Debtor referred to hereinabove stares in the face of

the Corporate Debtor. It is shocking that in the face of Director of Corporate

Debtor eulogizing the role of Respondent No. 1 in regard to discharge of her

duties, the Appellant raised the bogey of deficiency in performance of

Respondent No. 1, which is a brazen faced attempt to demonize Respondent

No.1 and deny her legitimate claim. It is apt to notice that aforesaid letter,

apart from appreciating the role of Respondent No.1 for putting in her 'heart

Company Appeal (AT) (Insolvency) No. 708 of 2018 -11-

and soul to discharge duties' is in reference to the claim for outstanding

salary dues in terms of letter dated 23rd December, 2016 served by

Respondent No.1 upon Corporate Debtor together with her resignation

letter. The aforesaid letter nowhere disputes the claim of Respondent No.1

having discharged duties as AGM (Legal) in terms of Letter of Offer nor

refutes her claim for deficiency of performance. It only expresses the

inability of Corporate Debtor to immediately satisfy the claim of Respondent

No. 1 qua the outstanding salary dues of Rs.24,07,659/- on account of

financial hardship faced by the Corporate Debtor and seeks to satisfy such

claim within one year while acknowledging and admitting such claim.

Appellant or Corporate Debtor has not disputed genuineness of this letter.

The defence raised by the Corporate Debtor before the Adjudicating

Authority and the version put forth by the Appellant qua the claim of

Respondent No.1, viewed in the light of foregoing discussion, can be termed

only as an attempt to wriggle out of the liability to deny the legitimate and

legally payable claim of Respondent No. 1 and frustrate the Corporate

Insolvency Resolution Process commenced at the instance of Respondent

No. 1 on fabricated and concocted grounds.

8. Viewed in the context of the conclusions reached and finding arrived

at in the foregoing paras, the impugned order cannot be held to be suffering

from any legal infirmity. The Adjudicating Authority has appreciated the

defense put forth by the Corporate Debtor properly and recorded findings

Company Appeal (AT) (Insolvency) No. 708 of 2018 -12-

which are perfectly justified on legal and factual basis. We are convinced

that this appeal is frivolous and the Appellant should be saddled with costs.

The appeal is accordingly dismissed. Costs to the tune of Rs.50,000/-

(Rupees Fifty Thousand Only) are imposed upon the Appellant, which shall

be deposited with Registrar, NCLAT within 30 days. Interim direction, if

any, shall stand vacated.

9. A copy of this order be sent to the Adjudicating Authority for

information and further necessary action.

[Justice Bansi Lal Bhat] Member (Judicial)

[Balvinder Singh] Member (Technical)

NEW DELHI 10th April, 2019

AM

Company Appeal (AT) (Insolvency) No. 708 of 2018