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2022 (12) TMI 51 - AT - Insolvency and BankruptcyInitiation of CIRP - Operational Creditors - existence of pre-existing dispute or not - Application filed by the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016 is dismissed - service of the Appellant was terminated by the Respondent on account of fraudulent activities which has caused damage to the Company - HELD THAT - The Appellant was appointed by way of an employment agreement dated 19.06.2003 and his service was terminated by the letter of termination dated 16.08.2016. Since, it is the case of the Respondent that the service of the Appellant has been terminated in terms of employment agreement, therefore, it would be relevant to refer to the clause of termination of employment provided in the employment agreement. It is also not in dispute that there is a criminal case registered against the Appellant in which charge has been framed. The Appellant tendered apology also and the Respondent has disassociated itself from the Appellant by way of notice published in the newspaper. This is also not in dispute that the Appellant is claiming his salary and other perks which is attached with the salary like gratuity bonus etc. The order of termination is based upon alleged fraudulent activities on the part of the Appellant - The Appellant has not claimed one months pay as provided in clause 3.2 rather he has asked the Respondent to pay the amount of his salary and other perks attached with it which already become due before the order of termination was passed. Therefore, it is the case of the Appellant that there is no dispute about the said amount. Section 8 of the Code deals with the necessity of issuing demand notice by the Operational Creditor to the Operation debtor before embarking upon his remedy of filing of application under Section 9 of the Code. The Respondent has tried to take advantage of Section 8(2)(a) to contend that the application is not maintainable because of the existence of a dispute before filing of the application and because of that dispute the service of the Appellant was terminated and that the Respondent had to register FIR also against the Appellant which is pending trial. Careful reading of Section 8(2)(a) of the Code provides that the existence of dispute has to be in respect of the amount so claimed and it is not referable to any kind of dispute such as the one which is highlighted in the present controversy. One thing is clear that the plea of pre-existing dispute has to co-relate with the amount claimed by the Operational Creditor or if a suit or arbitration proceedings is pending then the same should also be related to such dispute. In the present case, however, no dispute ever has been raised by the Respondent that the Appellant is not entitled to the salary for the period from 01.08.2016 to 16.08.2016, flexible pay basket from 01.04.2016 to 16.08.2016, gratuity from 12.06.2003 to 16.08.2016 and performance bonus and business development bonus from 01.10.2016 to 16.08.2016. The only issue raised is about the services having been terminated on account of misconduct etc. on the part of the Appellant. It has been mentioned in the employment agreement that in case of termination on account of misconduct, the Appellant would not be entitled to one month notice pay and nothing beyond that. The Appellant has not claimed one month notice pay about which the Respondent could have raised a dispute on the basis of the terms and conditions contained in the employment agreement. Appeal allowed.
Issues Involved:
1. Pre-existing dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016. 2. Validity of the operational debt claimed by the appellant. 3. Termination of employment and its impact on the claim. Issue-wise Detailed Analysis: 1. Pre-existing Dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016: The primary issue in this case revolves around whether a pre-existing dispute exists, which would render the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the "Code") non-maintainable. The Respondent argued that the existence of a criminal case against the Appellant, stemming from allegations of fraud and breach of trust, constituted a pre-existing dispute. The Tribunal examined Section 8(2)(a) of the Code, which stipulates that the existence of a dispute must be related to the amount claimed by the Operational Creditor. The Tribunal concluded that the dispute raised by the Respondent was not related to the operational debt claimed by the Appellant, but rather to the alleged misconduct that led to the termination of the Appellant's employment. Therefore, the Tribunal held that there was no pre-existing dispute concerning the operational debt. 2. Validity of the Operational Debt Claimed by the Appellant: The Appellant, an ex-employee of the Respondent, claimed an amount of Rs. 33,42,002/- as operational debt, which included salary, flexible pay basket, gratuity, performance bonus, and business development bonus. The Respondent did not respond to the demand notice issued under Section 8 of the Code, leading the Appellant to file an application under Section 9. The Tribunal analyzed whether the claimed amount constituted an operational debt. It was noted that the Appellant's claims were for amounts that had already become due before the termination of his employment. The Tribunal found that the Appellant's claims for salary and other perks were valid operational debts, as they were not disputed by the Respondent in relation to the amounts claimed. 3. Termination of Employment and Its Impact on the Claim: The Tribunal examined the terms of the employment agreement, particularly the clauses related to termination. Clause 3.2 of the employment agreement allowed for termination without notice or payment in lieu of notice in cases of misconduct. The Respondent had terminated the Appellant's employment on grounds of fraudulent activities and breach of trust. However, the Tribunal noted that the Appellant had not claimed one month's notice pay, which could have been disputed based on the terms of the employment agreement. Instead, the Appellant claimed amounts that had already become due before the termination. The Tribunal concluded that the termination of employment on grounds of misconduct did not affect the validity of the operational debt claimed by the Appellant. Conclusion: The Tribunal allowed the appeal, setting aside the impugned order of the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench), which had dismissed the application under Section 9 of the Code. The Tribunal held that the impugned order was patently illegal, as there was no pre-existing dispute related to the operational debt claimed by the Appellant. The Tribunal concluded that the Appellant was entitled to the claimed amounts, as they constituted valid operational debts. The appeal was allowed without any order as to costs.
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