2018 (7) TMI 1912 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - outstanding dues - no pre-existing dispute - HELD THAT - None of the contentions put forward by the Corporate Debtor comes under the purview of section 5(6) of the Code, so as to hold that there is pre-existing dispute so as to reject the claim of this nature. On the other hand, the applicant succeeds in establishing that more than ₹ 1 lakh is due to him from the Corporate Debtor as arrears of salary even if the rate of his salary is reduced to ₹ 84 lakhs per annum. The applicant succeeds in establishing that arrears of salary is due to him from the respondent and that despite demand the respondent failed to repay raising untenable contentions. The applicant also proves that he has complied with all the requirements to be meted out under section 9(5) and filed affidavit under section 9(3)(b) and certificate under section 9(3)(c) is also produced. The application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 is hereby admitted for initiating the Corporate Resolution Process in respect of Stone India Limited. Moratorium order is passed for a public announcement as stated in Sec.13of the IBC, 2016.

Summary

Issues Involved:
1. Validity of the demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of dereliction of duty and misconduct against the Operational Creditor.
3. Approval of salary and allowances by the Central Government.
4. Pre-existing dispute regarding the arrears of salary.

Detailed Analysis:

1. Validity of the Demand Notice:
The respondent contended that the application was incomplete as it lacked a valid demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016. They argued that the demand notice did not have the signature and address of the authorized person from the Operational Creditor, making it invalid. Additionally, they claimed that the service of the demand notice was not made according to Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. However, the tribunal found that the applicant had complied with all necessary requirements under Section 9 of the Code, including filing the affidavit under Section 9(3)(b) and the bank certificate under Section 9(3)(c), and proposed the name of the Resolution Professional.

2. Allegations of Dereliction of Duty and Misconduct:
The respondent alleged that the Operational Creditor's tenure led to increased liabilities for the Corporate Debtor due to negligence and dereliction of duty. They also claimed that an internal investigation revealed that the Operational Creditor sought commissions from a client, which was detrimental to the Corporate Debtor. However, the tribunal noted that the relieving letter issued to the Operational Creditor did not mention any pending inquiry or adverse remarks. The tribunal found it implausible that the Corporate Debtor would relieve the Operational Creditor without any protest if such serious allegations were true. The tribunal also dismissed the respondent's evidence, including an internal memo and an email, as insufficient to prove the allegations.

3. Approval of Salary and Allowances by the Central Government:
The respondent argued that the salary and allowances claimed by the Operational Creditor were subject to Central Government approval, which was only granted up to ?84 lakhs per annum, not the claimed ?1,23,53,900/-. The tribunal found that the document provided by the respondent as proof of Central Government approval was not authentic and lacked the necessary signature. The tribunal concluded that the respondent's contention did not hold merit and did not constitute a pre-existing dispute under Section 5(6) of the Code.

4. Pre-existing Dispute Regarding the Arrears of Salary:
The tribunal determined that the applicant successfully established that more than ?1 lakh was due as arrears of salary, even if the salary was reduced to ?84 lakhs per annum. The tribunal found that the respondent's contentions were untenable and did not amount to a pre-existing dispute. The applicant complied with all provisions of the Code, including proposing a Resolution Professional and producing the necessary written communication.

Order:
The tribunal admitted the application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016, for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared under Section 14 of the Code, prohibiting the institution of suits, transferring of assets, and recovery actions against the Corporate Debtor. The tribunal appointed Mr. Anil Anchalia as the Interim Resolution Professional to ascertain the particulars of creditors, convene a meeting of the Committee of Creditors, and submit progress reports to the Adjudicating Authority. The registry was directed to communicate the order to all relevant parties.