2020 (6) TMI 739 - Tri - Insolvency and Bankruptcy

Maintainability of application - recovery of salary dues - Operational Creditors - initiation of CIRP - HELD THAT - It is not in dispute that the Petitioner is an employee having worked with the Corporate Debtor/Respondent, and the salary dues to be payable for him. The instant application is filed with an intention to recover the salary dues and other consequential dues like bonus etc. However, the object of the Code is not to recover the alleged dues, it is meant for initiation of CIRP on justified reasons. There is an Employment Agreement dated 23rd December 13th September, 2013 executed between the Petitioner and the Respondent, wherein Clause '9' says that the Agreement will be governed by the laws of India. For an aggrieved party, knocking at the doors of Judiciary would be last resort. Such party should exhaust alternative remedy available by virtue of Agreement(s) they themselves have voluntarily executed and the terms and conditions in those Agreement(s) would bind them - In the instant case, approaching this Adjudicating Authority is not only the remedy available for the Petitioner as per the terms of agreement. It is a settled position of law that the provisions of the Code cannot be invoked to settle the dispute(s) or to recover the alleged outstanding amount. The mere acceptance of the debt in question by the Respondent would not automatically entitle the Petitioner to invoke the provisions of the Code, unless the debt and default is undisputed and proved it to the satisfaction of the Adjudicating Authority. The Respondent is directed to settle the issue amicable, failing which, the Petitioner is at liberty to invoke the arbitration and the Respondent is directed to participate in such Arbitration, as per law, in order to resolve the issue rather than to aggravate the issue - petition disposed off.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the IBC, 2016 based on default in payment of salary and bonus by the Corporate Debtor.

Detailed Analysis:
1. Initiation of CIRP: The Applicant/Operational Creditor filed C.P.(IB) No. 67/BB/2020 seeking to initiate Corporate Insolvency Resolution Process against the Respondent/Corporate Debtor for defaulting on a total amount of ?5,46,631 as of November 2018. The Operational Creditor was an employee of the Corporate Debtor and had not been paid his salary and bonus since November 2018, leading to financial distress. Despite repeated attempts to resolve the issue, the Corporate Debtor failed to make payments, causing significant hardship to the Operational Creditor.

2. Legal Position: The Adjudicating Authority noted that the purpose of the Insolvency and Bankruptcy Code (IBC) is not solely to recover alleged dues but to initiate CIRP on justified grounds. The Employment Agreement between the parties governed by Indian laws indicated that alternative remedies should be exhausted before approaching the Adjudicating Authority. The Code cannot be invoked to settle disputes or recover outstanding amounts unless the debt and default are undisputed and proven to the satisfaction of the Authority.

3. Financial Status of the Respondent: The Adjudicating Authority considered the financial status of the Respondent Company based on the Annual Returns for the Financial Year 2017-18. The Company's turnover and net worth indicated solvency, suggesting that the issue of outstanding amounts could be resolved amicably without invoking the Code.

4. Decision and Directions: In light of similar cases disposed of by the Authority, the instant Company Petition was also disposed of with specific directions. The Respondent was directed to settle the issue amicably, with the Petitioner having the liberty to invoke arbitration if needed. The Respondent was required to participate in the arbitration process as per law. The Petitioner was granted the liberty to seek appropriate remedies if aggrieved by the arbitration proceedings, with no order as to costs.

In conclusion, the judgment emphasized the importance of exhausting alternative remedies before resorting to the Adjudicating Authority under the IBC. It highlighted the need for undisputed debt and default for invoking the Code and considered the financial status of the Respondent in determining the course of action. The decision aimed at facilitating an amicable resolution while preserving the rights of both parties under the law.