2019 (12) TMI 564 - AT - Insolvency and Bankruptcy

Oppression and Mismanagement - Admissibility of application - initiation of CIRP - pre-existing dispute or not - HELD THAT - The Company Petition under Sections 241 and 242 of the Companies Act, 2013 filed by the 1st Respondent is pending before the 'National Company Law Tribunal'. In the said case, application for interim relief filed by the 1st Respondent has been heard and the order has been reserved on 14th May, 2018. During the pendency of the aforesaid application for payment of salary, without waiting for decision of NCLT, the 1st Respondent issued Demand Notice u/s. 8(1) of the 'I B' Code on 26th July, 2018, for the same amount as claimed and prayed for before the Tribunal in a Petition u/s. 241,242, which has already been disputed by the 'Corporate Debtor'. Though the Adjudicating Authority ('National Company Law Tribunal') Principal Bench has noticed that the petition u/ss. 241, 242 and 244 of the Companies Act, 2013, with prayer for payment of salary is pending before the 'National Company Law Tribunal' and the 'Corporate Debtor' in the said case disputed the entitlement of 1st Respondent to get salary of the said period, the Adjudicating Authority has admitted the application u/s. 9 - as there is a pre-existence of dispute with regard to salary payable to the 1st Respondent and matter is pending for decision before the 'National Company Law Tribunal', New Delhi prior to issuance of Demand Notice u/s. 8(1), the application u/s. 9 of the 'I B' Code filed by the 1st Respondent was not maintainable. The application u/s 9 of the 'I B' Code filed by the 1st Respondent is dismissed. In effect, the order(s) passed by ld. Adjudicating Authority appointing 'Interim Resolution Professional', declaring moratorium etc. pursuant to impugned order of admission and action taken by the 'Resolution Professional', including the advertisement published in the newspaper; calling for applications and all such actions are declared illegal and are set aside.

Summary

Issues:
1. Maintainability of application under section 9 of the Insolvency & Bankruptcy Code, 2016 due to pre-existing dispute.

Analysis:
The judgment by the National Company Law Appellate Tribunal, New Delhi, involved a dispute where the 1st Respondent filed an application under section 9 of the Insolvency & Bankruptcy Code, 2016 against a Corporate Debtor. The Appellant contended that there was a pre-existing dispute, rendering the application under section 9 not maintainable. On the other hand, the learned counsel for the 1st Respondent argued that there was no pre-existing dispute, leading to conflicting claims.

In the case, the Corporate Debtor responded by denying the claim made by the 1st Respondent for unpaid salary, stating that the 1st Respondent had voluntarily resigned from the position of CEO and Managing Director. The Corporate Debtor disputed the entitlement of the 1st Respondent to the claimed salary, highlighting a key point of contention in the legal proceedings.

The Tribunal noted that a Company Petition under Sections 241 and 242 of the Companies Act, 2013, filed by the 1st Respondent was pending before the National Company Law Tribunal. Despite the pending petition and the ongoing dispute over the salary claim, the 1st Respondent issued a Demand Notice under section 8(1) of the Insolvency & Bankruptcy Code, which was contested by the Corporate Debtor.

Ultimately, the Tribunal found that there was indeed a pre-existing dispute regarding the salary payable to the 1st Respondent, and since the matter was already pending before the National Company Law Tribunal, the application under section 9 of the Insolvency & Bankruptcy Code filed by the 1st Respondent was deemed not maintainable. Consequently, the impugned order was set aside, and the application was dismissed, allowing the Corporate Debtor to function independently through its Board of Directors.

Furthermore, the Tribunal declared all actions taken pursuant to the impugned order, such as appointing an Interim Resolution Professional and declaring a moratorium, as illegal and set them aside. The Adjudicating Authority was directed to close the proceedings, releasing the Corporate Debtor from the legal constraints. The Tribunal also instructed the Adjudicating Authority to determine the fees of the Interim Resolution Professional and the costs incurred, to be paid by the Corporate Debtor within a specified period.

In conclusion, the appeal was allowed based on the finding of a pre-existing dispute, leading to the dismissal of the application under section 9 of the Insolvency & Bankruptcy Code, and subsequent directions were issued regarding the proceedings and costs incurred.