2021 (8) TMI 856 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - HELD THAT - It is also an admitted fact from record that in August 2017, the Operational Creditor was called upon by the management of Corporate Debtor and was informed about his under performance for the past few years compared to other employees having very less experience and was low to an extent that the performance does not even cover the own costs of the Operational Creditor. Therefore, it is very clear from the admitted facts that the Operational Creditor and the Corporate Debtor were in loggerheads since 2017 with regard to the reduction of salary of Operational Creditor which itself a pre-existing dispute and accordingly the issue goes against the Operational Creditor. Admittedly, the amount claimed by the Operational Creditor in the Company Petition is towards arrears of difference salary. This Tribunal is of the considered opinion that the claim does not qualify within the definition of Operational Debt and this issue also goes against the Operational Creditor. Petition dismissed.

Summary

Issues involved:
1. Whether there is a pre-existing dispute between the parties?
2. Whether a petition under section 9 of the Code for arrears of salary is maintainable?

Analysis:
Issue 1: Whether there is a pre-existing dispute between the parties?
The Company petition was filed by the Operational Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor alleging default in payment. The Operational Creditor claimed that the Corporate Debtor reduced his salary without proper communication, leading to financial difficulties. The Corporate Debtor contended that the salary reduction was due to lack of performance. The Tribunal found that a dispute existed since 2017 regarding the salary reduction, indicating a pre-existing dispute between the parties. This issue was decided against the Operational Creditor.

Issue 2: Whether a petition under section 9 of the Code for arrears of salary is maintainable?
The Operational Creditor filed the petition seeking arrears of salary under Section 9 of the Insolvency and Bankruptcy Code. The Tribunal noted that the claim for the differential amount of reduced salary did not qualify as 'Operational Debt.' As a result, the Tribunal held that the petition for arrears of salary was not maintainable. Consequently, the Company Petition was dismissed.

The Tribunal's findings highlighted the importance of a pre-existing dispute between the parties in determining the maintainability of the petition. The judgment emphasized the need for clarity on the nature of the debt claimed under the Code to ensure the petition's validity. Despite the dismissal of the Company Petition, the Operational Creditor was not barred from seeking legal recourse through appropriate channels for recovering the claimed amount from the Corporate Debtor.