2023 (1) TMI 598 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - whether the debt meets the threshold limits of Rs. 1 crore or not - HELD THAT - This Appellate Tribunal, observed that remuneration of Rs. 60,00,000/- p.a. has been clearly mentioned and the Resolutions further mentioned that this shall be the minimum remuneration payable to him in any financial year during his tenure where the company has no profits or its profits are inadequate, makes the position abundantly clear that the ₹ 2nd Respondent / Company, intended to pay Rs. 60,00,000/- p.a., to the ₹ 1st Respondent, without any conditionality, and was minimum payment per annum, even when the Company did not earn any Profit during the year. These Resolutions are, therefore, crystal clear and leave no ambiguity, in establishing the fact, that the Appellant s contention that, it was only ₹ 50% of the salary payment fixed to be paid, and the remaining 50% of the salary, as variable salary linked to his performance, is untenable and this fact is also corroborated from Form MR1, filed with RoC, where also Rs.60,00,000/-, has been indicated as minimum remuneration, payable to the ₹ 1st Respondent, in any Financial Year, during the tenure even when the ₹ 2nd Respondent / Company, does not have any profit. This Appellate Tribunal also observed that proper demand notice under Section 8 of the I B Code, 2016 was issued dated 11.05.2021 with all facts and figures including amount due and not paid which was not replied admittedly by the 2nd Respondent within 10 days. The Reply indeed was sent much later on 10.06.2021. Issue regarding pre-existing disputes was not established. The documents filed with RoC, Board Resolution of the Appointment of the 1st Respondent, evidence from the Balance Sheet, issue of the Demand Notice not replied within 10 days, this Appellate Tribunal do not find any error, in the impugned order - application dismissed.

Summary

Issues:
1. Interpretation of employment contract terms and payment disputes.
2. Validity of demand notice under Section 8 of the Insolvency & Bankruptcy Code, 2016.
3. Compliance with remuneration terms and performance indicators.
4. Adherence to board resolutions and company financial records.
5. Applicability of minimum remuneration clauses and performance-based pay.

Analysis:

Issue 1: Interpretation of employment contract terms and payment disputes
The appeal was filed against an order admitting an application under Section 9 of the Insolvency & Bankruptcy Code, 2016, related to payment disputes between the parties. The 1st Respondent alleged non-receipt of full payment for services rendered, claiming an outstanding amount of Rs. 1,01,15,000. The dispute arose from the interpretation of the employment contract terms, including fixed and variable salary components linked to performance indicators.

Issue 2: Validity of demand notice under Section 8 of the I & B Code, 2016
The 1st Respondent issued a demand notice under Section 8 of the Insolvency & Bankruptcy Code, 2016, on 11.05.2021, seeking payment of outstanding dues. The 2nd Respondent failed to respond within the stipulated period, raising questions about the validity of the demand notice and subsequent actions taken by the parties.

Issue 3: Compliance with remuneration terms and performance indicators
The dispute involved claims and counterclaims regarding the payment of fixed and variable salary components based on performance indicators. The Appellant contended that the variable salary was subject to meeting Key Performance Indicators (KPIs), which the 1st Respondent allegedly failed to achieve. The 1st Respondent, on the other hand, argued that the remuneration terms were clear and not linked to performance conditions as claimed by the Appellant.

Issue 4: Adherence to board resolutions and company financial records
The Appellate Tribunal reviewed board resolutions and company financial records to ascertain the remuneration terms and appointment details of the 1st Respondent. The Balance Sheet and resolutions confirmed the agreed annual remuneration of Rs. 60,00,000 for the 1st Respondent, providing clarity on the payment obligations of the 2nd Respondent.

Issue 5: Applicability of minimum remuneration clauses and performance-based pay
The Tribunal found that the resolutions and company records clearly indicated a minimum remuneration of Rs. 60,00,000 per annum for the 1st Respondent, irrespective of the company's profitability. The absence of explicit performance-based pay conditions in the appointment resolutions supported the 1st Respondent's claim for the outstanding amount. The Tribunal upheld the impugned order, dismissing the appeal due to lack of merit and compliance with legal and factual considerations.

In conclusion, the judgment addressed the contractual interpretation, compliance with legal procedures, and adherence to remuneration terms, leading to the dismissal of the appeal and upholding of the impugned order.