9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (3) TMI 1046 - AT - Insolvency and BankruptcyDismissal of Section 9 petition - initiation of CIRP - It is contended that the Appellant remained an employee of the Corporate Debtor all through until his resignation and hence the Corporate Debtor was liable to clear the operational dues - HELD THAT - The Adjudicating Authority in the impugned order after noticing the full and final settlement document has observed that the same was executed between the Appellant and MNT and not between the Appellant and the Corporate Debtor. The Adjudicating Authority has thereafter concluded while passing the impugned order that the settlement agreement clearly shows that the Appellant rendered services to MNT which was a separate company from the Corporate Debtor. The Adjudicating Authority has further gone a step ahead to examine whether in such circumstances the Corporate Debtor can be said to owe any liability to the Appellant in the backdrop of their contention that the Corporate Debtor and the MNT shared the same the management. The Adjudicating Authority after referring to the decision of the Hon ble Supreme Court in the matter of VODAFONE INTERNATIONAL HOLDINGS BV. VERSUS UNION OF INDIA ANR. 2012 (1) TMI 52 - SUPREME COURT has relied thereon to hold that the holding company and subsidiary company are to be considered as separate legal entities and merely because their management was the same, raising of claims by the Appellant against the Corporate Debtor was not tenable. The reliance placed upon the Vodafone judgment supra by the Adjudicating Authority in the present facts of the case does not suffer from any infirmity and is very much in order. In this judgement the Hon ble Supreme Court has carved out the basic legal principle with regard to relationship between subsidiary company and holding company by holding that the legal relationship between a holding company and its subsidiary is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary. The business of a subsidiary cannot therefore ordinarily be treated to be the business of the holding company. A subsidiary is a separate legal entity for tax and liability purposes. A subsidiary being a distinct legal personality is also allowed to have decentralised management. Mere ownership, parental control, management of a subsidiary by the holding company therefore does not constitute sufficient and adequate ground to justify piercing the status of their relationship as has been urged by the Appellant in the present case. Further, wherever public interest necessitates lifting of the corporate veil in the interests of justice, there always has to be some specific proof and evidence of fraud, wilful breach of trust, or some sham at play leading to avoidance or limiting the liabilities of the subsidiary company - However, to hold the parent company liable, there is need of specific and detailed information, but no such credible information has been provided by the Appellant. In the present case, there are no sustainable grounds placed on record for holding the Corporate Debtor company liable for the acts of its subsidiary and hence we affirm the findings recorded by the Adjudicating Authority in the impugned order. The present is not a case where there is an undisputed debt for which Corporate Debtor can be brought under the rigors of CIRP. Therefore, in the attendant circumstances, the ratio of the judgement of the Hon ble Supreme Court in the case of Mobilox 2017 (9) TMI 1270 - SUPREME COURT squarely applies to the facts of this case. When any Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out from the present factual matrix. The Adjudicating Authority did not commit any error in rejecting the Section 9 application. There are no reasons to disagree with the findings of the Adjudicating Authority - There is no merit in the Appeal - Appeal is dismissed.
Issues Involved:
1. Employment relationship between the Appellant and Corporate Debtor. 2. Liability of Corporate Debtor to pay operational dues. 3. Existence of pre-existing dispute. 4. Applicability of the doctrine of privity of contract. 5. Relevance of the Vodafone judgment on the relationship between holding and subsidiary companies. Summary: 1. Employment Relationship between the Appellant and Corporate Debtor: The Appellant was appointed as General Manager by the Corporate Debtor on 10.10.2014. The Corporate Debtor failed to release timely salary payments from 2015 onwards, leading to the Appellant's resignation on 26.01.2016. The Appellant contended that he remained an employee of the Corporate Debtor until his resignation, supported by a full and final settlement statement admitting an outstanding amount of Rs. 9,28,972/- as debt due and payable. 2. Liability of Corporate Debtor to Pay Operational Dues: The Appellant sent a Section 8 demand notice on 06.03.2019, followed by a Section 9 IBC application on 30.04.2019 for default of debt amounting to Rs. 9,97,747/-. The Adjudicating Authority dismissed the Section 9 petition, holding that the Appellant was employed by MNT Infrastructure Private Limited (MNT) and not the Corporate Debtor. The Appellant argued that the Corporate Debtor and MNT were controlled by the same management and hence liable for the dues, but the Adjudicating Authority found no evidence of employment with the Corporate Debtor. 3. Existence of Pre-Existing Dispute: The Corporate Debtor contended that the Appellant was paid his salary regularly until his transfer to MNT. Legal notices exchanged between the parties in 2017 and 2018 indicated a pre-existing dispute regarding the Appellant's employment and dues. The Adjudicating Authority, relying on the Mobilox judgment, concluded that the disputes were pre-existing and not spurious, bluster, frivolous, or vexatious, thereby precluding the admission of the Section 9 application. 4. Applicability of the Doctrine of Privity of Contract: The Corporate Debtor argued that it was not liable under the settlement deed signed between the Appellant and MNT, as it was not a party to the contract. The Adjudicating Authority upheld this contention, emphasizing that a third party cannot be made liable under a contract unless it is a party to the said contract. 5. Relevance of the Vodafone Judgment: The Adjudicating Authority referred to the Vodafone judgment to assert that holding and subsidiary companies are separate legal entities. The judgment clarified that mere ownership or control by a holding company does not merge the legal identities of the two entities. The Adjudicating Authority found no grounds to pierce the corporate veil and hold the Corporate Debtor liable for the acts of its subsidiary, MNT. Conclusion: The Adjudicating Authority's reliance on the Vodafone judgment and the Mobilox judgment was deemed appropriate. The appeal was dismissed, affirming that the Corporate Debtor was not liable for the dues claimed by the Appellant, who was found to be an employee of MNT and not the Corporate Debtor. The Appellant was advised to seek other legal remedies if available.
|
