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2020 (9) TMI 1074 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - core issue is the alleged default of the Corporate Debtor in not finally granting the Performance Shares to the Petitioner - HELD THAT - The conditions as laid out in the Rules for the final grant and conveyance of such shares would indicate whether any right or claim arose in the hands of the Petitioner/Operational Creditor with regard to such Performance Shares. The Rules of the Performance Share Plan , a copy of which has been placed on record, shows that Essilor International had adopted the Rules regarding Performance Shares on 02.12.2015, as authorised by the EGM held on 05.05.2015, for the benefit of its Non-French employees and executive officers, in which they could participate, being a part of the Group. However, any grant of the same was at the discretion of Essilor Luxxotica, as the Company is presently called, and these are applicable to the entire Group, including employees of Essilor India. Broadly speaking, Performance Shares are granted free of cost, and are in the nature of incentives to retain employees, in lieu of their loyalty and to strengthen the Company brand, by linking them to future payment, subject to various conditions. Their legal framework is governed by the provisions of the French Commercial Code relating to free share grants. Some of the important clauses of the Performance Plan, for our purpose, and for our summary examination, are Clauses III, IV and V. Clause III deals with the Vesting Period . The process starts with a meeting of the Board of Directors for making a conditional grant of Performance Shares to certain employees. This is the Grant Date . This also defines the Initial Reference Price and the Average Price, which are required for assessing the Performance Condition subsequently. This clause also stipulates the conditions under which shares are delivered to the allotee on the Final Delivery Date . Prior to this final delivery date there is a vesting period starting with the Grant Date and ending with the Final as a Delivery Date, which may be the 4th anniversary of the Grant Date or the Performance Achievement of the Date; or the sixth anniversary of the Grant Date, which ever happens first. Hence, until the vesting period ends as above, it is apparent that there is no right to or ownership conferred upon the Employee vis a vis the Performance Shares. Coming to the facts of the Petitioner's case, it is seen that Performance Shares were awarded to the Petitioner on 02.12.2015, 22.09.2016 and 03.10.2017. As per Clause III of the Rules, the Vesting Period in the case of the Petitioner would have ended on, and he would have become eligible for finally earning the Performance Shares in four years, i.e. in the years 2019, 2020 and 2021 respectively. The conditions required to be fulfilled were two, namely the Presence Condition of the employee and the Performance condition of the shares. But he was admittedly not an employee in the Respondent/Corporate Debtor Company in 2019, having finally left the Company on 31.12.2018 after availing Garden Leave subsequent to acceptance of his resignation on 21.09.2018. Thus, as per Clause IV the Petitioner beneficiary had seized to hold any employee or corporate officer position whatsoever within the Essilor Group, to whom these Rules applied, and hence he had forfeited his right to the final earning of the Performance Shares or to any indemnity therefor - Such date of forfeiture of the right to a definitive grant of the Performance Shares was the date of the definitive cessation of all employee or corporate officer functions, i.e. 31.12.2018 in the case of the Petitioner. It becomes clear on the face of the available facts and the Rules governing Performance Shares, as mentioned above, that the Presence Condition referred to in Clause IV was not met and the Petitioner was ineligible for the same - the Petitioner cannot take the plea that he had retired in the normal course at the age of 58 years and was eligible for the Performance Shares by virtue of the Exception to Clause IV, being unaware of the extension letter. It is also seen from the Notice dated 27.07.2016 that it was circulated to all Regional and Branch Offices, all Notice Boards and All Employees. No material has been brought on record by the Petitioner to establish that the said Notice was fake, non-existent, an afterthought or issued only in his case to deny him the benefits claimed. The Petitioner was not eligible for the Performance Shares, going by the plain facts of the case, and hence there was no debt or default on the part of the Respondent/Corporate Debtor. However, while the summary proceedings under the Code lead us to this conclusion, and there are disputes raised by the Petitioner that cannot be investigated here, we may add that this order will not take away the rights of the Petitioner to pursue the same under any other law or forum, if permissible - Petition dismissed.
Issues Involved:
1. Classification of the Petitioner as an Operational Creditor. 2. Validity of the Demand Notice. 3. Privity of contract between the Petitioner and Respondent. 4. Eligibility for Performance Shares. 5. Jurisdiction of Indian courts. 6. Existence of debt and default. 7. Applicability of full and final settlement. Issue-wise Detailed Analysis: 1. Classification of the Petitioner as an Operational Creditor: The Respondent contended that the Petitioner does not qualify as an Operational Creditor under Section 5(20) of the Insolvency and Bankruptcy Code (IBC), 2016. The Tribunal rejected this argument, stating that Performance Shares fall within the meaning of "debt" and "operational debt" as defined in Sections 3(11) and 5(21) of the Code, respectively, because they were to be granted by virtue of employment. 2. Validity of the Demand Notice: The Respondent argued that the Demand Notice was invalid as it was not served upon the Company but to its CEO/key personnel. The Tribunal found this objection untenable, noting that the notice was served on key managerial personnel of the Company at its official address, fulfilling the requirements under Section 8(2) of the Code. 3. Privity of Contract Between the Petitioner and Respondent: The Respondent claimed there was no privity of contract regarding the Performance Shares, as they were issued by Essilor International. The Tribunal disagreed, noting that the Petitioner had previously received Performance Shares under the same employment agreement with the Respondent, making the contract valid. 4. Eligibility for Performance Shares: The Tribunal examined the "Rules of the Performance Share Plan," noting that the Petitioner did not meet the "Presence Condition" required for the final grant of Performance Shares, as he had resigned before the vesting period ended. The Petitioner's argument that he had retired at 58 years was dismissed, as he continued to work under the extended retirement age policy until his resignation in 2018. 5. Jurisdiction of Indian Courts: The Respondent argued that the dispute should be governed by French law and fall under the jurisdiction of the Commercial Court of Paris. The Tribunal held that the jurisdiction of Indian courts is not ousted by foreign jurisdiction clauses in private contracts, especially in insolvency proceedings aimed at resolution and asset maximization. 6. Existence of Debt and Default: The Tribunal emphasized that proceedings under Section 9 of the IBC are summary in nature and require a clear and undisputed debt and default. The Tribunal concluded that the Petitioner was ineligible for the Performance Shares, and thus, there was no debt or default on the part of the Respondent. 7. Applicability of Full and Final Settlement: The Tribunal noted that the Petitioner had accepted the terms of the full and final settlement, which included all salary, perks, and benefits, thereby precluding any further claims. The Tribunal found that the Petitioner was ineligible for the Performance Shares due to non-fulfillment of the "Presence Condition." Conclusion: The Tribunal dismissed the petition, concluding that the Petitioner was not eligible for the Performance Shares and there was no debt or default on the part of the Respondent. However, the Tribunal noted that this order does not preclude the Petitioner from pursuing claims under other laws or forums if permissible. Order: CP (IB) No. 317/BB/2019 is dismissed with no order as to costs.
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