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2022 (3) TMI 15 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - position on contract - Purview of review - HELD THAT - A Contract comes into existence, when the Terms and Conditions of the Contract were finalised. A proposal when accepted gives rise to an Agreement. The Agreement if reduced into writing and a document is executed between the parties, affixing their signature/thumb impression, such an agreement is to be a lawful one - It cannot be gain said that an offer is accepted when the acceptance is communicated. In reality, the communication is to be made to the offeror and a communication of acceptance made to a third person does not create a Contract. According to the Respondent, the Appellant/Operational Creditor was the CRM Manager, an important position of the branch and that many clients of the Respondent, who were availing the services of the Branch had abruptly cancelled their procedures under the influence of the Appellant/Operational Creditor. Which was poaching of clients, thereby causing huge loss to the Respondent/Corporate Debtor and, therefore, the Appellant is guilty of gross misconduct. In fact, the amounts which was to be refunded by the Corporate Debtor/Respondent is ₹ 2,13,000/-, during the period September 2018 to January, 2019 and that the Respondent/Corporate Debtor was seriously considering taking legal action for recovery of the amounts from the Appellant/Operational Creditor - the Respondent/Corporate Debtor denies the claim of the Appellant/Operational Creditor of ₹ 3,74,004/- together with interest @ 18% p.a. CIRP under I B Code - HELD THAT - The CIRP under the I B Code, 2016 is not to be determined by a Court of Law. Further, CIRP is not an adversarial litigation. The proceedings under the I B Code are summary in character. The Adjudicating Authority does not determine a Money Claim or Suit. I B Code is not a Debt Enforcement Procedure. Purview of review - HELD THAT - While scrutinising/examining a petition/application under the I B Code, an Adjudicating Authority is to decide (a) whether there is an operational Debt as per Section 4 of the Code (b) whether the documentary material/evidence submitted alongwith the Application exhibits that the aforesaid Debt is Due Payable and was not yet paid (c) whether there is an existence of Dispute between the Litigants/parties or the record of pendency of a Suit or Arbitration Proceedings filed by the receipt of Demand Notice of the unpaid Operational Debt pertaining to the Disputes - If anyone of the above aid stipulations is not there, then the Application is liable to be rejected. An Adjudicating Authority is required to adhere to the ingredients of Section 9 of the Code and especially, the requirement of Section 9(5) of the Act and admit or reject the application, depending upon the factors adumbrated under Section 9(5) of the Code. Role of Adjudicating Authority - HELD THAT - An Adjudicating Authority is to find out whether the Dispute in issue needs further investigation and the said Dispute is not a weak one. To put it succinctly, if an Adjudicating Authority is subjectively satisfied that the Dispute in question is plausible one and was raised as specified under Section 8(2)(a) then the Adjudicating Authority as per Section 9(5)(ii)(d) is to reject the Application, filed by the Applicant praying for the initiation of Corporate Insolvency Resolution Process - In the instant case, as per Clause 13 of the Appointment Letter of the Appellant/Operational Creditor, the Employment may be terminated without notice or payment in lieu of Notice, in the event of any breach of any terms of the Contract. This Tribunal taking note of the surrounding facts and circumstances of the present case, in an holistic manner and on a consideration of contentions advanced on behalf of the Appellant, this Tribunal comes to an irresistible conclusion that there is an existence of Dispute relating to the Contract of Employment of the Appellant with the Respondent coupled with the breach and the Dispute in question is not an illusory or moonshine one - Appeal dismissed.
Issues Involved:
1. Termination of employment and non-payment of dues. 2. Breach of employment contract. 3. Existence of operational debt and dispute. 4. Applicability of Corporate Insolvency Resolution Process (CIRP) under the I&B Code, 2016. Issue-wise Detailed Analysis: 1. Termination of Employment and Non-Payment of Dues: The Appellant, an Operational Creditor, challenged the order passed by the Adjudicating Authority (NCLT, Hyderabad Bench), which dismissed her application under Section 9 of the I&B Code, 2016. The Appellant claimed non-payment of dues, including salary and provident fund, following her termination for taking unsanctioned leave. The Appellant argued that the Respondent had assured settlement of dues, including two months' salary in lieu of termination as per the Notice Rules in her appointment letter. 2. Breach of Employment Contract: The Respondent contended that the Appellant breached the employment contract by taking an unsanctioned vacation to Bali, which led to her termination. The Respondent further alleged that the Appellant influenced other staff to join a competitor, amounting to gross misconduct and poaching of clients, causing a significant loss to the company. The Respondent denied any dues payable to the Appellant and claimed that the Appellant's actions justified her termination without compensation. 3. Existence of Operational Debt and Dispute: The Appellant filed a Form 5 Application to initiate CIRP, claiming an operational debt of ?3,74,004/- for unpaid salary and provident fund, with interest at 18% per annum. The Respondent, in its reply, denied the existence of any dues and highlighted the Appellant's misconduct and breach of the employment contract. The Adjudicating Authority concluded that there was a genuine dispute regarding the employment contract and the alleged dues, which was not illusory or moonshine. 4. Applicability of CIRP under the I&B Code, 2016: The Tribunal emphasized that CIRP under the I&B Code is not an adversarial litigation or a debt enforcement procedure but a summary process to ascertain the existence of an operational debt and any dispute. The Adjudicating Authority is required to determine whether there is an operational debt, whether it is due and payable, and whether there is a genuine dispute. In this case, the Tribunal found that the dispute regarding the employment contract and dues was genuine and substantial, warranting the dismissal of the Appellant's application for CIRP. Conclusion: The Tribunal upheld the Adjudicating Authority's decision, concluding that there was a genuine dispute regarding the employment contract and the alleged dues. The appeal was dismissed, and the application for CIRP was rejected, affirming that the Adjudicating Authority's decision did not suffer from any material irregularity or patent illegality.
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