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2022 (8) TMI 1112 - AT - Insolvency and BankruptcyRejection of application for initiation of CIRP filed u/s 9 of IBC - Operational Creditors - dispute prior to delivery of demand notice - HELD THAT - From the record of the EGM dated 20.5.2019 it is noted that the Appellant continued to function as a WTD and was entitled to a remuneration as stipulated in the clauses 48 and 49 of the Articles of Association and the figure of remuneration of the Appellant as WTD can be seen from the Form MR-1 filed by the corporate debtor wherein a remuneration of Rs.86, 49, 600 p.a. is shown as Appellant s remuneration (attached at pp.75-77 of appeal paperbook vol. I). Further an increment was given to the Appellant as CFO and WTD vide letter dated 2.7.2018. The Adjudicating Authority has erroneously inferred the existence of a dispute merely because a Writ Petition bearing WP (C) 4407/2019 was filed by the appellant even though there is no such reference or mention is made in the order dismissing the writ petition and no inference of dispute can be drawn from what is stated in the said order - the Appellant was appointed as a WTD of the corporate debtor on 29.9.2015 while he was already working as CFO and continued as WTD till 20.5.2019. Since he was paid his total emoluments and termination benefits till 31.3.2019 for his work as CFO he is entitled to receive payment for the period 1.4.2019 till 20.5.2019 for his work as WTD which is an operational debt in default and payable by the corporate debtor. The Adjudicating Authority has erroneously dismissed Appellant s application under section 9 - The case is sent to the Adjudicating Authority for passing necessary order after the admission of section 9 application - Appeal disposed off.
Issues:
- Dismissal of insolvency petition by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. - Dispute regarding the termination of employment as Whole Time Director (WTD) and entitlement to remuneration. Analysis: 1. The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the dismissal of the insolvency petition by the Adjudicating Authority. The Appellant claimed to have been appointed as a WTD after serving as CFO and Additional Director in the corporate debtor-company. 2. The Appellant's argument was based on the sequence of appointments and roles held within the company. The termination of employment as CFO and subsequent continuation as WTD led to the filing of a Writ Petition, which was dismissed as premature by the High Court of Delhi due to lack of dispute between the parties. 3. The Appellant contended that despite being terminated as CFO, he continued to work as WTD until 20.5.2019. The dispute revolved around the payment due for the period of work as WTD, which the corporate debtor failed to fulfill, leading to the claim of operational debt in default. 4. The Articles of Association of the corporate debtor were referred to by both parties to support their arguments regarding the entitlement to remuneration for services rendered as a WTD. The Adjudicating Authority erroneously inferred the existence of a dispute based on the filed Writ Petition, which did not indicate any actual dispute between the parties. 5. The judgment highlighted the importance of a real, non-spurious dispute for the dismissal of an insolvency application. The Appellant's entitlement to remuneration as a WTD was established through documented evidence, including the Form MR-1 and salary increment letters. 6. Ultimately, the National Company Law Appellate Tribunal set aside the Impugned Order and directed the admission of the section 9 application. The case was remanded to the Adjudicating Authority for further proceedings related to the operational debt in default. No costs were awarded in the judgment.
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