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TMI Blog2020 (9) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - C. P. (IB) No. 317/BB/2019 - - - Dated:- 23-4-2020 - Rajeswara Rao Vittanala, Member (J) And Ashutosh Chandra, Member (T) For the Appellant : A. Shanker, Sr. Advocate, Aditya Jossen, V. Chandrasekhar, Advs., Aditya Sondhi, Sr. Counsel For the Respondent : Gaurav Singh Gaur, Abhishek Bagga and Smita Paliwal, Advs ORDER Ashutosh Chandra, Member (T) 1. This Petition is filed by Mr. Seshagiri Gopala Krishnan, (hereinafter referred to as the 'Petitioner/Operational Creditor') under Section 9 of the IBC, 2016 R/w Rule 6 of the I B (Application to Adjudicating Authority) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process in respect of M/s. Essilor India (P) Ltd. (hereinafter referred to as 'Respondent/Corporate Debtor') on the ground that the Corporate Debtor has committed default f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim for the dues owed to him by the latter in respect of Performance Shares, but no response was received. Reminder giving a further 7 days' time was also ignored. Finally a Demand Notice was issued on 08.08.2019 in Form 3 of the Adjudicating Authority Rules, 2016 to the Respondent/Corporate Debtor, which was belatedly replied on 21.08.2019, denying the rightful claims of the Petitioner/Operational Creditor. 3. The Company Petition has been opposed by the Respondent/Corporate Debtor, through its statement of objections dated 15/11/2019, wherein it has been inter alia contented as follows: (1) The Petitioner/Operational Creditor does not classify to be an Operational Creditor as he does not fall within the ambit of section 5(20) of the Code. Hence the provisions of Rule 5(1) of the Insolvency and Bankruptcy (AAA) Rules, 2016 are not applicable. The liability is denied. It is stated that the petition is mala fide and has no legal basis. The Respondent Company - Essilor India Pvt. Limited is a subsidiary of Essilor Luxxotica, that then Essilor International Group of companies which had awarded the alleged Performance Shares, and the same is clear from the Petitioners submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as per appointment letter bearing reference number EIPL/HRD/08 - 09 dated 08/04/2008 and after the probation period, was confirmed vide confirmation letter bearing reference number EIPL/HR/IMCR/1326 dated 29/04/2009. The retirement age of all employees of Essilor India Pvt. Limited was revised from 58 years to 60 years as decided in the management meeting dated 22/07/2016. This was communicated by its HR department vide notice dated 27/07/2016 titled as Change in Age of Retirement' and the same was communicated to all employees in the head office and regional and branch offices, including the Petitioner. Therefore, it is incorrectly stated by the Petitioner that even after the age of 58 years, his services were continued without any valid contract. The Petitioner was well aware of this change. He has also acknowledged receiving various benefits like Provident Fund etc., which covered his employment beyond his age of 58 years, along with the Gratuity. Thus on the one side he chose to avail the benefits mentioned above for his tenure of employment beyond the age of 58 years, but on the other hand he refuses to acknowledge his employment beyond the age of 58 years with the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er intentional nor deliberate and shall not prejudice the rights of the Respondent. (8) With regard to the definition of Performance Shares, it is submitted, a Performance Shares is an Essilor International share which is granted free of cost to the employees after a certain period of time pursuant to the notice of eligibility and only if specific conditions are met . The Rules apply to Essilor International Performance Shares as adopted by the Board of Directors on 02/12/2015 in accordance with the Extraordinary General Meeting dated 05/05/2015 (Resolution No 14). The Respondent Company is a part of the Essilor Group and its employees can participate in the Group's long-term incentive Plan that operates in the form of grants of rights to Performance Shares of the Group. The Head of the region maintains the beneficiaries and proposes the number of units for the grant as per the Essilor Group's policies. It is made at the discretion of the top management who seek the approval of the Board of Directors of Essilor Luxottica. Without prejudice, it is submitted that there is no privity of contract between the Petitioner and Respondent herein in respect of the Performance S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions of the Performance Shares Plan. In Annexure B, page number 17 of the Petitioner's Demand Notice dated 08/08/2019 the last 2 columns clearly show maturity dates for the said shares as per the Rules, which shows that the shares granted under the Plan are a conditional grant subject to fulfilment of certain conditions. This condition refers to eligibility for the Performance Shares as per the Plan. It is also submitted that clause IV of the Rules of the Performance Shares Plan dated 02/12 2015 makes it clear that the Petitioner is right to definitive grant in respect of the Performance Shares stands for forfeited on 21/09/2018 when admittedly the Petitioner had tendered his resignation. The Performance Shares were granted to the Petitioner on 02/12/2015, 22/09/2016, and 03/10/2017, and would have been 'vested' in the years 2019, 2020, and 2021 respectively, provided the Petitioner had completed the vesting period of the same, which was never completed since the Petitioner vide letter of resignation dated 21/09/2018 had tendered his resignation even before completion of the vesting period of the Performance Shares. Hence the 2nd condition i.e. 'presence c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance Shares of Essilor Luxottica were being awarded to the Petitioner and the rights under the same have already been vested on him on several days prior to the date of his resignation. Between 2010 and 2014, a total of 2410 Performance Shares as per each year's specific Performance Share Plan were vested in him after the mandatory completion of the vesting period of 4 years, until 25/11/2018. Out of these the Petitioner has already sold 1485 shares that were available for sale by the end of number 2018. This material and important fact has not been disclosed by the Petitioner in the present application. Thus the Petitioner was well aware of the method of grant of Performance Shares being subject to various conditions of 'presence' 'and 'performance' conditions set out in the guidelines. (15) Moreover, the mandatory completion of the vesting period of 4 years in respect of the Performance Shares awarded to the Petitioner after the 2014, could not be completed due to his resignation on 21/09/2018. He was finally relieved from all his duties and employment on 31/12/2018. Thus his rights in respect of Performance Shares were automatically forfeited as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we can rely upon the Companies Act 2013 according to which key managerial personnel are the CEO, or the Managing Director or the Manager, the Company Secretary, the whole time Director, Chief Financial Officer and such other Officer as may be prescribed. Admittedly, the Demand Notice has been served upon such personnel in their official capacity and is therefore valid notice. (2) As regards the objection that there being no privity of contract between the Petitioner and the respondent Company, the claim was not maintainable, it is stated by the Petitioner that the his eligibility is by virtue of his employment with the Respondent Company. Even if the benefit of Performance Shares could be conferred by Essilor International, he was entitled as he was an employee of one of its Group companies. It is an admitted fact that the Petitioner has received sums previously also on account of sale of his Performance Shares not because he had any separate contract with Essilor International but because of his primary contract as an employee of the respondent Company. The Performance Shares promise to the Petitioner are a part of his salary component and he agreed to work for the same witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent till the Demand Notice, and the reply to that too was later than the prescribed time limit and hence has to be ignored. With regard to the enquiry instituted against the Petitioner on charges of bribery and corruption, it is stated that the respondent has not filed any police complaint nor initiated formal charges against the Petitioner in any legal forum. Only an investigation was launched which is not concluded. The Petitioner was caught in an internal issue in the management and lost his job as a result of reasons that are not attributable to him. Hence the investigations cited by the respondent are no proof of any pre-existing dispute with the Petitioner. Any such dispute was not raised by the respondent on receiving the legal notice on 01/07/2019 and hence the dispute is only fabricated and a defence as an afterthought. Reference in this regard has been made to the decision of the Hon'ble NCLT dated 23/07/2019 in the case of Ahluwalia Contracts India Ltd v. Rage Developers Ltd. (5) Regarding the issue of jurisdiction raised by the respondent that the same lies only in France it is stated that the Petitioner has not signed any contract with Essilor I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 (114) DR J4 27 (CIAL case) is misplaced as the Insolvency and Bankruptcy Code 2016 is a self-contained Code and the Respondent cannot rely on any other statute unless a particular term has not been defined in the IBC, as held in M/s. Innoventive Industries Ltd v. ICICI Bank Anr. Section 3(11) and section 5(21) of the Code clearly define Debt and Operational Debt , as different from the RDB act which was under consideration in the CIAL case cited by the Respondent. Reference in this regard has been made to the decision of the Hon'ble Supreme Court in Bhav Nagar University v. Palitana Sugar Mill Pvt. Limited and ORS, (2003) 2 SCC 111. Hence the meaning of the term open 'debt' has to be taken as per the IBC. The Performance Shares are not ordinary shares and are not open to the public at large. They are available to the Petitioner only because of his employment with the copy data. As they are a consideration for the services rendered by him in the course of employment, they are in the nature of 'debt'. (8) With reference to the delayed reply to the Demand Notice dated 08/08/2019, reliance has been placed on the case of Mobillox Innovations Pvt. Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Paris. 6. Heard Mr. A Shanker, Learned Senior Counsel for the Petitioner and Dr Aditya Sondhi, Learned Senior Counsel for the Respondent. We have carefully perused the pleadings of the parties and the extant provisions of Code and Rule made thereunder. We have also carefully perused the material brought on record. 7. The facts of the case are, briefly, that Sri Seshagiri Gopala Krishnan was employed with the Respondent/Corporate Debtor Company in the Management Cadre, vide Employment Letter dated 08.04.2018, in lieu of which he was to be granted remuneration and eligibility for Performance Shares. He was confirmed on 29.04.2009. After certain allegations and an enquiry he resigned/was made to resign on 21.09.2018. The manner of his exit does not merit much attention here, as the dates till which he worked alone are important in these summary proceedings under the Code, as they govern his claim for any benefit from the employer Company. Further, even after his resignation he was granted Garden Leave for about 3 months, on defined terms and conditions, including remuneration and perks beyond the age of 58 years, till his final exit on 31.12.2018. By the extended retire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional debt is defined in section 5(21) as a claim in respect of the provision of goods or services, including employment. Performance Shares referred to in the Petition would fall within the meaning of debt and operational debt , as they were to be granted to employees of the Corporate Debtor by virtue of their employment, subject to certain conditions. Secondly, We do not agree that the there was no Privity of contract between the Petitioner and the Respondent. The Petitioner had earned Performance Shares in the preceding years also under the same Agreement, and the same applied to all Group Companies. He was an employee of the Respondent Company in the same group and hence the Agreement was valid. Thirdly, the ground that the Demand Notice sent by the Petitioner was invalid since it was not served upon the Respondent Company is also not acceptable. It is seen that the Notice of Demand dated 08/08/2019 was served upon the President, CEO, and Head of Human Resources of the Petitioner Company Essilor India Pvt. Ltd., on 09/08/2019, at the Company's official address. All these persons are the key managerial personnel of the Company as per section 8(2) of the Code, and hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 12. Further, Clause IV stipulates Condition regarding the Beneficiary Presence . This reads as under: The beneficiary must, on the Final Delivery Date, have an employment contract or corporate office positions within the ESSILOR Group. For the purposes hereof, the ESSILOR Group shall be taken to include any Company in which Essilor international has over 10% ownership interest. In the event that the beneficiary seizes, for any reason whatsoever, to hold any employee or corporate officer position what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been inapplicable only if he had retired at the extended age of 60 years in the normal course. 14. Without going into any dispute or any investigation, 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 argument that the Petitioner was unaware of the extension of the date of retirement vide order dated 27.07.2016 and he had normally retired at the age of 58 years as per his terms of Employment, which remained un-amended, also appears to be unacceptable. As per the retirement age of 58 years, the Petitioner would have retired in May 2017, but the Notice for Change in Date of Retirement was issued on 27.07.2016 itself, almost a year back and when he was still in regular service. His suspension, initiation of investigation and final exit occurred only in 2018. Thus from May 2017 he continued to serve the Company till 21.09.2018 (and further till 31.12.2018 on Garden Leave), with the same rights and liabilities under the original Agreement and the same terms, remuneration and perks, including Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, the letter of extension of age etc. Issues raised by the Petitioner, namely his being unaware of the letter of extension of date of retirement, that the terms of the Performance Shares did not exclude him from his entitlement, that the investigations contemplated against him by the Company were ill founded and without proper opportunity being provided, interpretation of his acknowledgement of full and final settlement etc. are matters that require investigation and cannot be undertaken in these summary proceedings under the Code. The Hon'ble NCLT, Mumbai Bench, in the case of Shri Ajit Narayanan Rane v. You 1st Money Express Pvt. Limited clearly held, on similar lines that whether full and final settlement arrived at would include all dues of the operational Creditor such as ESOPS, was a matter that required investigation 17. We said earlier that proceedings under the Code cannot be initiated for recovery alone. In the present case no case has been made out that the Corporate Debtor was insolvent, had lost its substratum and its ability to repay its debts. The Petitioner has filed a copy of the Annual Return of Essilor India Pvt. Ltd in Form No. MGT-7 filed under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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