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TMI Blog2024 (3) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 61 of Insolvency and Bankruptcy Code 2016 ( IBC in short) by the Appellant arises out of the Order dated 02.03.2023 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court-III) in CP(IB) No.1108/ND/2019. By the Impugned Order, the Adjudicating Authority has dismissed the Section 9 petition filed by the Appellant seeking to bring the Corporate Debtor under the rigours of Corporate Insolvency Resolution Proceedings ( CIRP in short). Aggrieved by this impugned order, the present appeal has been preferred. 2. Making his submissions, the Learned Counsel for the Appellant stated that the Appellant/Operational Creditor was appointed as General Manager in the Corporate Debtor company-M/s Collage Group Infrastructure Private Limited ( Collage in short) on 10.10.2014. The Corporate Debtor also issued a confirmation of appointment letter which shows that the Appellant was an employee of the Corporate Debtor. In due course of time, the Corporate Debtor failed to release timely payments of salary and eventually salary payments came to a halt from 2015 onwards. The Appellant submitted his resignation on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Corporate Debtor had given a full and final settlement statement and thereby agreeing to clear the entire outstanding debt due to the Appellant, it was clear from this wilful admittance of debt that the Appellant was working with the Corporate Debtor and not with any separate entity. While admitting that the settlement agreement was signed by one of the representatives of MNT, it was clarified that the latter was governed and operated by the same staff/management of the Corporate Debtor and that there existed 100% shareholding between the two entities. It was further submitted by the Appellant that the Adjudicating Authority should have considered all relevant facts and evidence and pierced the corporate veil to find out the real status of MNT that it was not actually a separate entity. 7. The Learned Counsel for the Respondent refuting the submissions made by the Appellant submitted that the period for which the Appellant worked with the Corporate Debtor, that is, from October 2014 to March 2015, he got paid his monthly salary regularly by the Corporate Debtor. Subsequently, when the Appellant got transferred to MNT, there remained no privity of contract between the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. It has been the counter submission of the Respondent that the settlement deed to which the Appellant has adverted attention to had been correctly noticed by the Adjudicating Authority to have been signed between the Appellant and MNT and not with the Corporate Debtor. The Corporate Debtor was not obligated to honour the terms of a settlement deed which was signed between the Appellant and some entity other than the Corporate Debtor. Emphatically asserting that the doctrine of privity of contract is a settled principle of law under which a third party cannot be made liable under contract unless he is a party to the said contract and applying this principle, the Corporate Debtor was not liable in any manner to discharge the liability of a different legal entity. It was therefore contended that the Adjudicating Authority in the impugned order reached the correct finding that there exists no rightful claim of the Appellant against the Corporate Debtor as he was not an employee of the Corporate Debtor. 13. When we have a look at the impugned order, we notice the Adjudicating Authority has analysed in details the tenability of the contention of the Corporate Debtor that the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own separate commercial interests. 8. In the light of the decision referred to supra, the Hon ble Supreme Court held 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/liabilities of the subsidiary. It is clear from the perusal from the Full Final Settlement Agreement executed between the parties that, applicant rendered his services to M/s MNT Infratech Private Limited working under the same management. Therefore, it appears to us that the services of the Operational Creditor was placed with M/s MNT Infratech Private Limited, with is a separate Company and Operational Creditor continued his services with the side Company. 9. Taking into consideration all the aforesaid facts, we are of the view that, the Operational Creditor has failed to prove existence Operational Debt which is payable by the Corporate Debtor. Thus, we have no hesitation to hold that, the claims raised by the Operational Creditor against the Corporate Debtor i.e. M/s Collage Group India Private Limited are neither tenable in the eyes of law nor on facts. 15. We are of the considered opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been laid down by the Hon ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Private Limited (2018) in C.A. No.9405 of 2017 (hereinafter referred to as Mobilox ). It is relevant to refer to para 56 of Mobilox supra which is extracted as hereunder: - 56. Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. 18. It is the case of the Respondent that the Appellant had sent a legal notice on 11.04.2017 as placed at page 40 of Reply Affidavit of the Respondent. The legal notice was duly replied to by the Corporate Debtor on 10.05.2017 as placed at page 44 of Reply Affidavit of the Respondent. We notice that in their reply, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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