2020 (2) TMI 1552 - Tri - Insolvency and Bankruptcy

Insolvency Petition for Unpaid Salary: Operational Creditor vs. Corporate Debtor

The Operational Creditor filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, alleging non-payment ... Maintainability of application - initiation of CIRP - Corporate Debtors failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The total outstanding as overdue salary amount is ₹ 4,90,709/- plus interest @18% P.A. from 14.02.2019 till the realisation of outstanding amount is ₹ 4,22,447/-. Petitioner was appointed on false representation by OC's husband Mr. Ranjeet Singh working in-charge of production in the Machine Shop. He informed that OC was well qualified and can work as Assistant Engineer-Design and thus used his influence and position in the company to get higher salary. As a matter of fact, the OC did not attend office and wasn't competent and qualified and the OC suffered with respect to quality and loss of business of several lacs besides loss of repetition in international market which is entirely on account of the petitioner. Issues Involved:1. Petition filed under Section 9 of Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.2. Allegations of withholding salary by the Corporate Debtor leading to financial hardship for the Operational Creditor.3. Claim for outstanding salary and interest by the Operational Creditor.4. Counter-allegations by the Corporate Debtor regarding the competency and attendance of the Operational Creditor.Issue 1: Petition under Section 9 of Insolvency and Bankruptcy Code, 2016The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Operational Creditor, identified as 'Asha Devi,' alleged non-payment of outstanding salary by the Corporate Debtor, 'M/S. Karan Motors Private Limited,' leading to financial distress.Issue 2: Allegations of Withholding SalaryThe Operational Creditor, who was employed as an Assistant Engineer-Design, claimed that the Corporate Debtor started withholding salary without any valid reason, causing financial hardship. The salary withholding began with minor delays and escalated to several months, impacting the Operational Creditor's financial stability and leading to extreme hardship.Issue 3: Claim for Outstanding Salary and InterestThe Operational Creditor requested the Corporate Debtor to clear the outstanding salary multiple times, but the payments were continuously withheld, resulting in a significant overdue amount. The total outstanding salary, along with interest at 18% per annum, amounted to a substantial sum. Despite demands and legal notices, the payment remained outstanding, exacerbating the financial difficulties faced by the Operational Creditor.Issue 4: Counter-Allegations by the Corporate DebtorIn response to the application, the Corporate Debtor raised counter-allegations, claiming that the Operational Creditor was appointed based on false representations. The Corporate Debtor alleged that the Operational Creditor's attendance and competency were questionable, leading to quality issues and business losses. The Corporate Debtor contended that the Operational Creditor's actions had a negative impact on the company's reputation and international market standing.This judgment highlights the legal implications of non-payment of salaries, the process of initiating insolvency proceedings under the Code, and the importance of addressing financial disputes between operational creditors and corporate debtors. The detailed analysis of the issues involved provides a comprehensive understanding of the case and the legal arguments presented by both parties before the National Company Law Tribunal.