2020 (10) TMI 322 - Tri - Insolvency and Bankruptcy

Tribunal Upholds Creditor's Petition, Emphasizes CIRP Compliance

Prasun Sengupta Versus New Kolkata International Development Private Limited

The Tribunal found in favor of the operational creditor, upholding the validity and maintainability of the petition based on the employment agreement ... Maintainability of application - initiation of CIRP - Salary, retention bonus and other dues of former employees - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Non-propsal of name of IRP - HELD THAT:- no material has been brought on record to show that operational creditor who was CEO of the company was in fact communicating with unauthorised person. In the case of Mobilox, the Hon'ble Supreme Court had clearly held that feeble contentions regarding pre existing dispute or other aspect cannot be given undue weightage so as to thwart the process of CIRP. In the present case, as stated earlier, a series of mails have been exchanged from the valid mail of the corporate debtor. The retention bonus has become due only on completion of the term, hence, it appears to be a case where such payment is not made merely for the reason that services have already been obtained which is quite commonly observed in real business situations when intention becomes not to pay. There is no merit in the contention of the corporate debtor for the reason that no specific format has been provided in the IBC or regulations made thereunder. In our view such Power of Attorney has been properly executed as per general practice. We are further of the view that the 'Doctrine of Substance over Form' is to be applied in case of economic legislation like IBC 2016 so that its objectives to promote entrepreneurship and economic growth coupled with balancing of interest of all stake holders are achieved - Name of IRP has not been proposed which is not mandatory for application made under Section 9 of IBC. Hence, we will appoint the IRP from the approved list maintained by IBBI. In case such person does not accept the assignment, then another person would be appointed. This application is liable to be admitted. The application is otherwise complete in all respects - application admitted - moratorium declared. Issues Involved:1. Validity and maintainability of the petition based on limitation and authority of the person signing the application.2. Claimed dues of the operational creditor under the employment agreement.3. Technical objection regarding the validity of the Power of Attorney.4. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.Issue 1: Validity and Maintainability of the PetitionThe operational creditor, who was the CEO of the corporate debtor, claimed dues as per the terms of employment agreement. The corporate debtor challenged the petition's validity, citing limitation and lack of proper authority in communication. The operational creditor provided evidence of communication and claimed all dues were valid as per the agreement terms. The Tribunal found that notice under section 8 was served, the service was not disputed, and emails exchanged were valid. The Tribunal referred to the Mobilox case, emphasizing that feeble contentions cannot thwart the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted the authority of the person communicating in 2019 was unchallenged, and the claims were based on the agreement terms.Issue 2: Claimed Dues of the Operational CreditorThe operational creditor claimed various dues such as retention bonus, LTA, leave encashment, bonus, and gratuity as per the employment agreement. The corporate debtor disputed the claims, alleging the dues were not valid under the agreement. The Tribunal observed that the retention bonus became due only on completion of the term, indicating a possible intention not to pay despite services rendered. The Tribunal decided based on the material on record, supporting the operational creditor's case regardless of observations.Issue 3: Technical Objection regarding Power of AttorneyThe corporate debtor raised a technical objection regarding the validity of the Power of Attorney, claiming it was not in the proper format. The operational creditor argued that due to serious illness, the Power of Attorney was executed correctly. The Tribunal held that no specific format was mandated under the IBC or regulations, and the Power of Attorney was properly executed based on general practice and the Doctrine of Substance over Form.Issue 4: Appointment of Interim Resolution Professional and Declaration of MoratoriumThe Tribunal admitted the application under sections 8 and 9 of the Insolvency & Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the corporate debtor. A moratorium was declared, and a public announcement was ordered in accordance with relevant sections of the IBC. The Tribunal appointed an Interim Resolution Professional, declared the moratorium's effects and restrictions, and directed necessary public announcements. The Tribunal set guidelines for the IRP, including fee payment and time-bound resolution process.In conclusion, the Tribunal admitted the application, declared a moratorium, appointed an IRP, and provided detailed orders for the resolution process, emphasizing adherence to legal procedures and regulations.