2021 (7) TMI 1118 - Tri - Insolvency and Bankruptcy

Adjudicating Authority admits Section 9 application for Corporate Insolvency due to salary non-payment

The Adjudicating Authority admitted the Section 9 application under the Insolvency and Bankruptcy Code, initiating Corporate Insolvency proceedings ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The Adjudicating Authority is of the view that the Corporate Debtor in its reply to the demand Notice dated 19.12.2019 does not dispute the fact that the salary to the Operational Creditor has to be paid however, a condition has been laid that the Operational Creditor has to first recover the outstanding dues of ₹ 10,00,000/- from the customers therefore, it is a clear admission of default and this Adjudicating Authority does not have to indulge in the details or the terms of the Contract/Appointment letter. Pre-existence of dispute - HELD THAT:- The Corporate Debtor has rendered two different dates i.e. 10.12.2019 and 19.12.2019 for the alleged legal notice. The alleged dispute raised in the said legal notice is an afterthought and contrary to the stand taken by the Corporate Debtor. The Corporate Debtor has failed to produce any tracking report which could depict that the said Legal Notice dated 19.12.2019 was ever delivered to the Operational Creditor - thus, the defense of pre-existence of dispute can be categorized as a moonshine dispute. The application is admitted - moratorium declared. Issues:- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency process initiation.- Dispute over unpaid salary between Applicant and Corporate Debtor.- Corporate Debtor's defense of pre-existing dispute and jurisdictional issue.- Adjudicating Authority's decision on the application and appointment of IRP.Issue 1: Application under Section 9 for Corporate Insolvency:The Applicant filed an application under Section 9 of the Insolvency and Bankruptcy Code, seeking to initiate the Corporate Insolvency process against the Corporate Debtor due to non-payment of salary amounting to Rs. 8,07,750. The Corporate Debtor failed to make the payment despite several follow-ups, leading to the issuance of a Demand Notice under section 8 of the Code.Issue 2: Dispute over unpaid salary:The Applicant, a former employee of the Corporate Debtor, alleged non-payment of salary from December 2018 to May 2019. The Corporate Debtor claimed that the Applicant failed to collect outstanding dues from customers, resulting in a dispute over the salary payment. The Corporate Debtor's response to the Demand Notice highlighted the alleged outstanding dues of Rs. 10,00,000 and the Applicant's responsibility for collection as per the appointment letter terms.Issue 3: Corporate Debtor's defense and jurisdictional issue:In its reply to the Section 9 Application, the Corporate Debtor raised the issue of pecuniary jurisdiction and asserted a counter-claim of Rs. 10,00,000 against the Applicant. The Corporate Debtor argued that the Operational Creditor's application should be dismissed due to the jurisdictional limit set by the Ministry of Corporate Affairs. However, the Adjudicating Authority found the Corporate Debtor's defense unsubstantiated and admitted the application, citing the lack of a valid pre-existing dispute.Issue 4: Adjudicating Authority's decision and IRP appointment:The Adjudicating Authority analyzed the facts and evidence, concluding that the Corporate Debtor's response did not dispute the salary payment obligation. The Authority dismissed the Corporate Debtor's claim of a pre-existing dispute as unsubstantiated and ordered the commencement of the Corporate Insolvency Resolution Process (CIRP). Additionally, the Authority appointed an interim resolution professional (IRP) to oversee the resolution process and imposed a moratorium under Section 14 of the Code.In conclusion, the Tribunal admitted the application, appointed an IRP, and imposed a moratorium, emphasizing the need for resolution of the salary payment dispute through the insolvency process.