TaxTMI 
TaxTMI 
2022 (11) TMI 863
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.... 7,53,000/- (Rupees Seven Lakhs Fifty-Three Thousand Only) and credit/make payment of TDS of Rs. 45,000/- (Rupees Forty-Five Thousand Only) in respect of Applicant No. 1 for the months of September 2020 and October 2020 towards salary during the CIRP period along with interest at the rate of 18% p.a. from the date when the payment was due till payment and/or realization. iii) As regards the Applicant No. 2, direct the Resolution Professional of AMW Autocomponent Limited i.e., the Corporate Debtor herein, to release the lawful dues of the Applicant No. 2 amounting to Rs. 8,09,718/- (Rupees Eight Lakhs Nine Thousand Seven Hundred and Eighteen Only) and credit/make payment of TDS of Rs. 1,86,786/(Rupees One Lakh Eighty-Six Thousand Seven Hundred and Eighty Six Only), PT amount of Rs. 400/- (Rupees Four Hundred Only) and Provident Fund contribution of Rs. 36,000/- (Rupees Thirty-Six Thousand Only) in respect of Applicant No. 2 for the months of September 2020 and October 2020 towards salary during the CIRP period along with interest at the rate of 18% p.a. from the date when the payment was due till payment and/or realization. iv) As regards, Applicant No. 3, direct the Resolution ....
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....nal. The CoC in its 1st and 2nd meeting discussed on the salaries of the Applicant but did not came on any conclusion. Thus, by notice dated 28.10.2020 Applicants had given their resignation from their respective posts/director of the Corporate Debtor to the Resolution Professional. iii) Since the Applicants had not received any communication with regard to their salaries, they had addressed a letter dated 02.02.2021 to the Resolution Professional and requested to clear their salaries. Copy of letter is annexed. iv) The payment to all other employees pending CIRP was made and only the salaries of Applicants were not made because Applicants were holding senior managerial/acting as vice President/director of the Corporate Debtor. Since no payment was made, hence this Application. 4. The Respondent No. 1 CoC has filed its reply and submits as under: i) The Applicants being the directors are the related party of the Corporate Debtor and any payment to them would fall under related party transactions as per Section 28(f) of the Code. In the 1st CoC meeting, resolution with respect to approval to undertake related party transactions was rejected as it did not receive requisite vot....
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....are not the promoters or contributors of the Corporate Debtor. The Respondents are not entrusted with the power to consider whether the same should be paid or not. The Applicants further submit that even though the Applicants being the directors of the Corporate Debtor fall within the ambit of related party as defined under Section 5 (24) (a) of the Code, the salary/remuneration which they are entitled to receive does not qualify as related party transaction under the Code. 7. Thereafter in compliance of Order dated 02.11.2021 the Respondent No. 2 Resolution Professional had filed an affidavit and submitted that proposal for payment of salaries of the Applicant was placed once again before CoC in its 23rd meeting held on 26.11.2021 and majority of the members of the CoC in their wisdom decided to contest the Application. 8. The Applicant has filed its written submissions and reiterated the submissions already made in its pleadings. 9. The Respondent No. 1 CoC filed written submissions and made following submissions: i) The Applicant No. 2 & 3 has admitted in Form DIR- 12 filed by the Corporate Debtor that they are promoters. Form DIR-12 is annexed with the Application. ii) T....
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....subsidiary of a holding company to which the corporate debtor is a subsidiary; (j) any person who controls more than twenty percent of voting rights in the corporate debtor on account of ownership or a voting agreement; (k) any person in whom the corporate debtor controls more than twenty percent of voting rights on account of ownership or a voting agreement; (l) any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor; (m) any person who is associated with the corporate debtor on account of- (i) participation in policy making processes of the corporate debtor; or (ii) having more than two directors in common between the corporate debtor and such person; or (iii) interchange of managerial personnel between the corporate debtor and such person; or (iv) provision of essential technical information to, or from, the corporate debtor;" 12. It is an admitted fact that the Applicants were part of suspended board of directors of the Corporate Debtor on the date of initiation of CIRP of the Corporate Debtor and even after initiation of CIRP as they had resigned from the post of directors on 28.10.2021. Thus....
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....ctor holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise; (ii) where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise; (b) the expression "arm's length transaction" means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest. (2) Every contract or arrangement entered into under sub-section (1) shall be referred to in the Board's report to the shareholders along with the justification for entering into such contract or arrangement. (3) Where any contract or arrangement is entered into by a director or any other employee, without obtaining the consent of the Board or approval by a resolution in the general meeting under sub-section (1) and if ....
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....ess of the amount as may be decided by the committee of creditors in their meeting; (f) undertake any related party transaction; (g) amend any constitutional documents of the corporate debtor; (h) delegate its authority to any other person; (i) dispose of or permit the disposal of shares of any shareholder of the corporate debtor or their nominees to third parties; (j) make any change in the management of the corporate debtor or its subsidiary; (k) transfer rights or financial debts or operational debts under material contracts otherwise than in the ordinary course of business; (l) make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors; or (m) make changes in the appointment or terms of contract of statutory auditors or internal auditors of the corporate debtor. (2) The resolution professional shall convene a meeting of the committee of creditors and seek the vote of the creditors prior to taking any of the actions under sub-section (1). (3) No action under sub-section (1) shall be approved by the committee of creditors unless approved by a vote of sixty-six percent of the voting shares. (4) Where any ....
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....ate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. " 18. In light of the observations of Hon'ble Supreme Court, we are of the opinion that the decision of COC should not be interfered with, since the Resolution Professional had time and again placed proposal before CoC for payment of salaries to the Applicants and CoC after detailed deliberations rejected the proposal. If in commercial wisdom the CoC has rejected the resolution for payment of salary to the Applicants, the question of reversing the decision cannot be considered. Moreover, the Applicants being the promoters and persons associated with the management of the Corporate Debtor are statutorily obligated to extend all assistance to the Resolution Professional in managing the affairs of the Corporate Debtor. 19. Section 19 of the Code provides as under: Section 19. Personnel to extend co-operation to interim resolution professional.- (1) The personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor shall extend all ass....