TaxTMI 
TaxTMI 
2025 (5) TMI 583
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.... the case was remanded back to AA for necessary orders post-admission of the Section 9 Application. The Respondent assailing the order dated August 25, 2022, filed a Civil Appeal No. 5923 of 2022 ("Civil Appeal") before the Hon'ble Supreme Court of India, which vide its order dated August 14, 2024 remanded the case to this Appellate Tribunal for consideration as to whether after the relinquishment of the position of CFO, the Appellant was entitled to the same emoluments and perks in his capacity as a Director of the Respondent. The Hon'ble Supreme Court directed the parties to reagitate before this Appellate Tribunal with supporting documents. 2. Accordingly, this matter was taken up by us. Before proceeding further, we note the relevant orders of the Adjudicating Authority of 29th January 2020, which are instructive to be extracted as below: "14. In the lights of aforesaid provision, when we shall consider the case in hand, then we find, in response to the demand notice, notice of dispute has been raised by the Corporate Debtor's and that was duly delivered to the Operational Creditor. When we have gone through the reply to the demand notice, which is available at Page....
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....tion benefits till 31.3.2019 for his work as CFO, he is entitled to receive payment for the period 1.4.2019 till 20.5.2019 for his work as WTD, which is an operational debt in default and payable by the corporate debtor. 17. On the basis of aforementioned detailed discussion, we are of the view that the Adjudicating Authority has erroneously dismissed Appellant's application under section 9. We, therefore, set aside the Impugned Order and order admission of the section 9 application. The case is sent to the Adjudicating Authority for passing necessary order after the admission of section 9 application. The appeal is accordingly disposed of with these directions." 4. The Respondent assailing the order dated August 25, 2022, filed a Civil Appeal No. 5923 of 2022 ("Civil Appeal") before the Hon'ble Supreme Court of India. The Hon'ble Supreme Court of India vide its order dated August 14, 2024 noted as follows: "1. The instant appeal is directed against the judgment dated 25.08.2022 passed by the National Company Law Appellate Tribunal, New Delhi (in short, the "Appellate Tribunal"), whereby claim of the respondent for payment of emoluments for the period from 01.0....
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.... and the matter is remitted to the Appellate Tribunal for re-determination of the claim. 8. It is clarified that we have not expressed any Opinion on the merits of the case. The Appellate Tribunal will decide the issue(s) as per their own merits and on consideration of the records, as may be relied upon by the parties." [ emphasis supplied ] 5. As noted above in the orders of Hon'ble Supreme Court, the impugned judgment dated 25th August 2022, passed by this appellate tribunal was set aside and as per the orders of the Hon'ble Apex Court, we are taking up redetermination of the claim of the Appellant. The counsels of both sides were heard and we have also perused the additional affidavit on behalf of the Appellant, which was filed post the orders of Hon'ble Supreme Court and the reply on behalf of the Respondent to the additional affidavit filed by the Respondent. 6. The issue for our determination emerges from the following observations of Hon'ble Supreme Court which are extracted as follows: "We find from paragraph 16 of the impugned judgment that the respondent was a whole-time Director or that there was an obligation on the appellant-Company to ....
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.... any vehicle, computer, mobile phone, subscriptions for phone and internet, office stationery, books and documents etc, entrusted to his/her for care and charge. The Company reserves the right to deduct the money value of such property from the money payable to the Employee or take such action as may be deemed proper, in the event of the Employee fails to account for such property to the satisfaction of the Company. (b) return to the Company all lists of clients or customers, correspondence and all other documents, papers, records, software programs, media and any other properties including any copies/ duplicates thereof in any form which may have been prepared by him/her or may have come into his possession during the term of his/her employment and shall not retain any copies. ... 9. GOVERNING LAW AND JURISDICTION The provisions of this Appointment Letter shall be governed and construed in accordance with laws of India. Any controversy or claim arising out of, or relating to, this Agreement, or the breach hereof, shall be settled by binding arbitration to be held in English language in New Delhi, India, in accordance with the Arbitration and Con....
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....19 (termination letter). In the termination letter, the Respondent assured the Appellant that he will receive all salary and benefits as set out in the employment contract up to the date of termination i.e. 1 March 2019 (termination date), [@78 APB], including three-months' salary in lieu of the notice period, which was paid. 12. But as per the Act's Company Act 2013 requirements he was removed as a Whole-Time Director vide a resolution passed at the extraordinary general meeting on May 20, 2019. The relevant extracts of the letter by which he was removed as Chief Financial Officer is also extracted as below: "As you know following our recent discussions, it has been decided that your employment with SAAB India Technologies Private Limited (the Company) will terminate with effect from 1 March 2019 (Termination Date) by reason of redundancy of your position. The Company is restructuring the organization structure to reflect the country unit structure and size of the company. 1. In accordance with the terms of the letter of appointment dated 10 March 2014 signed and accepted by you on 12 March 2014 (employment Contract), the Company will pay you 3 months' salary ....
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....board meeting and AGM appointing the Appellant as Whole-Time Director - which mention no remuneration to be paid to the Appellant. Minutes of the AGM meeting are at @ Pg. nos. 147-148 of VoL I of the APB. 14. It is on record that Schedule I of the termination letter provided the below details of the payout to the Appellant. S. No Head Amount (in Rs) 1. Payment of accrued but unpaid salary 31,666/- 2. Payment of wages in lieu of notice 2,850,000/- 3. Payment in lieu of accrued but untaken annual leave as on the termination date To be confirmed before 15 March 2019 4. Payment of gratuity calculated in accordance with Payment of Gratuity Act, 1972. 1,370,192.31/- The above amounts were not disputed by the Appellant at the time of payment or even in the Petition. The termination letter was issued in full compliance with the employment contract and law. The Appellant has tried to indirectly claim that although his employment as CFO was terminated on 1 March 2019, yet from 2 March 2019 to 20 May 2019, he continued to be a Whole-Time Director of the Respondent, for which he had to be paid salary and other dues. We also note that Form No. ....
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....ndia." 16. We find that as per this article, the payment of remuneration to the Appellant as a Whole-time Director had to be approved by way of a resolution passed by the Board of Directors. However, no such resolution passed by the Board is placed on record, which can help the Appellants' case. We also do not find any other document on record demonstrating that the Board had approved payment of remuneration to the Appellant for his position as a Director. Appellant's reliance on Article 49 of the AoA, is also misplaced as Article 49 does not provide for payment of remuneration to a Whole-time Director as a matter of course, but makes it subject to other articles in the AoA. It is instructive to note this article as extracted below: "... 49. All other remuneration, if any, payable by the Company to a Director, whether in respect of his services as a Director in the whole time or part time employment of the Company, shall be determined in accordance with and subject to the provisions of the Act and these Articles" Thus, we find that Article 49 clearly states that payment of any remuneration to a director has to be approved by the Board and no such board r....
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....these monies were paid to a director for their directorship in the company. 20. The Appellant was last drawing a monthly salary of Rs. 9,50,000 as the CFO at the time of termination of his employment. The Appellant was appointed as the Whole-time Director of the Respondent by way of board resolution dated 28 September 2015 and Annual General Meeting (AGM) dated 29 September 2015. The Appellant's employment as the CFO was terminated in accordance with Clause 8.1 of the Employment Contract vide Termination Letter dated 1 March 20l9. Thereafter, by Payment Letter dated 20 March 2019, the Respondent informed the Appellant about the details of the full and final payment of Rs. 43,72,704 (after making necessary deductions of PF, income tax, etc.) that was paid to the Appellant as the final payment in connection with his employment. We find that Respondent while conveying the termination benefits on 31st March 2019, pointed out in this letter that the respondent has received a notice from Mr Santosh Kumar Giri on behalf of the Appellant and it will be responded in detail in due course. [@100 APB]. Immediately thereafter, on 15th March 2019 the Appellant issued a notice for revocati....
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....gly" [emphasis supplied] 22. Later on, when Appellant's demand Notice under Section 8 of the Code was sent to the Respondent on July 23, 2019, the Respondent denied liability, raising disputes that the Appellant's claims are baseless. Consequently, the Appellant initiated insolvency proceedings. However, the NCLT dismissed the Petition, holding that there were pre-existing disputes between the parties. Aggrieved by this decision, the Appellant had approached the National Company Law Appellate Tribunal (NCLAT) seeking to set aside the Impugned Order, which was allowed but was appealed by the Respondent before Hon'ble Apex Court and this matter is being heard as per the remand back by Hon'ble Apex Court. 23. After hearing counsels of both sides and perusing materials placed on record, we find that the Appellant was appointed as Chief Financial Officer (CFO) w.e.f. 01.05.2014 by an employment contract dated 10.03.2014. Later on the Appellant was appointed as the Whole Time Director (WTD) of the Respondent by way of Board Resolution dated 28.09.2015 along with the Annual General Meeting (AGM) dated 29.09.2015. It is to be noted that the Appellant was appointed as WTD bec....
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....the contention of the Respondent that since Article 48 provides that the remuneration to a Director has to be approved by the board and no such board resolution was passed, the Respondent is not liable to pay any amount to the Appellant. 25. We also agree with the arguments of the Respondent that the Appellant has been paid salary till 31 May 2019 for the notice period. We note that the Respondent was already paid salary in lieu of three-months' employment to the Appellant (i.e. salary for the period 1 March 2019 to 31 May 2019), whereas the Appellant was removed from the Board of the Respondent much prior to 31 May 2019. Even if any amount from the previous salary payments were due to him for being a director of the Respondent, all such amounts up to the date of his removal were already paid. And therefore, Appellant cannot claim any additional amounts from the Respondent other than the amount that has already been paid and accepted by the Appellant. 26. The Appellant has relied on various documents which show him as a WTD in the MCA master data, salary increment letter and salary slips for the month of February and March 2019. As has been discussed earlier, he was desig....
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....the same emoluments and perks in his capacity as a Director of the Company. We also do not find any documents on record, which substantiate the claim of the Appellant that he was liable to be paid the same emoluments as a CFO for the short period, till his appointment as a WTD was formally revoked as per the Act. 29. From the above analysis, we conclude that the Appellant was initially appointed as a CFO. Later on, being a CFO he was designated as WTD. On his termination, all terminal benefits were paid to him. The required formalities to remove him as a Director of the Company needed some approvals of the board as well as AGM which took time. During this interim period from 01.03.2019 till 20.05.2019, he was not working as CFO and therefore Appellants' claim that he was working as a WTD is not based any material on record. Therefore, his claim for same emoluments and perks in his capacity as a Director of the Company is devoid of any basis. We therefore cannot accept the claim of the Respondent that he is liable to be paid as a Director of the Company. 30. Furthermore, there has been a dispute regarding his termination which he had raised immediately after his services were ....