1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BRANCH
CHENNAI
(APPELLATE JURISDICTION)
COMPANY APPEAL (AT)(CH)(INS) No.26/2022 (Arising out of order dated 12.11.2021 passed by the 'Adjudicating Authority', National Company Law Tribunal, Hyderabad Bench, Hyderabad in CP(IB)/No.791/9/HDB/2019)
In the matter of:
Ms A. Chandani,
D/o Mr Anand Gupta, R/o 15-A, Chakravarthy Nagar, Aynavaram, Chennai 600023 Appellant Vs
M/s Sryas Holistic Remedies Private Ltd,
Rep by Mr. Kota Siva Kumar, Registered office at Centre Point Building, 3rdFloor, 359-363/301, SP Road, US Consulate Lane, Begumpet, Secunderabad, Telengana -16
Present:
Mr. G Abraham Prabhu, Mr Vijay Gurudass, Advocates for Appellant.
JUSTICE M. VENUGOPAL, MEMBER (J)
BACKGROUND:
The 'Appellant/Operational Creditor' has preferred the instant Company Appeal (AT)(CH)(Ins) No.26/2022 being dissatisfied with the order dated 12.11.2021 in CP(IB)No.791/9/HDB/2019 passed by the 'Adjudicating Authority', (National Company Law Tribunal, Hyderabad Bench).
2
2. The 'Adjudicating Authority', (National Company Law Tribunal, Hyderabad Bench) while passing the impugned order dated 12.11.2021 in CP(IB)No.791/9/HDB/2019 (Filed by the 'Appellant'/Operational Creditor/Applicant under Section 9 of the I&B Code 2016 r/w Rule 6 of the I&B (AAA) Rules, 2016) at paragraph 5 to 11 had observed the following:-
"5.We have heard the Learned Counsel for Operational Creditor and Learned Counsel for Corporate Debtor. The Learned Counsel for Operational Creditor would contend that after attending an interview Ms A Chandani was offered the post of Assistant Clinic Manager vide Letter of Intent dated 14.08.2014 with Date of Joining as 01.09.2014 with a salary of Rs.30,000/- per month and with her sheer hard work, skill and expertise, she was steadily progressing and received consistent praises for her dedication towards work and constantly raised her pay for the same. Due to martial life problems, she had requested the company for a transfer from Hyderabad to Chennai which was granted by the company. Subsequently, to stay away from miserable life she Dr. Divya. However after returning from Bali, the 2 persons being Doctors were not reported and the Operational Creditor warned and condemned. Totally dejected at their response, since she was already suffering a set back in personal life, could not get peace even in the work place.
6. The counsel for Operational Creditor would contend that she was alone suspended for going to Bali vide email dated 05.10.2018 of the Corporate Debtor and assured that settlement would be done by December, 2018 with all employee benefits as decided by the MD with pending back
3
wages vide email correspondence and was also assured of no legal impediment to join any other organisation. The counsel would contend that contrary to such assurances and suppressing what she was legally entitled she was not given even salary for last month of work.
7. The learned counsel for Operational Creditor would also contend that with exchange of mails, the Corporate Debtor have admitted to their liability to pay the salary due amount kept pending on saying since she was a friend with a doctor Ms Charanya, who allegedly having disputes with the company. The Corporate Debtor paid TDS for the unpaid salary and deducted Provident Fund for the said amounts.
8. We have heard the Counsel for Corporate Debtor. The counsel for Corporate Debtor would contend that the claim of the entire amounts made by the Operational are false and are denied. The counsel would contend that the Operational Creditor went on a vacation to Bali despite leave being not sanctioned which is in complete violation of the terms and conditions of appointment and thereby causing termination of services.
9. The Counsel for Corporate Debtor would also contend that after the causing huge loss to the Corporate Debtor as such the Operational Creditor is guilty of gross misconduct. The amounts which had to be refunded to the Corporate Debtor is Rs.2,13,000/- during the period from September, 2018 to January, 2019. In fact, the Corporate Debtor was seriously considering taking legal action for recovery of the amounts from the Operational Creditor.
4
10. The counsel for Corporate Debtor would also contend that the Operational Creditor influenced other two Doctors and staff to have the organisation and joint a competitor which amounts to gross misconduct and poaching of staff and sharing crucial information of the Corporate Debtor with the competitors.
11. We have thoroughly perused the records and heard the submissions made by the Counsel for Petitioner and Counsel for Respondent. Prima facie there is a breach of Employment Contract, she went outside without sanction of any leave or permission."
and consequently dismissed the 'Application'.
APPELLANT'S SUBMISSIONS:
3. The Learned Counsel for the Appellant/Applicant/Operational Creditor submits that the 'impugned order' passed by the 'Adjudicating Authority', (National Company Law Tribunal, Hyderabad Bench) had failed to appreciate that the 'Email correspondence' exchanged between the Appellant/ Operational Creditor and the Respondent/Corporate Debtor, wherein it was admitted that her settlement would be made, based on the 'Notice Rules', i.e. payment of 2 months' salary, in lieu of 'Termination' and the said fact was even mentioned in her 'Appointment Letter'.
4. According to the Learned Counsel for the Appellant, the Appellant's employment was terminated for taking 'unsanctioned leave' and that was the reason she was given two months' salary in lieu of 'Termination' resting on 'Notice Rules' of the Company as per their employment letter.
5
5. The Learned Counsel for the Appellant points out that the 'Appellant' had spent a short vacation in 'Bali' with Doctor of the Respondent's Company (including Dr. Charanya, Dr Charisma and Dr Divya) and after returning from Bali alongwith their colleagues, the other two colleagues, being the Doctors had not reported, but since the Appellant was just a 'CRM Manager' she was warned and condemned by the Respondent.
6. The Learned Counsel for the Appellant brings to the notice of this 'Tribunal' that the 'Appellant' was suspended from the Respondent's company for a visit to 'Bali' as per Email dated 05.10.2018 and the Doctors were spared for reasons unknown.
7. The Learned Counsel for the Appellant points out that the Appellant had decided to take a break from her professional life, later the same was conveyed to the Respondent's company Head HR(Mr. Kota) and the HR (MR. Gopal) who has known the Appellant, since the beginning and had assured the Appellant that a settlement would be made by December, 2018 with her employee benefit, as determined by the Managing Director, (Dr. Prashant), with pending 'Back Wages' through 'Email Correspondence' and was also assured of no legal impediment to join any other Organisation.
8. According to the Learned Counsel for the Appellant, the Appellant was not granted her salary for last month of work and all the requests made by the Appellant were in vain and that she was never given a due settlement, which she is supposed to receive. A salary of Rs.1,95,000/- is due, apart from other incentives, to be received by the 'Appellant' and she had left the employment with a hope that the said sum would be paid within a short span
6
of time. Moreover, after due enquiry, it was found that since the Appellant was a friend with the Dr. Ms Charanya who allegedly was having disputes with the Company, the Appellant was denied her legal dues and further that the Respondent/Company had even paid the 'Tax Deduction at Source' for her unpaid salary and deducted her provident fund for the said months.
9. The Learned Counsel for the Appellant submits that the Appellant had issued a legal notice to the Respondent requesting for a full and final settlement dated 29.05.2019 and the same was replied by the Respondent dated 22.06.2019 wherein unreasonable excuses for settling the amount were given and that the 'Appellant' had issued a Notice on 22.07.2019 under 'Form 3', as per the I&B Code, 2016 claiming a sum of Rs.3,74,004/- from the Respondent Company and the same was replied dated 09.08.2019 with tall claims, though admitting the Appellant's legal dues.
10. The Learned Counsel for the Appellant contends that the for the repayment of 'Operational Debt', the Appellant filed a CP(IB) No.791/9/HDB/2019, as per Section 9 of the I&B Code against the Respondent and since, the 'Adjudicating Authority' had dismissed the Application, the Appellant has filed instant Appeal before this Tribunal, challenging the impugned order dated 12.11.2021.
EVALUATION
11. A perusal of the contents of Form 5 Application filed by the Appellant/Operational Creditor to initiate Corporate Insolvency Resolution Process under the I&B Code, 2016 (under Rule 6 of the Insolvency &
7
Bankruptcy (Application to Adjudicating Authority) Rules 2016 under the caption Part IV Particulars of Operational Debt it is mentioned as under:
| 1 |
TOTAL AMOUNT OF DEBT DETAILS OF TRANSACTION ACCOUNT ON WHICH DEBT FELL DUE AND THE DATE FROM WHICH SUCH DEBT FELL DUE |
Total Amount due Rs.3,74,004/- (Rupees Three Lakhs Seventy Four Thousand and Four only) Being 1. Towards salary dues @ Rs.1,95,000/- (after deducting PF & IT) per month from September, 2018 to November, 2019 (3 months). 2. Provident Fund from March 2016 to December 2018 for Rs.1,79,004/- 3. Last month from which the amount fell January, 2019. 4. Interest for the above @ 18% per annum. |
| 2 |
AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DATES OF DEFAULT IN TABULAR FORM) |
The total amount in default is Rs.3,74,004/- (Rupees Three Lakhs Seventy Four Thousand and Four only) plus interest @ 18%. And the same has been duly acknowledged by the Corporate Debtor. |
12. The Appellant in Form 3 'Demand Notice' dated 22.07.2019 addressed to the Respondent/Company had claimed a payment of the unpaid 'Operational Debt Due' amounting to Rs.3,74,004/- (salary due of Rs.1,95,000/- -after deducting PF and IT) per month from September, 2018 to November, 2019 (3 months), the Provident Fund sum being Rs.1,79,004 (from March 2015 to December, 2018), last month which the amount fell January, 2018 and the interest for the aforesaid amount @ 18% per annum.
8
13. The Respondent/Company in its Reply dated 09.08.2019 addressed to the Appellant and other had mentioned that there were no dues payable to her and that the Appellant for the reasons went on a vacation to Bali despite the leave being not sanctioned which was in complete violation of the terms and conditions of the 'Appellant's appointment' and thereby caused Termination of her services.
14. Continuing further, in the Reply Notice dated 09.08.2019 of the Respondent/Company, it was averred that subsequent to the resignation/termination, since the Appellant was the 'CRM Manager', the Final Settlement, if any, could happen only if no issues were reported in the Claim, and there were many issues that came up like many clients who were availing services, but abruptly cancelled their procedure apparently under the Appellant's influence which was 'poaching of clients' thereby causing huge loss to the Respondent/Company and, therefore, the Appellant was guilty of 'misconduct' and that the 'Respondent' has full right to terminate the Appellant's services without payment of any compensation by way of her salary/wage or otherwise, according to the undertakings given by the Appellant, while in service.
15. Besides the above, in the Reply Notice dated 09.8.2019, the Respondent/Company had mentioned that the Appellant left the organisation and apparently influenced other staff (including Doctor) to leave the organisation and join a competitor, which amounts to gross misconduct. Apart from that, the Respondent/Company had denied the sum of Rs.3,74,004/- together with interest @ 18% claimed in the Notice by the Appellant.
9
16. Before the 'Adjudicating Authority', the Respondent/Corporate Debtor had filed a Reply/Counter to CP(IB)No.791/9/HDB/2019 wherein it was among other things mentioned that there was an explicit admission in Email Correspondence of the Appellant/Operational Creditor that she was relieved from the job on 08.10.2018 and further the Appellant had confirmed that after being relieved from the job on 08.10.2018 she had not associated herself with any other company. Therefore, a plea was taken by the Respondent/Corporate Debtor that the Appellant's claim for three months' salary (which include October and November, 2018 salary) was utterly a false one and further that the Appellant/Operational Creditor has claimed two months' additional salary and according to the Appellant's own admission, she had not worked for the period.
17. The Respondent/Corporate Debtor in its Reply/Counter before the 'Adjudicating Authority' had proceeded to mention that the Appellant/Operational Creditor was fully aware that contributions to her provident fund account were regularly made and the provident fund statement for members' pass book confirmed the amounts that were already remitted by the Respondent/Corporate Debtor to the Provident Fund Account of the Appellant/Operational Creditor. As such, there is no liability on the part of the Respondent/Corporate Debtor to an extent of Rs.1,79,004/- as claimed by the Appellant/Operational Creditor in the Application filed by her before the Adjudicating Authority.
18. The Respondent/Corporate Debtor in its Reply/Counter to CP (IB) No.791/9/HDB/2019 before the 'Adjudicating Authority' had mentioned the Clause 12 of the Appellant's appointment letter which reads as under:-
10
"You shall diligently adhere to the following guidelines of the Company including to comply with the policies of the Company to conduct the affair in strict compliance with the letter and spirit of the Law and to adhere to the higher principles of business ethics. Accordingly you must avoid activities, which are in conflict or give the appearance of being in conflict with these principles and with the interests of the Company. The following are potentially compromising situation which must be avoided. Any exceptions must be reported to the Company and written approval for continuation in this regard must be obtained.
i) Revealing confidential information to outsiders or misusing confidential information. Unauthorized divulging of information in a violation of the policy whether or not for personal gain and whether or not harm to the Company is intended.
ii) Accepting or offering substantial gifts, excessive entertainment, favours or payments, which may be deemed to constitute undue influence or otherwise be improver or embarrassing to the Company.
iii) Participating in civil or professional organisation that might involve divulging confidential information of the Company.
iv) Initiating or approving any form of personal or social harassment of employees.
v) Investing or holding outside directorship in suppliers, customers or competing companies including financial speculations, where such investment or directorship might influence in any manner a decision or course of the Company.
11
vi) Improperly using or disclosing to the Company any proprietary information or trade secrets of any former or concurrent employer or other person or entity with whom obligation of confidentiality exist.
vii) Unlawfully discussing prices, costs, customers, sales or markets with competing companies or their employer.
viii) Engaging in any conduct which is not in the best interest of the Company as might be decided by an appropriate internal authority or panel construed by Manager/MD.
You shall take every necessary action to ensure compliance with these guidelines and to bring problems areas to the attention of higher management for review. Violations of this conflict of interest policy shall result in the termination of employment under the Agreement, as the breach under this clause shall be construed to be a material breach of the Agreement.
You shall conduct yourself in conformity with the code of conduct from time to time. Further, you shall carry out the instructions in letter and spirit given by the superiors, shall not disobey the instructions given and shall not indulge in any unethical practices which results in loss of productivity or which affect the deliverables."
POSITION ON CONTRACT
19. It is to be relevantly pointed out that a 'Contract' comes into existence, when the 'Terms and Conditions' of the 'Contract' were finalised. A 'proposal' when accepted gives rise to an 'Agreement'. The 'Agreement' if reduced into writing and a document is executed between the parties, affixing their
12
signature/thumb impression, such an agreement is to be a lawful one as per decision of the Hon'ble Supreme Court in the matter of Tarsem Singh V. Sukhmider Singh, reported in AIR 1998 Supreme Court Page 1400.
20. It cannot be gain said that an 'offer' is accepted when the acceptance is communicated. In reality, the communication is to be made to the 'offeror' and a communication of acceptance made to a 'third person' does not create a 'Contract' as per decision reported in Felthouse V Bindely (1862) 6 LT 157.
21. It is to be remembered that the concept of an 'offer' and 'acceptance' must be cemented on (1) certainty (2) commitment and (3) communication. Even if anyone of the aforesaid requirements/component is lacking either in the 'Offer' or in 'Acceptance', then there is no valid contract, as per decision of the Hon'ble High Court of Bombay in Kilbern Engineering Ltd V. Oil and Natural Gas Corporation Ltd reported in AIE 2000 Bom 405.
22. One cannot ignore the vital fact that Section 73 of the Indian Contract Act, 1872 deals with 'compensation for loss or damage' caused by breach of contract. When a contract is broken, the party who has suffered by such violation is entitled to receive compensation for any loss or damage caused to him from the party which had breached the Contract as per decision K. Narayana Karup V. Sankaranarayanan reported in AIR 2000 Ker Page 296.
23. In case of violation/breach of contract, a party to the Contract is not to decide as to who had committed the breach. As a matter of fact, the damages can be recovered from the party who had committed the violation, only after the same is decided. Section 74 of the Indian Contract Act relates to 'Compensation for breach of contract where penalty stipulated for'.
13
24. Furthermore, in Law, a party who had violated, is to make compensation, in regard to the direct consequences flowing from the said violation and not in respect of loss or damage indirectly or remotely caused as per decision Pannalal Jankidas V Mohanlal, AIR 1951 SC 145.
25. Also that the principles of awarding damages for a reasonable period/reasonable period of notice will come into play, only when the 'Contract of Employment' is not for a fixed period as per decision S.S Shetty V Bharat Nidhi Ltd reported in (1958) SCR Page 442. That apart, the damages are to be awarded as compensation for any loss or damage arising naturally in the usual course of things from the breach of contract as per decision of Hon'ble Supreme Court in Karsandas H Thacker V Saran Engg Co Ltd, reported in AIR 1965 SC 1981.
26. According to the Respondent, the Appellant/Operational Creditor was the 'CRM Manager', an important position of the branch and that many clients of the Respondent, who were availing the services of the 'Branch' had abruptly cancelled their procedures under the influence of the 'Appellant/Operational Creditor'. Which was 'poaching of clients', thereby causing huge loss to the Respondent/Corporate Debtor and, therefore, the Appellant is guilty of gross misconduct. In fact, the amounts which was to be refunded by the Corporate Debtor/Respondent is Rs.2,13,000/-, during the period September 2018 to January, 2019 and that the Respondent/Corporate Debtor was seriously considering taking legal action for recovery of the amounts from the Appellant/Operational Creditor. Under these circumstances, the Respondent/Corporate Debtor denies the claim of the Appellant/Operational Creditor of Rs.3,74,004/- together with interest @ 18% p.a.
14
CIRP UNDER I&B CODE
27. The 'CIRP' under the I&B Code, 2016 is not to be determined by a 'Court of Law'. Further, 'CIRP' is not an adversarial litigation. The proceedings under the I&B Code are summary in character. The 'Adjudicating Authority' does not determine a 'Money Claim' or 'Suit'. I&B Code is not a 'Debt Enforcement Procedure'.
PURVIEW OF REVIEW
28. While scrutinising/examining a petition/application under the I&B Code, an 'Adjudicating Authority' is to decide (a) whether there is an operational 'Debt' as per Section 4 of the Code (b) whether the documentary material/evidence submitted alongwith the Application exhibits that the aforesaid 'Debt' is 'Due & Payable' and was not yet paid (c) whether there is an existence of 'Dispute' between the Litigants/parties or the record of pendency of a 'Suit' or 'Arbitration Proceedings' filed by the receipt of 'Demand Notice' of the unpaid 'Operational Debt' pertaining to the 'Disputes' as per decision of the Hon'ble Supreme Court in Mobilox Innovations Pvt Ltd. V. Kirusa Software Pvt Ltd reported in AIR 2017 Supreme Court Page 4532.
29. If anyone of the above aid stipulations is not there, then the Application is liable to be rejected. An 'Adjudicating Authority' is required to adhere to the ingredients of Section 9 of the Code and especially, the requirement of Section 9(5) of the Act and 'admit' or 'reject' the application, depending upon the factors adumbrated under Section 9(5) of the Code, as per decision in K. Kishan V Vijay Nirman Company Pvt Ltd reported in (2018) 146 CLA 1 (SC).
ADJUDICATING AUTHORITY'S ROLE
15
30. An 'Adjudicating Authority', in examining an 'Application' (Filed under Section 9 of the Code) is to ascertain whether a Notice of Dispute was received by the 'Operational Creditor' or whether there is a 'Record of Dispute' in the Information Utility. Further, an 'Adjudicating Authority' is to find out whether the 'Dispute' in issue needs further investigation and the said 'Dispute' is not a weak one. To put it succinctly, if an 'Adjudicating Authority' is subjectively satisfied that the 'Dispute' in question is plausible one and was raised as specified under Section 8(2)(a) then the 'Adjudicating Authority' as per Section 9(5)(ii)(d) is to reject the 'Application', filed by the Applicant praying for the initiation of 'Corporate Insolvency Resolution Process'.
31. In the instant case, as per Clause 13 of the Appointment Letter of the Appellant/Operational Creditor, 'the Employment may be terminated without notice or payment in lieu of Notice, in the event of any breach of any terms of the Contract'.
32. Be that as it may, in view of the detailed upshot, this Tribunal taking note of the surrounding facts and circumstances of the present case, in an holistic manner and on a consideration of contentions advanced on behalf of the Appellant, this Tribunal comes to an irresistible conclusion that there is an existence of 'Dispute' relating to the 'Contract of Employment' of the Appellant with the Respondent coupled with the 'breach' and the 'Dispute' in question is not an illusory or moonshine one. Viewed in that perspective the conclusion arrived at by the 'Adjudicating Authority' in CP(IB) NO.791/9/HDB/2019 (Filed by the Appellant) in dismissing the 'Application' does not suffer from any material irregularity or patent legality in the 'Eye of Law'. Resultantly, the Appeal sans merits.
16
RESULT
In fine, the instant Company Appeal (AT)(CH)(Ins) No.26/2022 is dismissed. No costs. IA No.50 and 51 of 2022 are closed.
(Justice M. Venugopal) Member (Judicial) (Kanthi Narahari) Member (Technical) 28th February, 2022 Bm/akc