‘THE NATIONAL COMPANY LAW TRIBUNAL SPECIAL BENCH (COURT NO. 2) NEW DELHI Company Petition No. (IB)-521(ND)/2017 UNDER SECTION 9 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 In the matter of: Sh. Narender Sharma, Applicant Vs Vistar Construction Pvt. Ltd. Respondent Judgment delivered on: (.12,2018 Coram: MS. INA MALHOTRA HON’BLE MEMBER (JUDICIAL) S. K. MOHAPATRA HON’BLE MEMBER (TECHNICAL) For Operational Creditor: Mr, Mukul Dev Sharma & Mr. H.R. Khan Advocetes For the Respondent: Ms. Mahjabeen Tawweer & Mr. Shakti Verma Advocates.ORDER S.K. Mohaparta, Member 1. Mr. Narender Sharma, claiming as the operational creditor has filed this application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘the Code} read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016 (for brevity ‘the Rules) for initiation of Corporate Insolvency Resolution Process in respect of Respondent Company M/s Vistar Construction Private Limited, claimed to be the Corporate Debtor. 2, The Respondent M/s Vistar Construction Private Limited against whom initiation of Corporate Insolvency Resolution Process has been prayed for, is a company incorporated on 09.10.1992 under the provisions of the Companies Act, 1956 having its registered office at office C- 23, G.K. Enclave-1, New Delhi-110048. Since the registered office of the respondent corporate debtor is in Delhi, this ‘Tribunal having territorial jurisdiction over the place, is the Adjudicating Authority in relation to the prayer for initiation of Corporate Insolvency Resolution Process in respect of (i8)-s2ninoy2027respondent corporate debtor under sub-section (1) of Section 60 of the Code. 3. The case of the applicant as stated in the application is that the applicant had applied for the post of Civil Engineer in the month of September, 2002 in the respondent company. On selection appointment letter dated 03.10.2002 was issued to the applicant by the respondent company with a gross salary of Rs. 1,20,000/- per annum. Later on, the salary got increased to many folds and the last drawn salary package of the applicant Operational Creditor was approximately 27 Lacs. 4. Itis stated in the application that Operational Creditor was forced to give his resignation on 27.05.2015 and it was told that the company is not able to give him salary. Accordingly, applicant gave his resignation letter and got relieved from his post on 30.05.2015. 5. The Applicant has claimed that a letter of the respondent company detailing full and final settlement of applicant’s salary account has been issued by the respondent Corporate Debtor, according to which the applicant is entitled to receive Rs. 12,22,518/- as onae 01.06.2015. It is accordingly stated in the application that as per the full and final settlement letter, Rs. 12,22,518/- is to be paid by the respondent company to the applicant in respect of his employment in respondent's company till 30.05.2015. It is contended that despite various Emails and telephonic calls, the respondent Corporate Debtor has failed to pay the aforesaid amount of Rs. 12,22,518/- (Rupees ‘Twelve Lakhs Twenty Two Thousand Five Hundred and Eighteen Only). It is alleged that the respondent Corporate Debtor with mala fide intention has retained the lawful dues of the applicant. ‘Thereafter, a legal notice dated 04.04.2017 was issued by the applicant Operational Creditor through its counsel to the respondent for payment of the outstanding operational debt. In addition, a demand notice under Section 8 of Insolvency and Bankruptcy Code, 2016 was sent on 21.07.2017 to the respondent Corporate Debtor and its Directors for payment of the unpaid operational debt of Rs, 12,22,518/- along with interest at the rate of 18% per annum.8. Applicant has submitted that the respondent company has replied to the legal notice and demand notice issued under Section 8 on 25.07.2017 and 27.07.2017 respectively with false and frivolous grounds in order to avoid the payment of legal dues of the applicant. Consequently on 29.08.2017 applicant tad filed an application under section 9 of the Insclvency and Bankruptcy code, 2016 read with rule 6 of the Insolvency and Bankruptey (Application to Adjudicating Authority) Rules, 2016. However due to some technical defect, the application was withdrawn and liberty to file fresh petition was allowed. 10. Subsequently on 05.10.2017 a fresh demand notice under Section 8 of the Code was sent by the operational creditor to the corporate debtor and its directors for the payment of unpaid operational debt of Rs. 12,22,518/- (Twelve lakhs twenty two thousand five hundreds and eighteen only) along with interest @ 18% per annum. 11. In response to the demand notice dated 05.10.2017 corporate debtor replied on 16.10.2017 in which it is alleged that false and frivolous grounds were taken to avoid thepayment of legal dues of operational Creditor. It is stated that the company has suffered loss of Rupees 15,00,000/- lacs due to default committed by applicant operational creditor. It is further stated that as per the employment contract one-month notice was to be given before the resignation, which has not been done by the operational creditor causing huge loss to the company. 12, In this regard applicant has contended that the resignation was given because operational creditor was compelled to leave the job by the company. It is further argued that no such objection was ever taken by the corporate debtor at the time of resignation or at any point of time within last 2 years. Applicant has denied that no belongings of the company has been kept by him, nor even any written communication was ever made by the company. It is alleged that the said objection is nothing but a lame excuse given by the corporate debtor to avoid the payment of legally recoverable dues. 13. In connection with the civil suit, applicant has submitted that the corporate debtor maliciously filed the civil suit before the civil judge to create a pending disputea 14, 15, 16, between the parties. However, it is argued that civil suit was filed after the filing of the previous insolvency application, ‘The operational creditor has relied on the final settlement statement, in which it has been clearly stated that the amount of Rs. 12,22,518/- was full and final amount held with the company and also form 16 part A dated 14.05.2015 and part B dated 26.05.2015 and form 12BA which shows the tax deduction and total of income of operational creditor. It has been contended that as no payment was made within 10 days of the demand notice sent under Section 8 of the Code and as there is no pending dispute in respect of the “unpaid operational debt the application filed under Section 9 should be admitted by initiating Corporate Insolvency Resolution Process against the Corporate Debto-. Respondent Corporate Debtor has filed its reply on 06.12.2017 mainly with the contention that the applicant's performance at the duty was not satisfactory and respondent had issued timely warnings to applicant to improve his performance efficiency. It is alleged that instead of improving his skill and experience in the work, Applicant vide its letter dated 27.05.2015 had chosen to submit his resignation fromae 17. 18, his employment with respondent company with effect from 27.08.2015 and requested respondent to relieve him from his employment immediately. It is stated that the submission of the said resignation letter of the Applicant was not in compliance with the terms of the employment contract with respondent, as he had to give one month written prior notice before leaving his employment with respondent. It is submitted that the sudden and immediate resignation of applicant and as he had stopped coming to the office immediately after that had caused great uncertainty and effected the execution of the work in the project. The said project was to be completed within a deadline as committed to the Client / Costumers / Allottees of the project. It is alleged that it has caused further financial loss te Respondent as the applicant failed to formally hand over the details of work executed by him. It is further stated that respondent did not handover all the requisite documents, including working drawings, schedules, building plans, etc. relating to the execution of the project in the site and consequently, the new engineer who hhad replaced the applicant was not able to execute the worka 19, 20. with the pace which was supposed to be done for a period of three months. Accordingly, Respondent had to incur a financial loss of INR 15,00,000/- (appx.) due to the willful negligence and default committed on the part of the Applicant for the delay in execution of the project. It is also the case of respondent that there is an existence of dispute between the parties with regard to the payment, even prior to the issuance of the Secticn 8 notice of the Code. The factum of the dispute was also brought to the knowledge of the Operational Creditor/Applican: in the reply to the notice under Section 8 of the Code. It is submitted that after the Applicant resigned from the office, without giving prior notice and handing over requisite documents, the Respondent has suffered financial loss and many projects were delayed. Itis further submitted that the respondent had sent two egal notices for the recovery of Rs.15,00,000/- for the loss occurred to the Respondent, as applicant herein has left the organization without giving prior notice and handing over requisite documents.ae 21. 22. 23. It is further submitted that the Respondent has filed a civil suit for recovery before Civil Judge Junior Division, Gautambudh Nagar, bearing Suit No.395 of 2017 titled as Vistar Construction Private Limited Vs. Narender Sharma, wherein learned Civil Judge issued notice on 16.10.2017. It is contended that suit for recovery is a suit governed by Article 113 of the Limitation Act, 1963 as per which the suit has to be filed within three years of arising of the cause of action. The cause of action arose on the date of the resignation of the applicant, which is very much within the limitation and therefore the claim of the respondent is not barred by limitation, It is submitted that the said suit is still sub-judice before the learned Civil Judge. ‘The respondent has also denied the genuineness of the full and final settlement letter and the TDS certificate relied upon by the Applicant as they don’t bear the signature and seal of the company. It is submitted that the Applicant in its application has denied that no document, working drawing, schedules, building plans, etc. relating to the execution of the projects at the site were kept with him and no written communication ().s21)Noy2017oe 24, 25. 26. was ever made by the respondent. It is submitted in this regard that being a senior civil engineer all che working drawings, schedules, building plans, etc. relating to the execution of the project at the site were kept with the applicant and the respondent kept on asking to hand over the same verbally which was ignored by the applicant. Heard the learned counsels for the parties and perused the case papers. ‘The main contention of the applicant is that the notice under Section 8 of the Code was issued to the respondent company first time on 21.07.2017 to which respondent has replied only on 27.07.2017. It is argued that respondent ‘company cannot dispute the unpaid amount for the first time in his response to the demand notice. It is accordingly contended that no dispute was pre-existing and therefore the application under Section 9 should be allowed. It is pertinent to mention here that applicant had earlier filed an application under Section 9, which was numbered as IB No. 321(ND) /2017. Prior to filing of the said application, notice under Section 8 was issued on 21.07.2017. However, as the notice was addressed to ‘8C DEVELOPERS’ which is n Wo)s2xinoy2017a different entity from that of the respondent company and as prior Section 8 notice was not issued to the respondent company, applicant prayed for withdrawal of the application, Accordingly, IB No. 321(ND)/2017 was dismissed as withdrawn on 18.09.2017 with liberty to file fresh petition. 27. Pursuant to the liberty granted the present IB No, 521(ND)2017 has been filed afresh on the same cause of action. 28, The following relevant date wise developments as detailed in the case records are reproduced below for proper appreciation of the matter. The applicant submitted his 27.05.2015 | resignation. 04.04.2017 | Legal notice was given by applicant for salary dues. Notice under Section 8 of the Code was 21.07.2017 | issued on behalf of the applicant Reply of respondent to the legal notice, 25.05.2017 27.07.2017 | Reply of respondent to the notice issued under Section 8 of the Code. 2 8) saxtwovy201729.08.2017 | Initial Section 9 application filed in the | matter. 18.09.2017 | Dismissed as withdrawn with Hberty to file fresh petition 20.09.2017 |Notice issued by respendent for recovery. 25.09.2017 | Notice issued by respondent for recovery. Fresh notice under Section & was issued 05.10.2017 before filing the present petition. Reply to Section 8 notice by respondent 16.10.2017 Notice issued in Civil Suit No.395 of 16.10.2017 2017 for recovery. 16.11.2017 | Present application filed. 35. There is no dispute that respondent company has replied within 10 days to both the notices respectively issued. under Section 8 by raising interalia following disputes. ae 3 (08)s2n(no/2017ae (a) The applicant resigned suomoto and was not forced to resign. Only oral warning was issued to the applicant to improve his efficiency. (b) Sudden resignation without one month written prior notice was in violation of the terms of ‘employment contract’ (c) After resignation as the applicant has stopped coming to office immediately thereafter, had caused great uncertainty and affected the execution of the work in the project which was to be completed within a deacline causing financial loss to respondent company. (a) Applicant has failed to formally hand over requisite documents including working drawings, schedules, building plans ete. relating to the execution of the project in the site and consequently, the new engineer who had replaced applicant was not able to execute the work with that pace which was supposed to be done for a period of three months, (c] Respondent had to incur a financial loss of INR 15,00,000/-(appx.) due to the willful negligence and default (i3}s211Noy2017ae committed on the part of Applicant for the delay in execution of the project. (0 Two legal notices were sent to the applicant on 20 and 25! September, 2017 for recovery of aforesaid amount. 36. It is seen that various disputes raised relates back to the date of resignation. There is a dispute as to whether it is, a suomoto resignation or a forced one. Issues have been raised on the breach of ‘employment contract’; on the ground that required advance notice was not given before stopping to attend office. In addition, there has been a counter claim of loss, Such plausible contentions require further investigation and the dispute relates to the date of resignation followed by its effect. 37. At this stage it is immaterial to consider who will succeed. Besides this forum, in the present proceeding, is not supposed to examine the merit of the disputed claims made by the parties. 38. Respondent has also filed a civil suit for recovery before Civil Judge Junior Division, Gautambudh Nagar, bearing Suit No.395 of 2017 titled as Vistar Construction Private Limited Vs. Narender Sharma, which is pending adjudication. A claimant can lodge recovery suit even on the last day of the (us}s2ainoy2017three years limitation period. Respondent had an offsetting claim and suit has been filed within the tation period as per the provisions of law. Therefore until the outcome of the pending recovery case, the claim / ‘counter claim of loss’ remains disputed. 39. Existence of dispute largely depends on the facts and circumstances of each case. In the factual background of this case ‘existence of real dispute’ cannot be totally overruled. 40. Existence of an undisputed operational debt is sine qua non for initiating CIRP under Section 9 of the Code. The Code is not intended to be substitute to a recovery forum, The moment there is existence of a dispute, the corporate debtor gets out of the clutches of the Code. 41. The expression “existence” has been understood as follows: “The Shorter Oxford English Dictionary gives the following meaning of the word “existence”: a. Reality, as opp to appearance. b. The fact or state of existing; actual possession of being. Continued being as a living creature, life, esp. under adverse conditions. wy 16 (18)-521{Noy2017ae 42. 43, Something that exists; an entity, a being, All that exists. (Page 894 - Oxford English Dictionary)’, Under Section 5(6) of the Code "dispute" includes a suit or arbitration proceedings relating to — a. the existence of the amount of debt; b. the quality of goods or service; or c. the breach of a representation or warranty. Since the word used, in the definition of "dispute", is “includes” the dispute can be on any ground and has a wide meaning. Adjudicating Authority is only to see whether there is a plausible contention of dispute which requires further investigation. Any dispute can be raised. Adjudicating authority is not to see the adequacy of dispute. Dispute must be existing and must not be vague. In the present case dispute on breach of terms of employment has been raised. ‘There is also a counter claim. Besides a suit has been filed within the limitation period and is pending adjudication in a court of law. In the facts it can be said that dispute is not only existing but also is continuing. The fact of “existence of dispute” has been informed within the stipulated period in the replies sent under section 8 (2) of the Code, 2 uspsaxgnoy/2017om 44, The relevant sub-section 5 of Section 9 of the Code runs as under: “Section 9 (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under ‘sub-section (2), by an order- w (ii) (0)-s2n(noy2017 Admit the application and communicate such decision to the operational creditor and the corporate debtor if- (a) (o) (e) (d) No notice of dispute has been received by the operational creditor or .. Reject the application and communicate such decision to the operational creditor and the corporate debtor, if (a. 0... o 8(a) Notice of dispute has been received by the operational creditor or there is a recerd of dispute in the information utility; or (Josen® (Emphasis given } 45. In the present case notice under Section 8 was duly replied within the period prescribed by bringing to the notice of the operational creditor the existence of dispate. There is substance and plausible contention in the replies and notices of the respondent, which necessitates investigation. In fact, the claim of loss and the prayer for its recovery are sub judice in a court of law. 46. The provisions of Section 9 (5) (ii) (d) of the Code clearly mandates that Adjudicating Authority shall reject the application when notice of dispute has been received by the applicant operational creditor. 47. In the line of aforesaid provisions of the Code, Hon'ble Supreme Court has also held that the moment there is existence of a dispute the operational creditor gets out of the clutches of the Code, Ze » ia}-saainov/201748. For the reasons stated above the application fails and therefore the same is rejected. 49. It is made clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the applicant before any other forum shall not be prejudiced on account of dismissal of instant application. 50. Let the copy of the order be communicated to the parties immediately in accordance with Section 9 (5) (i) of the Code. =. = Cf (S. K, Mohapatza) (Ina Mathotra) Member Technical Member Judicial 20 ie)s2xinoV2017