Whether salary during notice period falls within definition of Operational Debt under IBC : Read NCLT’s decision

National Company Law Tribunal

National Company Law Tribunal, Mumbai Bench (NCLT): The Coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member deliberated on what amounts to a pre-existing dispute.

The company petition was filed by the Operational Creditor seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor by invoking the provisions of Section 9 Insolvency and Bankruptcy Code for a resolution of Operational Debt of Rs 22,41,735.

Issue to be decided

Whether the notice of termination of the employment of the Operational Creditor three months or one month? And whether it would amount to a pre-existing dispute between the parties?

Analysis and Decision

Firstly, the Bench noted that there was no dispute between the parties regarding employment nor the salary and perquisites of the Operational Creditor. Similarly, there was no dispute with regard to receipt of one month notice period salary by the Operational Creditor through a cheque issued by the Corporate Debtor.

Therefore, the present Company Petition was being pressed by the Operational Creditor only in respect of salary for the remaining two months’ notice period.

The genuineness of the appointment letter relied on Corporate Debtor is at a stake in the present case and that ipso facto was a dispute.

Coram stated that the petition was for the resolution of salary of two months purported notice period which amounted to specific performance of the appointment letter, which does not fall within the definition of “Operational Debt” as it was not for the salary for the actual work done by the Operation Creditor.

Hence, Bench opined that the remedy of the Operational Creditor was to initiate necessary legal proceedings for recovery before the appropriate legal forum and through the route of IBC.

Therefore, the Bench was of the view that there was no merit in the application and hence the same was liable to be dismissed. [Sandesh Naik v. MT Educare Ltd., CP (IB)—678 (MB)/2020, decided on 12-5-2022]

Advocates before the Tribunal:

For the Applicant: Adv. Pooja Batia

For the Respondent: Adv. Nausher Kohli

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