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TMI Blog2025 (5) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 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 51 Annexure 9 then we find that in the reply to dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 01.03.2019 (wrongly mentioned as 01.04.2019) till 20.05.2019 as a whole-time Director of the Appellant-Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pay the same emoluments to him which were admissible to him in his capacity as CFO. The documents placed on record by both the sides do not substantiate such claim. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Conciliation Act, 1996, and conducted by a sole arbitrator mutually appointed by the Company and the Employee." [emphasis supplied] 9. Further the Appellant was appointed as an Additional Director of the Respondent on 11 March 2015 and, thereafter, vide board meeting of the Respondent held on 28 Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirements 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 in lieu of notice. ..... 7. You are reminded that even though your employment will end on the Termination Date, you will still be required to comply all your obligations which are intended to continue even after termination of your employment, including obligations with respect to confidential information, trade secrets, intellectual property and data, non-complete and non-solicitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. MR-l is a statutory requirement that the Respondent is mandated to file under the Companies Act, 2013 as a company upon appointment of a director. We note that the said form nowhere states that the Appellant was being paid any compensation separately for his position as a 'Whole-time Director'. We are, therefore, inclined to agree with the submissions of the Appellant that in Form No. MR-I, the Appellant's designation was selected as ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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 resolution appears to be on record which was passed, approving payment of additional remuneration to the Appellant for being a Whole Time Director. 17. Thus, with respect to reliance of the Appellant on the AoA-Articles of Association, the Respondent a Whole-Time Director will be paid for his/her services such an amount that has been decided by the board of the Respondent. We also note that the board of the Respondent had not approved or passed any resolution entitling the Appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 revocation of the termination of the Appellant from the services of the Respondent Company. Apart from various other issues the Appellant raised the issue of Section 169 of the Companies Act 2013 which allegedly had not been followed in the removal of the Appellant as a Director of the Company. [@152 APB]. The Respondent replied to this notice on 30th March 2019, wherein it was clearly brought on record that the Appellant was an employee of the Respondent Company and in terms of contract of employment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT) 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 because he was working as the CFO. The employment of the Appellant was terminated as per Clause 8.1 of the employment contract between the two parties. All the dues, which included three months' notice or salary in lieu of the notice were paid to the Appellant. Once he ceases to be CFO, it is inconceivable that he could have continued as a WTD. It is worth noticing that the Appellant was not appointed as a WTD and there is no material to show any separate remuneration was payable to the Appellant for the position as a WTD. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 designated as a WTD for being CFO. From the material on record, it cannot be concluded that he was working exclusively as a WTD, without being a CFO. Once his employment has been terminated, he no longer remains the WTD. Since he was appointed as a WTD by the board resolution it could be revoked only by the Board's resolution, which was done after few days on 20.05.2019. The Appellants' reliance on the financial statements of the respondent, from the years 2014-15 to 2020-21 may not be of any help as these financial statements onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alities 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 terminated on 01.03.2019. The Respondent had sent a notice to the Appellant on 15.03.2019 challenging the validity of termination of his employment and demanded that he was a key managerial person and he is entitled to severance pay of 18 months in addition to a 6 months' notice period, which effectively meant 24 months' salary. This was replied by the Respondent on 30.03.2019. But the Appellant had filed a writ petition before the Hon'ble High Court of Delhi challenging his termination as an employee and pre-emptively challenging hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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