N. SUBRAMANIAN versus M/S ARUNA HOTELS LTD. & ANR. on 3 March 2021

1. I.A. No. 163654 of 2019 for intervention is dismissed.

2. The present appeal is filed by an erstwhile employee of theCorporate Debtor, i.e. the Respondent No.1 Company. The Appellantjoined the Corporate Debtor as a Personal Assistant on 01.01.1983, andEover the years received several promotions, including to Manager-Administration. His final designation before he left from service in 2013was Public Relations Manager.

3. This appeal arises from an application that was made by theAppellant under Section 9 of the Insolvency and Bankruptcy Code, 2016F[“IBC”] dated 21.07.2017. In this application, the Appellant averredthat a sum of Rs.1.87 Crores was owed to him, being the arrears ofsalary from the year 1998 till 2013 when he retired from service, andthat several acknowledgments of liability have been given of the arrearspayable, the last of which was by a letter dated 30.09.2014 by theerstwhile Managing Director of the Company. The Corporate DebtorGreplied to the aforesaid Section 9 application denying any liability and, inany case, stated that claims that are made by the Appellant are time-barred. The National Company Law Tribunal [“NCLT”] in its judgmentdated 17.11.2017, after setting out the facts and, in particular, setting outthe acknowledgement of liability letter dated 30.09.2014, went on toHstate that the principal amount of Rs. 1.06 Crores being admitted, a case

has been made out for admission. It also referred to a certain “paymentvoucher” (which was relied upon by the learned counsel for theCompany), stating that this voucher was merely a red-herring, and inany case could not be relied upon. According to the NCLT, even a cursorylook at the said voucher by the naked eye would show that the name ofthe Appellant has been filled by somebody different from the personwho has filled – in a different handwriting – that the amount paid is in“full and final” settlement of the arrears of salary. It was also held thatthis payment voucher was only proof of payment of arrears of salary of6 months’ payment @ Rs.35,000/- p.m. which was not paid on the duedates, but which was paid in one go. In any event, the NCLT held thatthis voucher was not part of the claim of the Appellant.

4. The NCLT then referred to a Civil Suit that was filed on06.07.2017 by the Corporate Debtor one week after the notice underSection 8 of the IBC was issued by the Appellant (i.e. on 29.06.2017).The suit contained the following prayers:

“a) declaring the notice/letters dated 30.09.2006, 22.01.2013,30.06.2013, 31.03.2014 and 30.09.2014 alleged to have been issuedby 1[st] defendant as null and void and will not bind the plaintiff,

b) grant permanent injunction restraining the 2[nd] defendant fromrelying on or claiming against the plaintiff based on the allegedletters/notices dated 30.09.2006, 22.01.2013, 30.06.2013,31.03.2014 and 30.09.2014.”

The NCLT went on to state that the suit was a desperate attemptof the Company to get out of acknowledgements of liability that weredue, and appears to be “mala fide, fraudulent and mischievous”.

5. Mr. Ritin Rai, learned Senior Advocate appearing for theAppellant, informs us that this suit has been dismissed for non-prosecution.We are informed that an application to restore the suit to the file ispending.

6. Referring to the point of limitation, the NCLT held in favour ofthe Appellant, relying upon the acknowledgement dated 30.09.2014, asa result of which, it admitted the petition and appointed an InterimResolution Professional and imposed a moratorium under Section 14 ofthe IBC. In the appeal filed by a shareholder of the Corporate Debtor(i.e. Respondent No.2 before us), the National Company Law AppellateTribunal [“NCLAT”] referred to a letter by the Employees Provident A

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AFund Organisation dated 13.04.2016 and stated that the Appellant’s claimhas been settled as a result of that letter. It then, in a cryptic fashion,went into the point of limitation and recorded:

“7. The Respondent - (‘Operational Creditor’) himself has pleadedthat the salary is due since 1998 which was not paid but delay ofBraising claim of arrears of salary for the period 1998 to 2016 hasnot been explained.

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9. In the present case as we find that there is an ‘existence ofdispute’ about arrears of salary and the Respondent has also failedCto explain the delay in making claim of arrears alleged to be donesince 1998 to 2016 (delay of about 18 years), we hold that theapplication under Section 9 preferred by the Respondent was notmaintainable.”

7. For these reasons, including the fact that according to theDNCLAT, a dispute has been raised, the NCLAT held that the NCLT wasincorrect in admitting the matter, and thus allowed the appeal and setaside the NCLT order.

8. Mr. Rai, learned Senior Advocate appearing for the Appellant,has referred to three acknowledgements that are on record. The first isEvide a letter dated 30.09.2006 acknowledging arrears of payment ofsalary from 01.01.2000 till the actual date the Appellant was relievedfrom service. The second is a letter dated 30.06.2013 stating that the“accounts will be settled” as the Appellant had now been retired fromservice. He emphasised the third letter, dated 30.09.2014, which hadFappended to it the list of the exact amount due from 1998 till the date ofretirement which amounted to roughly Rs.1.06 Crores. According tohim, all these acknowledgements would show that amounts due andpayable to the Appellant cannot be said to be barred by limitation. Equally,the Employees Fund Organisation letter is only a red-herring, and hasnothing to do with the facts of this case, and it is clear that given theGacknowledgements of liability, there is no question of any “dispute”. Onthe contrary, this admitted principal amount of Rs.1.06 Crores is due tothe Appellant.

9. Mr. Mohan Parasaran, learned Senior Advocate for theRespondent Company, has argued that a new management took overHthe Company in 2015, and the amounts due to the Appellant were neither reflected in the annual reports of the Corporate Debtor nor in a DueDiligence Report dated 27.07.2015. What is clear from a reading of theReport, together with the annexures thereto, is that 77 employees wereowed various amounts which was promised to be paid by the newmanagement. What is conspicuous by its absence is the name of theAppellant in the aforesaid annexures, and therefore, according to Mr.Parasaran, no amount was owed to the Appellant. In any case, he arguedthat the NCLAT appreciated the facts correctly, and the claim of theAppellant is clearly time-barred. As an alternative argument, if the Courtwere to set aside the NCLAT judgment, it ought to remit the same forhearing on whether the NCLT was correct on merits in admitting theSection 9 petition.

10. Having heard learned counsel for both parties, what becomesclear is the fact that from the date of the last acknowledgement i.e.30.09.2014 till the date on which the petition before the NCLT was filedi.e. 27.07.2017, three years have not elapsed. Therefore, at least to theextent of an acknowledgement made by the then Managing Director ofthe Corporate Debtor, the arrears of salary due for a period of at least 3years prior to 30.09.2014 would certainly be within limitation, andtherefore payable to the Appellant. This being the case, it is clear thatthe NCLT judgment is correct in admitting the Section 9 application bythe Appellant. Mr. Rai correctly points out that the Employees ProvidentFund letter dated 13.04.2016 was only a red-herring, and has nothing todo with the arrears of salary which had to be paid. It is clear that thereis an acknowledgement of liability, which therefore shows that there isno “dispute” as to amounts owed to the Appellant. The impugned NCLATjudgment is accordingly set aside. Consequently, the NCLT judgment isrestored to the file. The alternative argument of Mr. Parasaran alsostands dismissed in view of what has been held by this judgment.

11. The Appeal is thus allowed.

CIVIL APPEAL DIARY NO. 34841 OF 2018, CIVILAPPEAL DIARY NO. 34836 OF 2018 & CIVIL APPEAL DIARYNO. 34839 OF 2018

12. Permission to file the Civil Appeals are rejected.

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