Rajeev Shetty vs M/s.Skyline Construction & Housing Pvt. Ltd

Per: Rajeswara Rao Vittanala, Member (Judicial)

C.P.(IB)No.159/BB/2017 is filed by Rajeev Shetty (‘Petitioner/Operational Creditor’) U/s 9 of the IBC, 2016, R/w Rule 6 of the I&B (AAA) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of M/s.Skyline Construction & Housing Pvt. Ltd (‘Respondent/Corporate Debtor’), on the ground that it has committed default for an amount of

Rs.58,68,768/- (Rupees Fifty Eight Lakhs Sixty Eight Thousand Seven Hundred and Sixty Eight Only) with 18% interest from 10.06.2015.

Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows:

M/s.Skyline Construction & Housing Pvt. Ltd., (herein referred to as 'Respondent/Corporate Debtor') was incorporated on 14.07.1980, bearing CIN: U45201KA1980PTC003879 and its authorized Share Capital is Rs.1,00,00,000/- consisting of 29,225, Equity Shares of Rs.100 each. The issued and subscribed capital is Rs.94,61,396/- consisting of 64,433, Equity Shares of Rs.100 each fully paid up.

Rajeev Shetty (herein after referred to as 'Petitioner/Operational Creditor') was initially appointed as an 'Associate Vice President-Projects' vide letter dated 03.10.2008, and was subsequently confirmed vide letter dated 20.08.2009. His initial package was Rs.1,87,250/- per month, which was subsequently revised to Rs.1,59,160/- per month, vide letter dated December 3rd, 2008, and again it was revised to Rs.4,42,260/-per month, vide letter dated 12th January, 2015. Thereafter, he has resigned for the post on 08.04.2015, which was accepted, and thus he was relieved from the employment at closing hours of 10.06.2015, vide certificate dated 07.07.2015. He had worked in the office of Corporate Debtor from 03.10.2008 to 10.06.2015. However, his dues were not settled. The Petitioner started sending several emails by asking the Respondent to settle his pending salary and other settlement benefits. Ultimately, Shri Sanjay / Shri H. S. Raghava have issued a statement of dues vide email dated 11.01.2017 by certifying total dues as Rs.58,68,768/- towards LTA, Bonus, leave encashment , salary etc. fell due from the date

of appointment i.e. 03.10.2008 till the date of his relieving from the Employment.

However, the Respondent in their statement of objection dated 07.05.2019, denied their liability to clear the dues by raising moonshine defense and there was no single document filed in support of its defense. The Petitioner has produced a certified copy of the Order passed by the Hon'ble High Court of Karnataka in CoP No.55/2011 in which 16 former employees of the Respondent Company, similar to the Petitioner, were compelled to file Petition seeking to winding up when the Respondent Company failed to clear their dues. The Respondent, after realizing that an order of winding up was inevitable, and thus cleared dues with interest in respect of all the Petitioners therein. It is alleged that modus operandi of the Respondent Company is crystal clear, that it shall not clear the dues unless compelled by the Adjudicating Authority to do so, come what may.

It is stated that MD of the Respondent Company, who did not deny the liability, has directed the Petitioner to contact HR Department, instead of bothering him. The financial department by virtue of an email dated 11.01.2017 along with a tabular from responded to the Petitioner with the total amount pending as on date, which is a part of the records. The Respondent Company is now taking a moonshine defense, without filing any documents in its support. The statement of objections is liable to be ignored by this Adjudicating Authority for want of supporting documents. The memo dated 24.06.2019 purportedly issued by their Auditor stating no dues from the Company, as per the office records, in respect of the petitioner is not all tenable. And such document by a third party to the proceedings is not sustainable in law.

The Company petition is opposed by the Respondent by filing Statement of Objections dated 07.05.2018 by inter alia contending as follows:

It is alleged that the petition is nothing but a pure abuse of the process of the Adjudicating Authority. It is alleged that the petition is filed only to harass the Respondent, and make wrongful gain in one or the other way. The Petitioner had earlier filed a similar Application before this Adjudicating Authority against the Respondent vide C.P.(IB)No.12/BB/2017. When the Respondent entered appearance and filed its preliminary objections, the Petitioner withdrew the application only to fill in the lacunae on his part. The present Application is yet another attempt to harass the Respondent despite knowing the fact that the Petitioner is not entitled to any relief.

It is stated that Section 3(8) of the IBC, 2016 defines the terms “Corporate Debtor” as a corporate person, who owes a debt to any person. Further, Section 5(20) defines Operational Creditor as a person to whom an Operational Debt is owed and includes any person to whom such debt has been legally assigned or transferred. The Corporate Debtor does not owe any debt whatsoever to the Petitioner. In fact, there is no debt much less an operational debt owed to the so called Operational Creditor. Such being the case, there is no question of Corporate Debtor having defaulted in paying the debt that has become due and payable but not repaid to the Operational Creditor. It is contented that, as per Section 6 of the Code, only when a Corporate Debtor defaults in paying a debt that has become due and payable but not repaid, CIRP, under Part II of the Code may be initiated by the Petitioner against the Respondent. The same being applicable to be present case, the application filed by the Operational Creditor is liable to be rejected.

It is stated that the claims of the Petitioner for recovery of monies alleged to be unpaid Operational Debts is seriously disputed by the

Respondent. The Respondent is a solvent and profit making Company. The Respondent has been in the business of constructing residential apartments and development of properties for several years and has built up a reputation in the market. The net worth of the Company is positive and the Corporate Debtor is possessed of several assets, and is fully capable of meeting any debt as and when they fall due. The Respondent, at present is in the process of executing several projects of constructing residential apartments, in and around Bangalore City. Therefore, the Petitioner is estopped from seeking CIRP at the hands of this Tribunal as there are no debt much less operational debt payable to the Petitioner as alleged. There is absolutely no basis for Operational Creditor to initiate CIRP against the Corporate Debtor.

It is stated that the Petitioner was appointed as an "Associate Vice-President - Projects" of the Corporate Debtor vide Letter of Appointment dated 03.10.2008. The services/appointment of Petitioner was confirmed by the Corporate Debtor vide a letter of confirmation dated 20.08.2009. Thereafter, on 08.04.2015, the Petitioner tendered his resignation to the Respondent and the same was accepted and the Petitioner was relieved from employment at the closing hours of 10.06.2015 vide letter dated 07.07.2015. The present application is filed in the year 2017, that too claiming various amounts under the head LRA, Bonus, and Leave Encashment from the date of appointment, i.e., 03.10.2008 till the date of relieving from the employment. Not only there is an inordinate delay but also the said claims are purely imaginary and are made without any basis.

It is stated that the Petitioner has relied upon alleged e-mails dated 11.01.2017 and 22.12.2016 said to have been sent by one Mr. Sanjay and Mr. H.S. Raghava, respectively, along with an attachment/tabular form. It is based on these alleged e-mails, the

Petitioner claims that the alleged debt is accepted and acknowledged by the Respondent vide the aforesaid e-mails. The Petitioner claimed that said Mr. Sanjay and Mr. H.S. Raghava are the employees of the Respondent having sent the said e-mails and thus the debt in question is deemed to be accepted. However, they are not part of administration of Corporate Debtor at the relevant point of time. Mr. Sanjay, who was working as Chief Financial Officer of the Respondent, was relieved from the employment vide Relieving order dated 22.12.2016. Likewise, Mr. H.S. Raghava, working as head of Human Resource Department with the Corporate Debtor, was also relieved from the employment vide Relieving order dated 01.08.2016. In other words, as on 22.12.2016 Mr. Sanjay was no longer in employment with the Respondent and as on 01.08.2016 Mr. H.S. Raghava was also not working in employment with the Respondent. Such being the case, the alleged e-mails dated 11.01.2017 and 22.12.2016 along with alleged attachments of a tabular from claimed to have sent by the Respondent are all cooked up and created only for the purpose of the present case. It is alleged that Mr. Sanjay and Mr. H.S. Raghava have misused the Company e-mail account only to stealthily aid the Petitioner. In fact, Mr. Sanjay and Mr. H.S. Raghava have joined hands with the Petitioner and all the three have hatched a conspiracy against the Corporate Debtor with an intention to make unlawful gain at cost and expense of the Corporate Debtor.

It is stated that from a bare perusal of the alleged tabular sheet produced by the Petitioner, it can be seen that the Operational Creditor is basing his claim for Rs.58,68,768/- under three heads, firstly, LTA (Leave Travel Allowance) @ 8.33% of the basic, secondly, Bonus @ 10% of Gross and thirdly, leave encashment for the period 03.10.2008 till 10.06.2015. Assuming for a moment but not conceding that the Petitioner is entitled to the aforesaid amounts,

it is surprising as to why the Petitioner kept quite from 03.10.2008, i.e., the date of his appointment till 10.06.2015 i.e., the date he was relieved from the employment claiming the said amounts for more than 7 years. What is further surprising is the fact that the Petitioner has not at all claimed the alleged amounts, while he was in employment with the Respondent. The alleged claims are made only after the Petitioner was relieved from the employment. If the Petitioner is really entitled to the amounts claimed under the aforesaid three heads, he would not have certainly waited until the date he was relieved. In fact, the Petitioner is aware that the amounts claimed under the aforesaid three heads cannot be claimed as a matter of right, as the same are at the discretion of the management/directions of the Company for good and bona fide service rendered.

Heard Shri Ashish Krupakar for the Petitioner and Shri Deepak B. learned Counsel for Respondents. We have carefully perused the pleadings of both the parties, and extant provisions of the Code and the law on the issue.

The Learned Counsels for both parties, have once again reiterated their pleadings as briefly mentioned supra and thus they are not reiterating again in order to avoid repetition.

The Petitioner issued a legal notice dated 07.11.2017 to the Corporate as well as Mr. Avinash Prabhu, the Managing Director of the Corporate Debtor, wherein a detailed facts of the case are furnished to the Corporate Debtor, and also pointed out the debt of Rs.58,68,768/- was admitted by the Corporate Debtor vide email dated 11.01.2017 issued by the Financial Department of the Company. It is also pointed out that he was relieved on 10.06.2015 without any adverse remarks. Even though, notice was acknowledged by the Corporate Debtor and the

Company, they did not reply to the legal notice. Aggrieved by that non-payment and non-reply of the legal notice, the Petitioner has earlier filed C.P.(IB)No.12/BB/2017 by inter alia seeking to initiate CIRP in respect of Corporate Debtor namely M/s.Skyline Construction and Housing Pvt. Ltd. Accordingly, the Respondent has filed Preliminary Statement of Objections dated 31.08.2017 by raised few technical grounds on the format of demand notice issued to the Corporate Debtor. Therefore, the Petitioner herein, instead of rectifying the mistakes of the Company Petition .has filed memo dated 26.10.2017 by praying to the Adjudicating Authority to permit him to withdraw the Company Petition with a liberty to file fresh Company Petition in the interest of justice and equity. Accordingly, the Adjudicating Authority passed an order dated 26.10.2017 by granting permission to withdraw the case with a liberty to file fresh Company Petition. Therefore, the present Company Petition is filed duly following the prescribed procedure under the provisions of the Code. Therefore, the contentions made by the Respondent contrary to it are not tenable.

As stated supra, the working of Petitioner in Respondent Company during 03.10.2008 to 10.06.2015 is not in dispute. The certificate dated 07.07.2015 issued by Managing Director of the Respondent, did not say anything with regard to settlement of dues. It is relevant to extract email dated 20th August, 2015 , which reads as under:

The Operational Creditors have filed Joint Memo dated 25.10.2019 in both the Company Petitions bearing C.P.(IB)No.159/BB.2017 & C.P.(IB)No.43/BB/2018 by inter alia furnishing that there are 61 Appeals are pending before Karnataka State Consumer Dispute Redressal Commission Bangalore, 98 Complaints are pending before Karnataka State Consumer Dispute Redressal Commission Bangalore, 46 Execution Petitions are pending before Karnataka State Consumer

Dispute Redressal Commission Bangalore, 32 Complaints are pending before Karnataka District Consumer Forum Bangalore, 16 Complaints are pending before Karnataka District Consumer Forum Bangalore (Bangalore 2nd Additional), 12 Complaints are pending before Karnataka District Consumer Forum Bangalore (Bangalore 3rd Additional), 5 Complaints are pending before Karnataka District Consumer Forum Bangalore (Bangalore 4th Additional). There are more than 25 Cheque bounce, 30 civil cases and 28 Criminal cases against the Corporate Debtor and the Director namely Shri Avinash Prabhu and his brother Shri Deeraj Prabhu for cheating home buyers, vendors, Land owners, Banks, Employee etc.

In pursuant to the said memo dated 25.10.2019, the Corporate Debtor has filed Objections dated 13.11.2019 by inter alia contending as follows:

Corporate Debtor is the Respondent and the aggrieved parties preferred an appeal against the order of District Consumer Forum.

The Petitioner has filed an Affidavit dated 18.12.2017, U/s 9(3) of the Code, by inter alia stating that statutory notice dated 09.11.2017 was issued to the Respondent by electronic mail and also by Registered Post and after acknowledging it, they have not responded. Therefore, it is to be deemed that there is no pre/post existing dispute with regard to the claim made by the Petitioner. The Petitioner has also filed his Bank (HDFC ) statement dated 14.12.2017 wherein it is certified that there is no credit entry of Rs.58,58,768/ in the Account of Petitioner/s SB A/c 05231141204915 during period 09.11.2017 to 13.12.2017. Moreover, the defence raised in the statement of objections are not all tenable and they are liable to be rejected. Another C.P.(IB)No.43/BB/2018 is pending against the Corporate Debtor. Since there is no dispute raised with regard to the outstanding amount in question and it default, and Corporate Debtor claimed that it is solvent Company, the Adjudicating Authority has granted sufficient time to resolve/settle the issue raised in the instant Company petition, in the light of several cases pending against it. However, the Respondent failed to avail the opportunity given by the Adjudicating Authority , even though several adjournment have been granted to them right from 2017 till date and thus there is no other alternative for us except to consider the matter as per its merits and pass appropriate orders. It is not in dispute that the Respondent is facing several cases filed by Homebuyers/vendors etc. As stated supra, the Respondent has not filed any single document to substantiate its contentions raised in it. It has not filed its balance sheet to substantiate its contention that it is solvent Company and its net worth is positive. Law provide protection to genuine Companies from misusing provisions of the Code by un-scrupulous elements. Therefore, provisions of Code and the rules made thereunder, mandate Operational Creditors to cause statutory demand notice to Corporate Debtor so as to put their defence by way of reply. In the instant case, as stated supra, the basic facts of employment of Petitioner in the Company is not dispute and the

Respondents has not produced any evidence to show that the claims of Petitioner is settled prior/post issue of Demand notice. Moreover, they have started raising frivolous defences in the instant case, when notice was given to them. All the post allegations like service of petitioner was poor, not contributed for the welfare of the Company etc. are afterthoughts. As stated supra, it is not case of Respondent that services of Petitioner was terminated but he himself has voluntarily resigned for the reasons stated above. The Operational Creditors has filed a memo dated 01.04.2019 by inter alia stating that the Managing Director of the Company (Corporate Debtor) was arrested by the Central Crime Branch (CCB) for cheating several people and he is still in jail and not yet release in bail. A paper cutting is showing the arrest of said Managing Director filed along with memo.

The Contention of the Respondent that the case is barred by latches and limitation is not borne by facts of case, and the debt and default in question is admittedly not in dispute. The Respondent is facing another case as mentioned supra, apart from several cases before several Courts. Therefore, it prima facie show that the Company is not solvent Company as claimed. The instant Company Petition is filed in accordance with law, and also suggested a qualified Resolution Professional namely Mr. S. Viswanathan, with Registration No.IBBI/IPA-001/IP-P00538/2017-18/10963, who has also filed written Consent in Form-2 dated 03.09.2019, who is eligible to be appointed as IRP. It is settled position of law that once debt and default in question is proved, and there being no dispute raised by the Corporate Debtor, in an Application/Petition filed U/s 9 of Code, it is mandatory for the Adjudicating Authority to initiate CIRP, appoint IRP, impose moratorium etc. Therefore, we are convinced that there is a debt and default in question, which is not in dispute and thus it is fit case to admit by initiating CIRP in respect of Corporate Debtor.

03.09.2019, who is eligible to be appointed as IRP. It is settled position of law that once debt and default in question is proved, and there being no dispute raised by the Corporate Debtor, in an Application/Petition filed U/s 9 of Code, it is mandatory for the Adjudicating Authority to initiate CIRP, appoint IRP, impose moratorium etc. Therefore, we are convinced that there is a debt and default in question, which is not in dispute and thus it is fit case to admit by initiating CIRP in respect of Corporate Debtor.

In view of the above facts and circumstances of the case and the law on the issue, by exercising powers conferred on the Adjudicating Authority, U/s 9 (5)(i) of the Code, the Company petition bearing C.P.(IB) No.159/BB/2017 is hereby admitted by initiating Corporate Insolvency Resolution Process (CIRP) in respect of Respondent/Corporate Debtor with the following consequential directions:

Mr. S. Viswanathan, bearing Registration No.IBBI/IPA-001/IP-P00538/2017-18/10963, who is qualified Resolution Professional, is hereby appointed as Interim Resolution Professional, in respect of the Respondent/Corporate Debtor to carry out the functions as mentioned under the Insolvency and Bankruptcy Code, 2016 and various rules issued by IBBI from time to time;

The following moratorium is declared prohibiting all of the following, namely:

The IRP is directed to follow all extant provisions of the IBC, 2016 and all extant rules including fees rules as framed by IBBI from time to time. The IRP is hereby directed to file progress reports to the Tribunal from time to time.

The Board of Directors and all the staff of Respondent/Corporate Debtor are hereby directed to extend full co-operation to the IRP, in carrying out his functions as such, under the Code and Rules made by IBBI.

Post the case for report of IRP on 30.12.2019.