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Supreme Court of India
N.Subramanian vs M/S. Aruna Hotels Ltd on 3 March, 2021Author: Rohinton Fali Nariman
Bench: Rohinton Fali Nariman, B.R. Gavai, Hrishikesh Roy
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 187 OF 2019
N. SUBRAMANIAN …Appellant
Versus
M/S ARUNA HOTELS LTD. & ANR. …Respondents
WITH
CIVIL APPEAL DIARY NO. 34841 OF 2018
CIVIL APPEAL DIARY NO. 34836 OF 2018
CIVIL APPEAL DIARY NO. 34839 OF 2018
JUDGMENT
R.F. Nariman, J.
CIVIL APPEAL NO. 187 OF 2019
1. I.A. No. 163654 of 2019 for intervention is dismissed.
2. The present appeal is filed by an erstwhile employee of the Corporate
Signature Not Verified
Debtor, i.e. the Respondent No.1 Company. The Appellant joined the
Digitally signed by R
Natarajan
Date: 2021.03.05
15:29:55 IST
Reason:
Corporate Debtor as a Personal Assistant on 01.01.1983, and over the
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years received several promotions, including to Manager-Administration.
His final designation before he left from service in 2013 was Public
Relations Manager.
3. This appeal arises from an application that was made by the Appellant
under Section 9 of the Insolvency and Bankruptcy Code, 2016 [“IBC”]
dated 21.07.2017. In this application, the Appellant averred that a sum of
Rs.1.87 Crores was owed to him, being the arrears of salary from the
year 1998 till 2013 when he retired from service, and that several
acknowledgments of liability have been given of the arrears payable, the
last of which was by a letter dated 30.09.2014 by the erstwhile Managing
Director of the Company. The Corporate Debtor replied to the aforesaid
Section 9 application denying any liability and, in any case, stated that
claims that are made by the Appellant are time-barred. The National
Company Law Tribunal [“NCLT”] in its judgment dated 17.11.2017, after
setting out the facts and, in particular, setting out the acknowledgement
of liability letter dated 30.09.2014, went on to state 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 “payment voucher” (which was
relied upon by the learned counsel for the Company), stating that this
voucher was merely a red-herring, and in any case could not be relied
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upon. According to the NCLT, even a cursory look at the said voucher by
the naked eye would show that the name of the Appellant has been filled
by somebody different from the person who 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 that this payment voucher was only
proof of payment of arrears of salary of 6 months’ payment @
Rs.35,000/- p.m. which was not paid on the due dates, but which was
paid in one go. In any event, the NCLT held that this voucher was not
part of the claim of the Appellant.
4. The NCLT then referred to a Civil Suit that was filed on 06.07.2017 by
the Corporate Debtor one week after the notice under Section 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 issued by 1st defendant as null
and void and will not bind the plaintiff,
b) grant permanent injunction restraining the 2 nd
defendant from relying on or claiming against the
plaintiff based on the alleged letters/notices dated
30.09.2006, 22.01.2013, 30.06.2013, 31.03.2014 and
30.09.2014.”
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The NCLT went on to state that the suit was a desperate attempt of the
Company to get out of acknowledgements of liability that were due, and
appears to be “mala fide, fraudulent and mischievous”.
5. Mr. Ritin Rai, learned Senior Advocate appearing for the Appellant,
informs us that this suit has been dismissed for non-prosecution. We are
informed that an application to restore the suit to the file is pending.
6. Referring to the point of limitation, the NCLT held in favour of the
Appellant, relying upon the acknowledgement dated 30.09.2014, as a
result of which, it admitted the petition and appointed an Interim
Resolution Professional and imposed a moratorium under Section 14 of
the IBC. In the appeal filed by a shareholder of the Corporate Debtor (i.e.
Respondent No.2 before us), the National Company Law Appellate
Tribunal [“NCLAT”] referred to a letter by the Employees Provident Fund
Organisation dated 13.04.2016 and stated that the Appellant’s claim has
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
pleaded that the salary is due since 1998 which was not paid
but delay of raising claim of arrears of salary for the period
1998 to 2016 has not been explained.
***
9. In the present case as we find that there is an ‘existence of
dispute’ about arrears of salary and the Respondent has also
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failed to explain the delay in making claim of arrears alleged to
be done since 1998 to 2016 (delay of about 18 years), we
hold that the application under Section 9 preferred by the
Respondent was not maintainable.”
7. For these reasons, including the fact that according to the NCLAT, a
dispute has been raised, the NCLAT held that the NCLT was incorrect in
admitting the matter, and thus allowed the appeal and set aside the
NCLT order.
8. Mr. Rai, learned Senior Advocate appearing for the Appellant, has
referred to three acknowledgements that are on record. The first is vide a
letter dated 30.09.2006 acknowledging arrears of payment of salary from
01.01.2000 till the actual date the Appellant was relieved from service.
The second is a letter dated 30.06.2013 stating that the “accounts will be
settled” as the Appellant had now been retired from service. He
emphasised the third letter, dated 30.09.2014, which had appended to it
the list of the exact amount due from 1998 till the date of retirement
which amounted to roughly Rs.1.06 Crores. According to him, all these
acknowledgements would show that amounts due and payable to the
Appellant cannot be said to be barred by limitation. Equally, the
Employees Fund Organisation letter is only a red-herring, and has
nothing to do with the facts of this case, and it is clear that given the
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acknowledgements of liability, there is no question of any “dispute”. On
the contrary, this admitted principal amount of Rs.1.06 Crores is due to
the Appellant.
9. Mr. Mohan Parasaran, learned Senior Advocate for the Respondent
Company, has argued that a new management took over the Company
in 2015, and the amounts due to the Appellant were neither reflected in
the annual reports of the Corporate Debtor nor in a Due Diligence Report
dated 27.07.2015. What is clear from a reading of the Report, together
with the annexures thereto, is that 77 employees were owed various
amounts which was promised to be paid by the new management. What
is conspicuous by its absence is the name of the Appellant in the
aforesaid annexures, and therefore, according to Mr. Parasaran, no
amount was owed to the Appellant. In any case, he argued that the
NCLAT appreciated the facts correctly, and the claim of the Appellant is
clearly time-barred. As an alternative argument, if the Court were to set
aside the NCLAT judgment, it ought to remit the same for hearing on
whether the NCLT was correct on merits in admitting the Section 9
petition.
10. Having heard learned counsel for both parties, what becomes clear is
the fact that from the date of the last acknowledgement i.e. 30.09.2014
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till the date on which the petition before the NCLT was filed i.e.
27.07.2017, three years have not elapsed. Therefore, at least to the
extent of an acknowledgement made by the then Managing Director of
the Corporate Debtor, the arrears of salary due for a period of at least 3
years prior to 30.09.2014 would certainly be within limitation, and
therefore payable to the Appellant. This being the case, it is clear that the
NCLT judgment is correct in admitting the Section 9 application by the
Appellant. Mr. Rai correctly points out that the Employees Provident
Fund letter dated 13.04.2016 was only a red-herring, and has nothing to
do with the arrears of salary which had to be paid. It is clear that there is
an acknowledgement of liability, which therefore shows that there is no
“dispute” as to amounts owed to the Appellant. The impugned NCLAT
judgment is accordingly set aside. Consequently, the NCLT judgment is
restored to the file. The alternative argument of Mr. Parasaran also
stands dismissed in view of what has been held by this judgment.
11. The Appeal is thus allowed.
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CIVIL APPEAL DIARY NO. 34841 OF 2018, CIVIL APPEAL DIARY NO.
34836 OF 2018 & CIVIL APPEAL DIARY NO. 34839 OF 2018
12. Permission to file the Civil Appeals are rejected.
……………………………………..J.
[ ROHINTON FALI NARIMAN ]
……………………………………..J.
[ B.R. GAVAI ]
……………………………………..J.
[ HRISHIKESH ROY ]
New Delhi;
March 03, 2021.
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