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Synopsis

The National Company Law Appellate Tribunal (NCLAT) has recently held that merely because ex-directors were getting a salary before the commencement of the Corporate Insolvency Resolution Process (CIRP) is no ground to claim same salary after the commencement of CIRP.

The NCLAT bench at Delhi, comprising Chairperson Ashok Bhushan and technical members Barun Mitra and Arun Baroka, was hearing an appeal against the order of the National Company Law Tribunal (NCLT), which upheld the liquidator's decision.

The suspended director had filed Form E before the liquidator, claiming salary dues accrued after the commencement of CIRP. 

The liquidator rejected the claims, leading the suspended director to approach the NCLT. After the NCLT rejected the application of the suspended director, they approached the NCLAT.

Before the NCLT, the suspended directors contended that the initiation of CIRP only suspends their functions as part of the Board of Directors. However, they argued that they are still entitled to function as directors after the initiation of CIRP and receive the emoluments they were receiving prior to the CIRP period.

The liquidator contended that the ex-directors were not entitled to any salary after the commencement of the CIRP and that the IRP/RP had at no point directed the appellants to carry out any work.

The liquidator further argued that under Section 19, ex-directors are obliged to render cooperation to the IRP/RP, and it was a statutory obligation of the appellants for which they cannot claim emoluments.

The NCLAT, while dismissing the appeal, stated that the mere fact that ex-directors were receiving a salary before the commencement of the CIRP is no ground to claim same salary after the commencement of the CIRP.

"The Appellant may be right in his submission that in event Ex-Directors are permitted to work, they may claim their emoluments but in the present case the Appellants at no point of time were appointed on payment of emoluments by the IRP or RP, which is clear from their claim form. The mere fact that they were getting salaries prior to commencement of CIRP is no ground to claim same salary after commencement to CIRP" the order reads. 

For Appellant : Ms. Vaishnavi, Advocate.

For Respondents : Mr. Gaurav H. Sethi, Mr. Deeptanshu Chandra, Mr. Rahul Pawar, Advocates.