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Synopsis

The National Company Law Tribunal (NCLT) in Mumbai has recently rejected a Section 9 application filed by an ex-director of a company who was seeking operational dues from the company while serving as a CEO.

The NCLT Mumbai bench, consisting of Justice Reeta Kohli and Technical Member Madhu Sinha, was hearing an application for initiating the Corporate Insolvency Resolution Process (CIRP) against a company.

The applicant had held the position of director and Chief Executive Officer (CEO) within the company.

The applicant had been appointed as the CEO and Director of the company on June 1, 2017. Subsequently, on October 28, 2018, the employee submitted his resignation from the company in the capacity of a Director. This resignation was duly accepted by the company.

However, the applicant argued that he had only resigned from his position as a Director and had never tendered his resignation as the CEO.

Therefore, he contended that he was entitled to his dues as the CEO since he had not resigned from this role.

The corporate debtor argued that the petitioner's appointment was as "Executive Director cum CEO," indicating that he held a collective role and responsibility.

The corporate debtor added that having dual nomenclature in the appointment letter did not grant the petitioner the liberty to hold two independent positions, nor did it allow him to tender his resignation from one post while continuing in the other.

The corporate debtor also contended that the terms of the appointment did not separately define the set of responsibilities for an Executive Director and a CEO. Furthermore, no separate salary was specified in the appointment letter for these alleged two distinct positions.

The bench was apprised of the fact that there was a lock-in period of three years as per the agreement. However, the petitioner had unilaterally resigned within a year.

The tribunal said that resigning as a director did not entitle the petitioner to claim dues as a CEO.

“..we are of the considered opinion that Unilateral decision on the part of the Petitioner to tender his resignation from the post of Executive Director and not that of CEO, Acceptance of his the resignation and relieving him from company with immediate effect does not leave the Petitioner to claim his dues as CEO,” the order reads.

Therefore, while dismissing the petition the tribunal said that the reference to two terms does not make the applicant's appointment as holding two separate posts

“Reference of two terms does not make his appointment as holding two separate posts by any plausible reasoning. Be that as it may the case of the Petitioner/ Operational Creditor himself is that he resigned within one year out of his own free will and the same having been accepted immediately further dilutes the claim of the Petitioner,” the order reads.

Advocate Mr. Yogesh Deshpande appeared for the applicant.

Advocate Nausher Kohli appeared for the corporate debtor. 

Case title: Mr. Sudhir Chauhan vs Esmart Energy Solutions Limited