Ms. Maja Hoellrigl vs M/S. Endcraft India Private Limited

Hemant Kumar Sarangi, Member (T)

The present application is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 (for brevity 'IBC, 2016), read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity 'the Rules') by Ms. Maja Hoellrigl (for brevity 'Applicant), through Mr. Kapil Kumar Sharma, authorizing him, through Special Power of Attorney dated 28.12.2018. The current application has been filed with a prayer to initiate the Corporate Insolvency Resolution Process (CIRP), against M/s Endcraft India Private Limited (for brevity Respondent').

The Applicant, the Operational Creditor ("OC") namely, Ms. Maja Hoellrigl is a person/ ex-consultant, of the Corporate Debtor, residing at Boerhaavegasse 8a/1/308, Vienna, Austria.

The Respondent, the Corporate Debtor ("CD") namely, M/s. Endcraft India Private Limited, is a company incorporated on 28.01.2013, under the provisions of Companies Act, 2013 with CIN No. U25200DL2013PTC247629, having its registered office at 70, Okhla Industrial Estate, Phase-3, New Delhi 110020. The Authorised Share Capital of the respondent company is Rs. 5,00,00,000/- and Paid Up Share Capital of the company is Rs. 4,01,00,000/- as per Master Data of the company.

It is the case of the Operational Creditor that, she was working as a consultant for the Corporate Debtor providing consultancy in the area of her expertise during her visits to India. That vide a Consultancy Agreement dated 01.04.2018, the Operational Creditor was hired by Corporate Debtor as an Independent Consultant for providing Independent Advisory and Consulting Services during her visits to India. The Operational Creditor by way of the said Consultancy Agreement agreed to provide Consultancy to Corporate Debtor for a total consultancy fee of Euro 6600 per month, net of taxes along with other incentives.

The Operational Creditor further states that she was happy with the role assigned to her, as a consultant. Apart from the same, the Operational Creditor states that it was getting difficult for Operational Creditor to travel every time for work, the Operational Creditor states that she submitted her resignation on 04.07.2018, through email, which was accepted by the Corporate Debtor on 04.08.2018. The Operational Creditor also states that the Corporate Debtor even offered her alternative roles including the role of being a "foreign sounding board" of the organisation. Both emails of the Operational Creditor and Corporate Debtor have been annexed.

It has also been stated by the Operational Creditor that the Corporate Debtor was extremely happy and satisfied with the working, as well as the performance of the Operational Creditor throughout the tenure of her employment, there were never any complaints or issues, that the promoters or the board of Corporate Debtor communicated or expressed to Operational Creditor. It was to the surprise of the Operational Creditor, that vide email dated 08.08.2018, Mr. Rajiv Jain informed the Operational Creditor that, due to one of the employee's final handover, which was handled by Operational Creditor, the management is considering cancelling the Consultancy Agreement of Operational Creditor with an immediate effect and management will negotiate the terms of the Contract with Operational Creditor.

The same email further states that, Operational Creditor's resignation which was submitted by Operational Creditor vide her email dated 04.07.2018, has been forwarded to Corporate Debtor's legal department and Operational Creditor should expect a legal response to the same. The Operational Creditor received email dated 12.08.2018, from Mr. Rajiv Jain, promoter and Director of the Corporate Debtor, stating that the Corporate Debtor will not require any further services of Operational Creditor and is waiving off the notice period of Operational Creditor, pursuant to the Consultancy Agreement. The email further stated that, the Consultancy Agreement stands terminated from 04.08.2018 and the Corporate Debtor will not be liable to pay the Operational Creditor any professional fee or any further payments.

The Operational Creditor states that, the Corporate Debtor has no right, to waive off Operational Creditor's running notice period and also, to not pay the notice period professional fee which she is liable to claim from the Corporate Debtor. As per clause 10.4 of the Consultancy Agreement, Operational Creditor is entitled to give a prior written notice of 180 business days (Six Months), before terminating the aforementioned agreement with Corporate Debtor.

Since August 2018, the professional fee has not been paid to the Operational Creditor, by the Corporate Debtor, which she is entitled to receive as per the Consultancy Agreement. The Operational Creditor further states that, she raised a combined invoice for Rs. 33,46,992/- (Rupees Thirty Three Lakhs Forty Six Thousand Nine hundred Ninety Two), for the notice period (August 2018 to January 2019), dated 30.09.2018 and requested the Corporate Debtor to clear it out as per the Consultancy Agreement.

On failure to pay the outstanding dues by the Corporate Debtor, the applicant sent a demand notice dated 27.10.2018, under Section 8 of the Insolvency and Bankruptcy Code, 2016, to the respondent, asking them to make the entire payment of Rs. 33,46,992/-(Rupees Thirty Three Lakhs Forty Six Thousand Nine Hundred Ninety Two), within 10 days from receipt of the notice, failing which the applicant shall initiate the Corporate Insolvency Resolution Process against the Respondent.

The Corporate Debtor issued a show cause notice dated 29.10.2018, to the Operational Creditor, stating that, " ... in the capacity as Group CEO, you failed to fulfill your obligations towards the company, including in relation to achieving sales and profitability targets, despite repeatedly warned by the management of the company about your performance. consequently, vide your letter dated July 4, 2018, you terminated the agreement.

.... Mr. B Muralidha ran ("Murali"), an ex-Chief Executive Officer of the Company, who was reporting to you, resigned from the company on August 3, 2018. As Murali's reporting manager, you were required to complete his exit formalities as per Company's policies. On August 3,2018, Murali handed over the Company's laptop and handset to you. Based on the internal enquiry conducted by us, we came to know that Murali had informed you that he has deleted all the confidential / sensitive information / data of the Company including official emails from the laptop as well as handset.As you were closely working with Murali, you knew that the data deleted by Murali included marketing / business promotion strategies, financial details, upcoming project details, sales orders and contact details of customers. As a result, Murali had committed offences of stealing confidential data, destroying Company's confidential and sensitive data, criminal breach of trust and mischief under the provisions of Indian Information Technology Act, 2000 and Indian Penal Code, 1860."

As per the submissions of the Operational Creditor, the Corporate Debtor has duly received the demand notice sent by it. The Corporate Debtor has replied to the demand notice dated 06.11.2018, but has repudiated the claim in reply without material particulars and hence the contents of the same are wrong and denied. The respondent has still not cleared the dues and as such the intention of the respondent as apparent on the face of it are mala-fide.

The Operational Creditor has stated that total debt due and payable is Rs. 33,46,992/-(Rupees Thirty Three Lakhs Forty Six Thousand Nine Hundred Ninety Two). The date of default is 01.08.2018.

Hence, the application under section 9 of the IBC, 2016 was filed by the applicant to initiate CIRP. The counsel for Corporate Debtor appeared in court on 23.01.2019 and accepted notice, the Corporate Debtor was also granted ten days time to file its reply vide the order dated 23.02.2019.

The Corporate Debtor has filed its reply, In its reply the Corporate Debtor states that on 29.07.2016, the Operational Creditor was made group CEO of the DCJ group of companies, which included the Corporate Debtor, by the Promoters of the Corporate Debtor. On 01.04.2018, Operational Creditor entered into a Consultancy Agreement (Agreement') with the Corporate Debtor, wherein the Operational Creditor was to provide its services for a period of 3 years, as per Clause 3 of the Agreement. Operational Creditor's professional fees was fixed as Euros 6600 i.e., Rs. 5,27,886/- per month, as per Clause 5 of the Agreement. The Clause 10 of Agreement defined termination.

That on 04.07.2018 Operational Creditor resigned as a Consultant and under Clause 10.4 of the Agreement was obligated to serve 180 days till Corporate Debtor finds a suitable replacement. Corporate Debtor vide its email dated 04.08.2018 accepted the resignation of Operational Creditor. That on 02.08.2018, Operational Creditor during service of 180 days post registration, met Mr. B. Muralidharan, the erstwhile CEO, of the Corporate Debtor, after office hours in Eros Hotel, Nehru Place, New Delhi, wherein, she signed his clearance form for his registration and took custody of his official laptop and handset even though he had informed that he had deleted and reset his laptop and handset in complete disregard to the prescribed standard exit procedure laid out by Corporate Debtor. On 03.08.2018 Mr. B.Muralidharan vide his email to Operational Creditor stated that he had inadvertently deleted the entire data of his official laptop and handset while resetting the same.

The Corporate Debtor further states that on 08.08.2018, through its email to Operational Creditor stated that due to the recent events of her handling the exit of Mr. B. Mura_lidharan, the Board and Corporate Debtor's lawyer have taken notice of the said event seriously and therefore, are cancelling the Agreement forthwith. On 12.08.2018, the Corporate Debtor vide email to Operational Creditor terminated the Agreement w.e.f 04.08.2018, in terms of the legal advice and therefore, Corporate Debtor was not obligated to pay Corporate Debtor during the remainder of the 180 days of the notice period.

The Corporate Debtor further states that, there is a pre-existing dispute between the parties, prior to the issuance of Demand Notice dated 27.10.2018, which is discernible from various correspondences exchanged between parties on 08.08.2018, 12.08.2018, 07.09.2018, 06.11.2018 etc. not just prior to the initiation of the present proceedings under the code. The acts by the Operational Creditor, as stated below, are a gross misconduct. Therefore, Corporate Debtor terminated the Agreement under Clause 10.1.1, on 12.08.2018, and waived off the six months notice period for the petitioner without any liability to make any further payment as per the terms of the Agreement.

a. Operational Creditor on 03.08.2018 signed Mr. B Muralidharan's clearance from knowing fully well that he had committed gross misconduct by deleting Corporate Debtor's proprietary information from his official laptop which was duly recorded in the Respondent letters dated 08.08.2018, 12.08.2018, 07.09.2018.

b. Despite several reminders on 12.08.2018, 07.09.2018 and 06.11.2018 the Operational Creditor failed to return Corporate Debtor's confidential and proprietary data for almost three months upon her termination by the Respondent violating Clause 8.3, Clause 11(a), Clause 11(b), Clause 11(c) of the Agreement.

After the reply of Corporate Debtor, Operational Creditor has filed its rejoinder, in its rejoinder the Operational Creditor states that, on 27.10.2018, the Operational Creditor issued a Demand Notice against the Corporate Debtor which the Corporate Debtor responded to vide its response letter dated 06.11.2018. The Corporate Debtor issued a show cause notice dated 29.10.2018 after almost 3 months of termination of the Consultancy Agreement of the Operational Creditor w.e.f 04.08.2018 and also replied to the Demand Notice on 06.11.2018 creating a false/moonshine dispute to avoid the payment of the operational debt due to the Operational Creditors.

The so called moonshine dispute raised by the Corporate Debtor pertains to:

a. Taking handover from one of the CEO's namely Mr. B. Muralidharan (ex-employee of the Corporate Debtor), who was asked to leave by the Corporate Debtor. Mr B. Muralidharan had met the Operational Creditor to handover his laptop and while giving handover he informed the Operational Creditor that he had made a factory reset of the laptop. The Operational Creditor asked him to explain his action in an email. Mr. B. Muralidharan vide his email dated 03.08.2018 wrote a detailed email to the Operational Creditor at 05.08 p.m. explaining and justifying his actions for resetting the official devices which was within 42 minutes of the receipt of the said mail shared by the Operational Creditor to the Corporate Debtor.

b. The Operational Creditor was asked by the Corporate Debtor to return the data available with her. After submitting the resignation, she went back to Austria and requested the Corporate Debtor to suggest ways through which she can return the data. The Operational Creditor even prepared a hard disk, however, the same was denied by the Corporate Debtor on the pretext that as per the Indian Custom Laws, the same is not allowed. The data then duly returned when her husband was travelling to India.

The Operational Creditor further states that, aforementioned handover is being portrayed by the Corporate Debtor as a moonshine dispute whereas this has no relation with the contract, the 6 months notice period and even the termination of the Operational Creditor's contract which was terminated for convenience and not misconduct.

In "Innoventive Industries Ltd.(Supra)", the Hon'ble Supreme Court held that pre-existing dispute is the dispute raised before demand notice or invoices was received by the 'Corporate Debtor'. Any subsequent dispute raised while replying to the demand notice under Section 8(1) cannot be taken into consideration to hold that there is a pre-existing dispute.

In "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited- 2017 SCC OnLine SC 1154", Honble Supreme Court held:

"40 Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."

In the present case, there is a pre-existing dispute, while going through the application it has been observed that the vide emails dated 08.08.2018 and further, there was already a dispute in existence between the parties. The Demand Notice under Section 8 (1) was issued much later on 29.10.2018, when it was again brought to the knowledge of the Operational Creditor vide notice of dispute issued by the Corporate Debtor.

As a sequel to the above discussion, this application fails and the same is hereby rejected and dismissed.

It is made clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the applicant before any other forum shall not be prejudiced on account of dismissal of the instant application.

The registered office of respondent is situated in New Delhi and therefore this Tribunal has jurisdiction to entertain and try this application.

Let the copy of order be served to the parties.