NCLT HAS RULED BOTH IN FAVOUR AND AGAINST THE EMPLOYEES WHO TRIED TO INITIATE CIRP UNDER IBC 2016 AGAINST THEIR EMPLOYERS

NCLT HAS RULED BOTH IN FAVOUR AND AGAINST THE EMPLOYEES WHO TRIED TO INITIATE CIRP UNDER IBC 2016 AGAINST THEIR EMPLOYERS 

CASES IN FAVOUR OF EMPLOYEES 

NCLT ruling in favour of employees is also held in the following cases:

1.Aruna Hotels v Employees of Aruna Hotels - Where NCLT Chennai held that initiation of CIRP (Corporate Insolvency Resolution Process)  for dues of employees as OC (Operational Creditor) is valid .

2. Nitin Gupta (Operational Creditors – Employee of the Company) Vs Applied Electro Magnetic Private Limited- NCLT held that the Petition u/s 9 of IBC, 2016 in the matter. The Court was satisfied that the present application is complete & there has been part admission of the salary dues & non-payment of the same has caused default by the respondent

CASES AGAINST EMPLOYEES 

NCLT Ruling against the employee or employees pleading to initiate CIRP against his employer failed in the following cases.

1.However , in KKV Nagaprasad v Lanco Infartech Ltd, an unpaid employee attempt to initiate CIRP failed. In this case , NCLT held that   employee did not show his bonafide to the Tribunal. Employee failed to demonstrate that the debt was indeed due and payable. 

2.S N singh vs Tayo Rolls Ltd ,  NCLT Calcutta has held that 284 employees of operational debtors cannot file one petition as  joint petitions by more than one creditors cannot filed under Section 9 of IBC Code.

Office Assistant Drags Company Into Insolvency

Office Assistant Drags Company Into Insolvency

The Chennai bench of the National Company Law Tribunal (NCLT) has initiated the corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC) against a company based on a petition by an office assistant for non-payment of salary dues amounting to Rs 3.2 lakh.

Office Assistant as an Operational Creditorrot

Pradeep M R, the office assistant, classified as an operational creditor under the IBC, was appointed on July 1, 2011 by Merchem Limited, a manufacturer of specialty chemicals. The last payment of salary to him was made on February 22, 2016 for the month of December 2015. "Thereafter, no payment has been made in the account of the operational creditor," NCLT said.

"The operational creditor has fulfilled all the requirements of law for admission of the application and has also proposed the name of the IRP (interim resolution professional)," NCLT's member, judicial, Ch. Mohd Sharief Tariq, said in his order. "This bench is satisfied that the corporate debtor has committed a default in making payment of the outstanding debt claimed by the operational creditor," he said.

Commencement of CIRP for non-payment of Salary of Rs 3,20,397

"Therefore, (the petition) is admitted and the commencement of corporate insolvency resolution process is ordered, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed," NCLT ruled. Pradeep claimed Rs 3,20,397 on account of services which he had rendered to the company as an office assistant. Though a private notice for service on the corporate debtor (Merchem) was ordered on December 21, 2017, which was served, there was no representation from the corporate debtor, the tribunal said.

"Therefore, the corporate debtor was proceeded ex-parte on January 9, 2018," it said.

Chennai-based C Ramasubramaniam has been appointed as IRP and has been directed to take charge of the management of the company immediately. The NCLT said that the supply of essential goods or services of the corporate debtor should not be terminated, suspended or interrupted during the moratorium period.

Courtesy – Times of India

EMPLOYEE MOTIVATION BY TOP 10 COMPANIES

EMPLOYEE MOTIVATION BY TOP 10 COMPANIES

Motivating your employees is vital to any business. A motivated workforce means a highly productive staff, all of which will help you achieve your business goals. ... Employee incentive programs are one of the easiest ways to incentivize your workforce.

Motivated employees can lead to increased productivity and allow an organisation to achieve higher levels of output. Imagine having an employee who is not motivated at work.

Company Name	Employee Benefits Offered
3M	3M offers a variety of perks to keep employees mentally and physically healthy. They offer smoking cessation, weight management, and stress management programs. The office also contains an on-site pharmacy, medical clinic, and fitness center. Employees can also take advantage of the company’s child and elder care consulting services.
AOL	AOL offers great perks for new parents. The company’s Well-Baby program provides a number of family benefits to employees, including prenatal instruction and a lactation program. The office includes an on-site care facility for new parents as well.
Boston Consulting Group	Executives at the Boston Consulting Company strive to instil a work-life balance in their employees to combat the high intensity of consulting. The firm issues a “Red Zone Report” to management when an employee is working too many hours. The firm also allows flexible scheduling, which is ideal for working parents. BCG offers generous leave; new moms can extend their unpaid leave up to one year (this includes adoptive mothers as well).
Campbell Soup	For employees with young children, Campbell Soup has an on-site kindergarten and after-school programs. The office also has a lactation room for mothers. Other benefits help to keep employees healthy: the company offers healthy cooking lessons, subsidized costs on healthy meal options in the cafeteria, and an on-site fitness center.
Deloitte	Deloitte offers employees unique sabbatical programs. Employees can take up to four unpaid weeks off for any reason. Workers can also choose to take 3 - 6 months off, partially paid, to pursue a career-enhancing opportunity.
Ernst & Young	EY provides a variety of benefits for working parents. The company provides low-cost back-up childcare and a parents’ network that includes seminars and forums (such as a forum for parents of children with special needs). EY was also one of the first big accounting firms to reimburse LGBT employees for the additional federal and state taxes incurred for their same-sex domestic partners’
Google	Google has long been known as a company with a wide variety of perks to keep employees happy and motivated. Google makes it almost unnecessary for workers to leave the office – there are free meals, on-site doctors and medical services, yoga classes, massages, and back-up childcare. Google even provides employees with a free concierge service to handle errands, such as picking up dry cleaning or taking a car for an oil change.   Google also offers longer maternity and paternity leave than the average American company: dads get six weeks paid leave, and moms can take up to 18 weeks leave.
J.M. Smucker Company	J.M. Smucker offers its employees a number of health-related benefits, including on-site wellness opportunities (such as health screenings and education programs) and a financial incentive for employees enrolled in the company’s healthy lifestyle program. However, perhaps the most unique perk is that the company reimburses employees for tuition costs up to 100%, with no cap.
Medallia	Medallia offers employees a unique perk: a budget for overcoming fears. Employees are given money to help them overcome a particular fear, whether personal or professional. People have used this money for everything from stand-up comedy classes (to overcome a fear of public speaking) to singing lessons.
SC Johnson & Son	Being a family company, SC Johnson not surprisingly provides a number of family benefits, including generous maternity and paternity leave and family volunteer events. Employees can also take advantage of the company’s concierge service for a variety of chores, including delivering groceries, getting an oil change, and mailing packages.

How to Attain Competitive advantage Through Innovation

How to Attain Competitive advantage Through Innovation

WHAT IS AN INNOVATION?

 Innovation is a new idea or notion that result in a new service or product. Innovation can make a great impact on the purchase, usage and disposition styles.

• For instance, Microwave ovens have transformed the manner we cook.

• Text messaging and email has transformed the manner we interact.

• Digital cameras and mobile phones have transformed the manner in which we take photos and exchange them with our friends.

•  Reusable and recyclable packaging have transformed the awareness on recycling the products.

• For disposing of the scraps or unwanted products or used products, now on-line sites such as Craigslist, eBay and Freecycle offer innovative means for consumers. 

“Why innovation is seen as a core competency in relation to competitive advantage and how this relates to the current highly competitive state of the global event industry?”

The main aim of each business organisation in today’s highly competitive atmosphere is to overthrow competition by winning new customers. Those businesses which are owners of knowledge symbolise a tool for the creation of innovations. As per Hana (2013), nowadays business organisations find it significant to innovate and encourage an innovative culture.  According to him, knowledge too is very critical in the process of innovation since it symbolises not only significant but also the output of the alteration progression. According to Bartes (2009), the 21st century is footed upon information, knowledge and state-of-the-art economy.  

Today, if an organisation wants to be a success, it has to rely on knowledge of the employees, their creative function and with more relevance is imposed on uninterrupted learning and research and development. Tushman & Nadler (1986) pointed out that business organisations can reap competitive benefit only by managing the business effectively today while concurrently fostering creative for tomorrow. (Tushman & Nadler 1986:74). Thus, for any business, innovation is still visualised as a major driver for economic performance. As per Tidd et al., (2006), business owners who tries to employ technological innovation for manufacturing a new or novel product or service or by using a new process in the course of their manufacturing process, definitely will attain a strategic competitive benefit as compared to its competitors (Hana 2013:82).

As per Global Innovation 1000 study (2011), 7 of the top 10 innovating companies were not actually top spenders of innovation. However, these top 10 innovators are able to maintain a good financial performance than the top 10 R&D spenders (Jaruzelski & Mainardi 2011).

The following table demonstrates how the top 10 most innovative companies like Google, Apple, 3M, Toyota, GE, P&G, Microsoft, Intel and Samsung are expending.

INNOVATION HELPS TO INCREASE THE NETWORTH

The following figure shows how the top 10 innovating companies noteworth outstripped their peers on the Global Innovation 1000 list on the major three major financial metrics such as revenue growth, market cap growth and the EBITDA as % of revenue.  Thus, innovative companies are able to expand their growth in revenues, market cap growth and an increase in EBITDA .

“The four key dimensions of innovation: Product, Process, Position and Paradigm offering events industry examples of each.”

At the phase of product development, a capability to involve actively with the consumers to demonstrate the soundness of the concepts and to evaluate market perspective and risks and the capability to clout the present product podiums into new products .

Xerox Innovation

PROCESS DEVELOPMENT

Process development stage takes many phases. For instance, Xerox introduced the first ever copying machine in 1949 which had to be operated by the experienced operators manually. Xerox later resorted to processing enhancement and market switching by introducing lithographic plate printing.  In 1955, Xerox introduced an automatic version of its copier, and in 1958, it introduced advanced copier machines with after sales services. Thus, for Xerox, it took nearly one decade to improve its process

POSITIONING

Positioning involves placing the invented process or product in a particular context. It refers to how a particular process or product is comprehended symbolically and how they are employed. For instance, Levi-Strauss jeans are a well-known international product which originally produced as clothing material for manual workers then re-branded as a fashion item (elrha.org 2015).

Paradigm innovation

Paradigm innovation refers to the whole sector paradigm-footed innovations which relate to the mental replicas which outline what a business is about. The emergence of community –oriented feeding therapy to eliminate malnutrition is the recent illustration of paradigm shift of innovation as it involves a mixture of a product which is PlumpyNut, a distribution for the whole community (the process), the absence of the role of aid agencies (a paradigm shift) and involving communities to offer a solution to handle the malnutrition at home itself (elrha.org 2015).

At commercialisation phase, a capability to function with the pilot users to phase out the products more methodologically and to coordinate across the whole organisation for an efficient launch (elrha.org 2015).

 “The Consequences for not innovating.”

As per Joseph Schumpeter, the business failures are triggered by incidents which are external to the business. There are many business failures mainly due to constant soaring in the market competition which is triggered by innovation. There will be creative destruction if a business fail to innovate and to swim along with its competitors. Some of the businesses that failed not to invent are Xerox, Yahoo, Blackberry, MySpace, Polaroid and the whole publishing industry

Final Readings

Innovation is like oxygen for any organisation whether it is a small or big one. Business organisations which do not innovate may lose their position in the market. Many companies who do not innovate had disappeared from the market, and the examples are Xerox, Yahoo, Blackberry, MySpace, Polaroid and the whole publishing industry. There are many advantages for the firms that innovate. As per Global Innovation 1000 study (2011), 7 of the top 10 innovating companies were not actually top spenders of innovation. However, these top 10 innovators are able to maintain a good financial performance than the top 10 R&D spenders (Jaruzelski & Mainardi 2011). This demonstrates that if a business organisation wants to grow both vertically and horizontally, it has to innovate and this is needed for their survival and to outperform their competitors.

Whether an Insolvency Professional can be paid fees higher than what is due from a Corporate Debtor?

There is a need to fix a ceiling of the Fees to be paid to an Insolvency professional on case to case basis on the basis of volume of work involved.

Whether an Insolvency Professional can be paid fees higher than what is due from a Corporate Debtor?

Shrikrishna Rail Engineers Private Ltd

vs

Madhucon Projects Ltd

In the matter of Shrikrishna Rail Engineers Private Ltd vs Madhucon Projects Ltd , Hyderabad NCLT made a reference to Insolvency and Bankruptcy Board to investigate the up-normal amount of fees payable to Insolvency Professional.

This is the first case where IBBI has been asked to look into the collusion of related parties in an insolvency proceeding.

In their petition  , the Shrikrishna Rail Engineers Private Ltd filed an insolvency petition under section 9 of the IBC code 2016 and prayed for the following reliefs.

1.    To pass winding up order against vs Madhucon Projects Ltd

2.    To Appoint Mrs. Bhavana Sanjay Ruia as Insolvency Professional at a hefty pay of Rs 5 Crore as professional fee up to the meeting of Committee of Creditors. In subsequent months , the proposed IRP is to be paid Rs 1.75 Crores as monthly payment.

It is to be noted that Mrs. Bhavana Sanjay Ruia is the wife of Shri Sanjay Kumar Ruia , a Chartered Accountant who appeared in this case as counsel for the corporate debtor.

However , NCLT Hyderabad found that amount due from Corporate Debtor is just only Rs 4.16 Crores.

In other words , fees for insolvency professional is 200% higher than the debt due from the corporate debtor.

In view of the above , NCLT Hyderabad is of view that the remuneration quoted by IRP is extremely high and referred the matter to IBBI to take action against the Resolution Professional.

On this background, the IBBI has recently issued a circular that IRP has to disclose whether he is a related party to the corporate debtor or counsel appearing for the Corporate debtor.

Whether IBBI is going to take any action against this collusion of related party and claiming unjustified fees for the insolvency professional , we have to wait and see. 

Further , it is necessary on the part of IBBI to  fix a ceiling of the Fees to be paid to an Insolvency professional on case to case basis on the basis of volume of work involved.

A FOREIGN FINANCIAL OR OPERATIONAL CREDITOR CANNOT INVOKE INSOLVENCY PROCEDURE IN INDIA IF HE DOES NOT PRODUCE A NO-DUE CERTIFICATE FROM INDIAN FINANCIAL INSTITUTION – A MAJOR HANDICAP TO BE PLUGGED INTO.

A FOREIGN FINANCIAL or operational CREDITOR CANNOT INVOKE INSOLVENCY PROCEDURE IN INDIA IF HE DOES NOT PRODUCE A NO-DUE CERTIFICATE FROM INDIAN FINANCIAL INSTITUTION – A MAJOR HANDICAP TO BE PLUGGED INTO.

Smart Timing Steel Ltd. versus National Steel and Agro Industries Ltd

FACTS OF THE CASE

In this case, Smart Timing Steel Ltd. (“Appellant”), being an Operational Creditor in this case, filed an application before the Adjudicating Authority (Mumbai Bench) for initiation of corporate insolvency resolution process under Section 9 of Insolvency & Bankruptcy Code (“Code”). It is important to note that the Appellant did not submit the certificate from the Financial Institution (maintaining its accounts) confirming that there is no payment of the operational debt by the Corporate Debtor, along with its petition, which is a mandatory requirement under Section 9 of the Code.

Later, when the Appellant was given an opportunity to file the above certificate, it failed to do so and submitted that it should be exempted from such compliance, as the bank of the Appellant is situated outside India. The Appellant in this case had no office or bank account in India with any of the scheduled banks, Financial Institution (as defined under Section 45 of RBI Act, 1934), Public Financial Institution (as defined under Section 2 (72) of the Companies Act, 2013) or with any other institution notified by Central Govt. as “ Financial Institution”. Consequently,  the Appellant failed to enclose such certificate from ‘Financial Institution’ maintaining its account.

DECISION OF THE NCLAT , MUMBAI BENCH

The above petition of the Appellant was rejected by the Adjudicating Authority on ground of non-compliance with the provision of Section 9(3)(c) of the Code (i.e., non-filing  the above certificate). Aggrieved by the above order, the Appellant filed an appeal before NCLAT under Section 61 of the Code).

DECISION OF THE NCLAT

Referring to Section 9 of the Code, NCLAT observed that the entire provision of sub-clause (3) of Section 9 is “required to be mandatorily followed and it is not empty statutory formality”.

NCLAT was of the view that the argument that foreign companies having no office in India or no account in India with any Financial Institution will suffer in recovering the debt from corporate debtor as it cannot be accepted as apart from the Insolvency code, there are other provisions of recovery like suit which can be preferred by any person.

Macquaire Bank Limited V/s Uttam Galva Metallics Limited

In the above case also , the same issue was raised . National Company Law  Appellate Tribunal (NCLAT), Chandigarh, have upheld the order of the Hon'ble NCLT Chandigarh wherein the Hon'ble Tribunal had held that the "Certificate from a foreign Bank cannot be considered as Certificate from financial institution as contemplated under Section 9 (3) (c) of the I&B Code 2016."

The Supreme Court has over ruled the NCLAT decision

However, the Supreme Court has over ruled the NCLAT decision on 15th December, 2017 In the matter of Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd. Civil Appeal no. 15135-2017 .  Hence, Section 9(3)(c) is no longer mandatory but only directory in nature.

MY VIEWS

Indian Insolvency code should not prescribe a procedure that cannot be satisfied or fulfilled against foreign suppliers. Such provisions will be considered as ultra vires of UNCITRAL Model Law on Cross-Border Insolvency (1997) to which Indian government is a signatory or the provisions of free trade advocated by World Trade Organisation to which Indian government is a signatory. 

By making it mandatory the certificate from an Indian financial institution , the foreign suppliers are put at handicap. Declaring it as a mandatory provision for getting a certificate from a Indian financial institution , it is submitted that it is against the natural justice.

Instead , foreign suppliers should be allowed to enclose the following along with their application for initiation of insolvency under IBC Code 2016.

·       Copy of the contract entered between Indian buyer and foreign supplier.

·       Copies of bill of lading and invoices.

·       Copies of the acknowledgement of receipt of goods

·       Copy of the notice served on Indian buyer demanding the payment.

·       An affidavit by foreign supplier or his power of attorney that no payment has been received  from the Indian buyer.

This is a serious gap in the Insolvency and Bankruptcy Code 2016 and this has to plugged immediately through suitable amendment.

CAN SUPREME COURT USE ARTICLE 142 OF THE CONSTITUTION TO PUT QUIETUS TO THE ISSUE WHEN NCLAT WAS RELECTANT TO TAKE RECOGNITION THE COMPROSISE BETWEEN DEBTOR AND CREDITOR IN THE CIRP PROCEEDIGNS ALREADY COMMENCED UNDER IBC 2016?

CAN SUPREME COURT USE ARTICLE 142 OF THE CONSTITUTION TO PUT QUIETUS TO THE ISSUE WHEN NCLAT WAS RELECTANT TO TAKE RECOGNITION THE COMPROSISE BETWEEN DEBTOR AND CREDITOR IN THE CIRP PROCEEDIGNS ALREADY COMMENCED UNDER IBC 2016?

Lokhandwals Kataria Construction P Ltd vs Nisus Finance and Investment Managers LLP

FACTS OF THE CASE

The Mumbai bench of the National Company Law Tribunal (NCLT) on 15 June initiated a corporate insolvency resolution process against the debtor. 

Later, the company and the creditor approached the National Company Law Appellate Tribunal (NCLAT) saying that the two had settled the dispute and that some of the dues had already been paid.

NCLAT said on 13 July 2017 that under the IBC 2016, a case can be withdrawn before the admission of an insolvency case, and not after that. 

The parties then filed a plea with the Supreme Court, which allowed a settlement to be considered under article 142 of the Indian constitution. 

WHAT IS THE MEANING OF QUITEUS ORDER UNDER ARTICLE 142 OF THE CONSTITUTION?

Article 142 provides that “the Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it”. 

RECOMMENDATION

As of now, there is no provision under IBC 2016 to order a winding up case as closed when the parties to the dispute have made an out-of-court settlement.

The government may also consider amending the IBC to make provisions for settlement of insolvency proceedings once a plea is admitted.

It should be noted that all the creditors should have come into compromise arrangement and not a single creditor in each case. In this case, the settlement is made between a debtor and a creditor. It is not known whether all the creditors have given their consent for the compromise as the compromise has been made with a single creditor.

The amendment should specify that a compromise is to be reached with the all the creditors and not with a single creditor or appellant alone. 

Insolvency Professionals Has to Compulsorily Adhere the Listing Company Formalities while carrying out the Insolvency proceedings for Listed companies. Any Fines levied for non-compliance will have to be paid by Insolvency Professionals from their Personal Funds

Insolvency Professionals Has to Compulsorily Adhere the Listing Company Formalities while carrying out the Insolvency proceedings for Listed companies. Any Fines levied for non-compliance will have to be paid by Insolvency Professionals from their Personal Funds

Insolvency and Bankruptcy Board of India Circular No. IP/002/2018 3 rd January, 2018

Sub: Insolvency professional to ensure compliance with provisions of the applicable laws.

A corporate person undergoing insolvency resolution process, fast track insolvency resolution process, liquidation process or voluntary liquidation process under the Insolvency and Bankruptcy Code, 2016 (Code) needs to comply with provisions of the applicable laws (Acts, Rules and Regulations, Circulars, Guidelines, Orders, Directions, etc.) during such process. For example, a corporate person undergoing insolvency resolution process, if listed on a stock exchange, needs to comply with every provision of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, unless the provision is specifically exempted by the competent authority or becomes inapplicable by operation of law for the corporate person. 

2. It is hereby directed that while acting as an Interim Resolution Professional, a Resolution Professional, or a Liquidator for a corporate person under the Code, an insolvency professional shall exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person undergoing any process under the Code complies with the applicable laws. 

3. It is clarified that if a corporate person during any of the aforesaid processes under the Code suffers any loss, including penalty, if any, on account of non-compliance of any provision of the applicable laws, such loss shall not form part of insolvency resolution process cost or liquidation process cost under the Code. 

It is also clarified that the insolvency professional will be responsible for the non-compliance of the provisions of the applicable laws if it is on account of his conduct.

 4. This circular is issued in exercise of powers under section 196 read with section 208 of the Insolvency and Bankruptcy Code, 2016.

Sub: Insolvency professional to use Registration Number and Registered Address in all his communications.

 It has been observed that a few insolvency professionals are using different addresses and emails while communicating with the stakeholders, despite repeated advice from the Insolvency Bankruptcy Board of India (IBBI) to use the addressees and emails registered with the IBBI in all their communications.

2. It is hereby directed that in all his communications, whether by way of public announcement or otherwise to a stakeholder or to an authority, an insolvency professional shall prominently state: (i) his name, address and email, as registered with the IBBI, (ii) his Registration Number as an insolvency professional granted by the IBBI, and (iii) the capacity in which he is communicating (Example: As Interim Resolution Professional of XYZ Limited, As Resolution Professional of ABC Limited, etc.).

3. Additionally, an insolvency professional may use a process (Example: CIRP, Liquidation, etc.) specific address and email in its communications, if he considers it necessary subject to the conditions that:

(i) the process specific address and email are in addition to the details required in Para 2 above, and

(ii) the insolvency professional continues to service the process specific address and email for at least six months from conclusion of his role in the process.

4. This circular is issued in exercise of powers under section 196 read with section 208 of the Insolvency and Bankruptcy Code, 2016.