Insolvency plea time-barred if filed after 3 years: NCLAT

Setting aside the National Company Law Tribunal (NCLT) order, the National Company Law Appellate Tribunal (NCLAT) held that corporate insolvency proceedings cannot be initiated on the payment of salary arrears and other remuneration as they are timebarred.

NCLAT said this is in the matter of Omega Laser Products B.V. — a Dutch company, and a shareholder of its Indian arm.

A former managing director (MD) of the company had moved NCLT, seeking payment of salary arrears from the Indian arm of the company.

The appellate tribunal ruled that the former MD’S plea would be time-barred by limitation for initiating insolvency against the Indian arm, on the ground it had been filed beyond a period of three years.

The NCLAT said there was no acknowledgement of debt by the board of corporate debtor in terms of Section 18 of the Limitation Act, 1963. It held that a majority of the claims were barred by time. The appellant had filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC) against the NCLT order.

The dispute started when the former MD had claimed he was entitled to ~3 lakh remuneration from January 16,

NCLAT said this is in the matter of Omega Laser Products B.V. — a Dutch company, and a shareholder of its Indian arm

2010, which was revised on August 1, 2014 to ~4 lakh per month, but the payment fell short of the agreed sum.

Meanwhile, the Indian arm of the company alleged that such a revision of salary had to be sanctioned by the board and there was no document to prove this.

After examining the merits of the case, the NCLAT, however, concluded there was no specific approval either on the payment of arrears of any ‘fixation of the MD’S remuneration or increase of his salary/perks’.

The NCLAT also held that there was no crystallised quantum of an amount that could be claimed as salary/remuneration fixed by the board of corporate debtor as contemplated under Section 196 of the Companies