Poaching Of Employees By The Operational Creditor Does Not Fall Within The Ambit Of Pre-Existing Dispute: NCLT Kolkata

Background Facts

India Medtronic Private limited (“Operational Creditor”) and Healthcare Associates Private Limited entered (“Corporate Debtor”) entered into a Non-exclusive Distribution Agreement effective from 25.04.2015 until 28.04.2017 vide which the Corporate Debtor was appointed the non-exclusive distributor for sale of the products of the Operational Creditor in Eastern and North Eastern India. The Agreement was extended by one year till 27.04.2018. It was contended that the Corporate Debtor did not question any of the unpaid invoices that were raised and further did not deny the issuance of cheques amounting to Rs.3,21,20,236/- which were dishonored on presentation. A Demand Notice dated 17.01.2020 was issued by the Operational Creditor. However, the Corporate Debtor filed a Money Suit after the issuance of the Demand Notice contending that the Corporate Debtor was unable to recover its dues from the market due to absence of employees poached by the Operational Creditor

It was submitted by the Operational Creditor that the Corporate Debtor had given an undertaking dated 17.08.2018 whereunder the Operational Creditor had agreed to assist the Corporate Debtor in recovering its dues in exchange of the right to adjust 50% of the amount recovered from the market. However, the undertaking was not an agreement but only an indemnity given by the Corporate Debtor to the Operational Creditor. It cannot absolve the Corporate Debtor from its obligation to the pay for the goods supplied by the Operational Creditor. It was further submitted that Corporate Debtor had filed the Plaint on account of damages suffered by it. But random amounts of damages were claimed in the Plaint on account of Loss of Business Profits, Loss of Goodwill, etc and the Corporate Debtor tried to set off these claims of damages (which were without any foundation) against the liquidated claim which it had already admitted.

On the Contrary, It was contended by the Corporate Debtor that the Operational Creditor started poaching its Key Managerial Personnel and began soliciting direct sale of products to clients of the Corporate Debtor at a reduced price. This resulted in failure of the Corporate Debtor to recover substantial dues from the market. It was further submitted that several mails regarding this issue were written by the Corporate Debtor to the Operational Creditor and after much deliberation, the Operational Creditor agreed that it would assist the Corporate Debtor in recovery of dues on the condition that the Operational Creditor would receive 50% of the proceeds of the dues of the Corporate Debtor. This was agreed vide an undertaking dated 17.08.2018 by the Corporate Debtor. However the Operational Creditor breached the reciprocal obligations laid down in the undertaking by not taking any steps to assist the Corporate Debtor in recovery of dues from the market. It was further alleged that the 3 cheques submitted as evidence by the Operational Creditor were false and fabricated as the blank security cheques which were wrongfully filled in by Operational Creditor were not given by Corporate Debtor in 2018 or 2019 but given in 2015 and 2017.

Findings of the Tribunal

The Tribunal observed that the Operational Creditor had not denied that the 3 blank cheques were furnished to it in 2015 and 2017, hence it was deemed to be admitted. Therefore, the three cheques were issued at a time when the debt was neither due nor payable by the Corporate Debtor. Thus the Operational Creditor had failed to establish the debt on the basis of the three dishonored cheques.

It was further observed that Rakesh Mehta was the authorized signatory of the Operational Creditor to sign the undertaking dated 17.08.2018. However, the undertaking bears the signature of the wife of Rakesh Mehta. It was observed that a different person cannot execute an undertaking when another person is the authorized signatory. The Corporate Debtor contended that the wife of Rakesh Mehta signed the undertaking under coercion. It was observed that since this contention was neither denied nor controverted by the Operational Creditor, the undertaking also cannot be relied upon as an acknowledgement of debt.

The Tribunal further observed that poaching of employees can be an issue. Reliance was placed on the Delhi High Court Judgment of Muthoot Finance Limited vs Shalini Kalra & Ors wherein the Delhi High Court granted interim reliefs in a suit involving damages for poaching of employees. Further Reliance was placed on the Bombay High Court judgment of Jet Airways (I) Ltd. vs Mr. Jan Peter Ravi Karnik wherein the Bombay High Court ordered for compensation by award of damages in favour of the plaintiff for poaching by the defendant. Nevertheless, the Tribunal observed that the nature of relief or the grant thereof in case of poaching will depend upon the facts of each case. Even though the Corporate Debtor had blamed the Operational Creditor for causing business losses due to poaching of its employees, this action cannot be called a pre-existing dispute as it did not fit the definition of genuine dispute given under the Supreme Court judgment of Mobilox Innovations Private Limited v. Kirusa Software Private Limited.

With the aforesaid observations, the Tribunal rejected the petition.

Case: India Medtronic Private Limited vs Healthcare Associates Private Limited

Case No. C.P. (IB) No. 41/KB/2021

Counsels for the Applicants :Sr. Adv. Jishnu Saha, Adv. Shiv Ratan Kakrania, Adv. Rahul Ray, Adv. Divyanshu Sharma, Adv. Tanuj Kakrania, Adv. Karanjeet Sharma

Counsel for the Respondent :Adv. Shaunak Mitra, Adv. Debartha Chakraborty, Adv. P. Ganguly, Adv. S. Kar, Adv. J. Sabbah,

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