Pranav B Prem

The National Company Law Tribunal (NCLT), Chennai Bench, has held that the unpaid salary dues of a whole-time director amount to “operational debt” under the Insolvency and Bankruptcy Code, 2016 (IBC), thereby entitling such director to initiate the corporate insolvency resolution process (CIRP). The Bench comprising Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy, in an order dated October 10, 2025, admitted an application filed under Section 9 of the IBC by Arul Prasad Senniappan against Viprah Technologies Limited for recovery of unpaid salary dues of ₹10.50 lakh.

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Background

The applicant had served as a Whole-Time Director of the corporate debtor from January 2016 to March 2017. The application was filed for recovery of unpaid remuneration for this period. The tribunal noted that the minutes of the Board meeting dated December 15, 2018, contained a clear acknowledgment by the company regarding the dues payable to the applicant. This acknowledgment, the Bench observed, extended the limitation period under Section 18 of the Limitation Act, 1963, since it constituted a written recognition of liability.

Observations of the Tribunal

The NCLT rejected the argument that the applicant’s status as a director disqualified him from invoking insolvency proceedings. It held that being a director does not ipso facto bar a person from claiming a legally enforceable debt in the nature of salary arrears. Quoting from the order, the Bench stated: “The Tribunal notes that being a director does not ipso facto bar a director from claiming a legally enforceable debt (salary) that had accrued to him. Further, the law under the IBC does not provide that a director’s initiation of a Section 9 demand is per se invalid; the test remains whether the claim is real, undisputed and within limitation.”

The tribunal further clarified that an operational creditor can include an employee or even a director, provided a legally enforceable claim exists. It emphasized that the fiduciary obligations imposed by Section 166(4) of the Companies Act, 2013, cannot override the statutory remedy available under the IBC to recover unpaid dues once the employment relationship has effectively ceased. “There is no express bar under the IBC prohibiting a director from issuing a notice for unpaid remuneration that qualifies as ‘operational debt’ under Section 5(21). The fiduciary obligations under Section 166(4) of the Companies Act, 2013, cannot override a statutory remedy available under the IBC in respect of unpaid dues, particularly when the employment relationship has effectively ceased,” the order stated.

Corporate Debtor’s Defence and Tribunal’s Findings

The corporate debtor contended that the applicant had been guilty of misconduct, breach of fiduciary duties, and competition through another firm, and therefore, his salary claim was not maintainable. Rejecting these arguments, the Bench held that allegations of misconduct, without contemporaneous initiation of any formal action or written repudiation of salary claims, cannot amount to a bona fide pre-existing dispute. “Allegation of misconduct, without contemporaneous initiation of formal action to recover damages or forfeiture, or a specific written repudiation of the salary claim prior to the demand, does not amount to a bona fide pre-existing dispute that will defeat an otherwise established claim,” the Bench observed.

It further noted that the corporate debtor had not denied the employment relationship nor produced any documentary evidence proving that the applicant’s salary had been paid. The tribunal relied on the minutes of meetings and other communications to conclude that “even informal written communication constitutes valid acknowledgment under law.”

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Order and Directions

Finding that the applicant had established both debt and default, the NCLT admitted the petition and initiated the CIRP against Viprah Technologies Limited. The Bench appointed CA S. Prabhu as the Interim Resolution Professional (IRP) and directed the applicant to deposit ₹2 lakh towards CIRP expenses. A moratorium under Section 14 of the IBC was declared, thereby suspending the powers of the company’s board of directors and prohibiting any recovery or enforcement actions against the corporate debtor during the insolvency resolution process.

Appearance

For Applicant: Advocates PJ Sri Ganesh, P J Rishikesh and Agil Vatchalam

For Respondent: Advocates Pawan Jhabakh, Manivannan J and Antony R Julian

Cause Title: Arul Prasad Senniappan Vs. Viprah Technologies Ltd

Case No: IBA/1297(CHE)/2019

Coram: Judicial Member Jyoti Kumar Tripathi, Technical Member Ravichandran Ramasamy