Salary During Notice Period Does Not Fall Within The Definition Of 'Operational Debt' Under IBC: NCLT, Mumbai

The NCLT, Mumbai Bench comprising of Justice H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member in the case of Sandesh Naik v. MT Educare Limited held that salary for purported notice period amounts to specific performance of the appointment letter and does not fall within the definition of 'Operational Debt' as the same was not salary for the actual work done by the Operational Creditor. The Applicant demanded the balance due to him from the Respondent, for which he placed reliance on an appointment letter which provided for a notice period of 3 months or salary in lieu of the purported notice period of 3 months. The Respondent contended that the appointment letter on which the Applicant is relying upon is a forged and fabricated document and that as per original appointment letter, the standard resignation policy provided that the Applicant's term would expire within 30 days, which shall be the notice period and he shall be entitled to the salary of the said period only. As regards whether the amount due as salary of the alleged notice period of 2 months classifies as 'Operational Debt' under the Code, the Tribunal held that the same does not amount to Operational Debt as it was not salary for the actual work done by the Operational Creditor and was in fact, specific performance of the appointment letter.