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TMI Blog2022 (10) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... erational Creditor and initiated Corporate Insolvency Resolution Process ('CIRP' in short) against the Corporate Debtor with immediate effect. Aggrieved by this impugned order, the present appeal has been preferred. 2. The brief factual matrix of the case is that an Agreement dated 02.12.2015 was entered into between the Metro Heart Centre Pvt. Ltd. (MHCPL), later known as "Alcuris Healthcare Pvt. Ltd.", the present Respondent No. 1 and "ABMAY Health Ventures LLP", the Corporate Debtor creating a joint venture named "SRV Heart Centre - unit of MHPCL". The heart centre as a unit became functional as per the terms of the agreement w.e.f. January, 2016. Over a period of time, differences arose between the two parties on various issues such as settlement of accounts, calculation of profit sharing ratio etc. Claiming outstanding dues as operational debt, Demand Notice under Form-3 of the IBC was sent by Respondent No. 1 to the Corporate Debtor on 07.12.2019. The Corporate Debtor sent an interim reply to the Demand Notice on 17.12.2019. A police complaint was also filed against the Corporate Debtor by Respondent No. 1 on 11.01.2020 arising out of the disputes between the parties. In add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties as per the terms of the agreement. 5. It has been also submitted that after an initial period of operationalization of this Profit Sharing Agreement, differences and disputes arose between the parties. Respondent No. 1 started failing to deliver on their responsibilities such as arranging cardiologist and cardiac surgeons, mal-functioning of Cathlab Machine, inability to maintain necessary equipment essential for the procedure etc. The Learned Counsel for the Appellant also stated that Dr. Ajay Pandey, who was an employee of the Respondent No. 1 had been breaching the Profit Sharing Agreement by unilaterally giving heavy discounts selectively to the patients. The resignation of Dr. Ajay Pandey later and the resultant vacancy in the Cathlab led to the non-operationalization of Cardiac Surgery Department by more than two months thereby causing loss of revenue to the joint venture impacting the profit-sharing formula. The Learned Counsel for the Appellant has relied on the judgement of this Tribunal in "AS Techno Soft Pvt. Ltd." Vs. "Gold Squares India Pvt. Ltd." in Company Appeal (AT) No. 331/2017 that the supply of sub-standard quantities is a ground for dispute under the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in an un-registered partnership and not that of a service provider and service recipient. If the Respondent No. 1 was providing goods/services to the Corporate Debtor, only then it ought to have raised invoices to that effect. 9. It has been admitted by the Learned Counsel for the Appellant that two payments of Rs. 5 lakhs each were made on 30.11.2019 and 31.12.2019 but that these payments were made on the last date of the months which was towards profit sharing. These payments were claimed to have been made even before the issue of the Demand Notice and therefore has no link with admission of any debt. These were in the nature of advance amounts deposited by the Corporate Debtor time and again with the Respondent No. 1 as running costs which was liable to be adjusted at a later period and that this was in the knowledge of the Operational Creditor from the beginning and later also clarified by the Corporate Debtor in the reply to the Demand Notice dated 23.01.2020. 10. It was vehemently argued by the Learned counsel for the Appellant that deduction of tax under Section 194-J of the Income Tax Act, 1961 cannot be criteria for assuming that the relationship of the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges were to be paid by the Appellant/Corporate Debtor to the Respondent No. 1 and the arrangement was thus one of income-sharing and not Profit Sharing. It is also submitted that the payment entries made by the Corporate Debtor to the Respondent No. 1 were booked as Cath Lab Expenses in their ledger and not as sharing of profits. Further the fact that the Corporate Debtor deducted TDS under Section 194-J of the Income Tax Act for four years is corroborative that this was not a Profit Sharing Agreement but an income sharing arrangement wherein the Respondent no. 1 is a service-provider. 14. The agreement provided for payment of fees to Respondent No. 1 according to the service/procedure performed. The Corporate Debtor used to raise the invoice and collect the payment from the patients and thereafter made payment to Respondent No. 1. All bills and invoices were raised by the Appellant and the payment was also received by the Appellant from the patients thereafter the Appellant made payment to the Respondent on weekly basis and as per the terms of agreement. Moreover, since the Respondent No. 1 was providing service, the outstanding amount becomes an operational debt. 15. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other equipment unilaterally from the hospital. 17. It has also been stated that non-raising of invoice cannot be a tenable ground for rejection of Section 9 petition since raising of invoice is not mandatory and buttressing their stand has relied on the judgement of the Hon'ble Supreme Court in M/s Consolidated Construction Consortium Vs. M/s Hitro Energy Solutions Private Ltd." As regards the contention of the Appellant that there was material breach on account of giving of discount by Dr. Ajay Pandey, it was stated that it cannot be a ground for dispute since it was a discount given to poor and needy patients and the hospital was being run for the benefit of general public. It has been contended that even after resignation of Dr. Ajay Pandey, there was a continuous flow of patients as can be evidenced from the register of patients and output from Cathlab equipment and hence a frivolous ground of dispute raised by the Corporate Debtor. Moreover, it is denied that there was any deficiency on the part of Respondent No. 1 in the working of Cathlab and that the Appellant had not enclosed any document evidencing deficiencies. On the cost of stents, it was stated that the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. To apply the Mobilox test, at this stage, we may first look into the provisions of the IBC to find out as to how 'Operational Creditor' and 'Operational Debt' is defined and thereafter have a look at the salient relevant clauses of the agreement entered between the SRV Heart Centre Unit of Metro Centre Pvt. Ltd. (MHCPL) and SRV Hospital to better appreciate the relationship between the Corporate Debtor and Respondent No.1. 21. Section 5(20) of the IBC lays down that unless the context otherwise requires "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred and Section 5(21) provides that "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 22. From a plain reading of the above definition of operational debt, it is clear that it is a claim in respect of provisions of goods or services including dues on account of employment or a debt in respect of repay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cathlab including lighting and airconditioning. 2. Purchasing of a Cathlab and install at SRV Hospital. 3. To arrange all the necessary equipment for Cathlab. 4. To install all the necessary equipment to the major operation of SRV Hospital (except the equipment SRV Hospital already having) for cardiac, surgery - Heart Lung Machine, BTCO2 5. Performing all the angiography, angloplasty, pacemaker insertion other allied cathlab procedure and cardiac surgery. 6. Arranging Cardiologist, Cardiac surgeon, Anesthetics, Technician & Administration - Please detail out role of administration. Additionally costs related to cardiologist, cardiac surgeon, anesthetics, technician bought in by Metro will be borne by Metro. The hospital staff and technicians will be (illegible and smudged) Income sharing offer: Both the parties broadly agree on the below mentioned charges and sharing ratio. The same can be reviewed every six months and can be changed if required by both the parties agreeing in writing. xxx xxx xxx Discount to patients:- Any discounts to be given to any patient deviating from the above charges mentioned have to be ratified by authorized personnel from both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by our Client. Therefore, whatever your client is claiming through the Demand Notice is nothing but a claim with respect to profit/income earned out of the business arrangement which both the parties had between them by virtue of the Agreement. Therefore, the alleged claim under the Demand Notice is not Operational Debt under the provisions of Insolvency and Bankruptcy Code and hence your client is not operational creditor under the provisions of Insolvency and Bankruptcy Code thereby has no right to issue the Demand Notice under the provisions of Insolvency and Bankruptcy Code." 25. We also note that the Corporate Debtor had strongly pleaded before the Adjudicating Authority that the Respondent No. 1 did not provide goods and services to them and neither raised any invoices and hence in the absence of operational debt, the jurisdictional precondition for initiation of Section 9 IBC proceedings was non-existent. It was also urged that since this was a dispute arising out of a profit-sharing arrangement, it is either for the Commercial Court to go into the details or be resolved by invoking the Arbitration clause as provided in the Agreement. 26. While we do not agree that invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor and Respondent No. 1 are like the principal as well as the agent of the other party. This spirit is not only captured in the body of the agreement but also demonstrated in the actions and conduct of both parties in their role as "general profit sharing partners". Thus, for the above reasons, we are not inclined to agree with the contention of the Respondent No. 1 that the outstanding amount so claimed constitutes an operational debt under the IBC. As we hold that the claim is not in the nature of Operational debt, we need not go further to examine whether there was any default in respect of a debt which had become due and payable and whether it was laced with pre-existing dispute. 29. With the aforesaid discussion, we are of the considered view that the Adjudicating Authority has erroneously admitted the application under Section 9 of the IBC. We therefore set aside the impugned order. The orders passed by the Adjudicating Authority initiating CIRP against the Corporate Debtor and appointing Interim Resolution Professional and all other orders pursuant to impugned order are declared illegal and set aside. The Corporate Debtor company is released from the rigours of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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