2022 (10) TMI 886 - AT - Insolvency and Bankruptcy

Tribunal rules debt not operational under IBC, releases Corporate Debtor from CIRP, and grants appeal.

Prashanth Shekara Shetty Designated Partner of Abmay Health Ventures LLP Versus Alcuris Healthcare Private Limited, Abmay Health Ventures LLP

The tribunal determined that the claim raised by Respondent No. 1 did not qualify as an operational debt under the Insolvency and Bankruptcy Code (IBC). ... Initiation of CIRP - Operational Creditors or not - existence of debt and dispute or not - whether claim raised by the Respondent No. 1 is actually an operational debt and whether the said operational debt exceeds an amount of Rs. 1 lakh? - HELD THAT:- 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 - a plain reading of the 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 repayment of dues arising under any law for the time being in force payable to Centre or State Government or local authorities. It is, thus, confined to four categories viz. goods, services, employment and Government dues. From the material on record, facts and circumstances there arises no clear or unambiguous jural relationship between the two parties as one of Corporate Debtor and Operational Creditor. Rather both the Corporate 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 - the claim is not in the nature of Operational debt, it need not be further examined 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. The Adjudicating Authority has erroneously admitted the application under Section 9 of the IBC - Appeal allowed. Issues Involved:1. Whether the claim raised by Respondent No. 1 is an operational debt under IBC.2. Whether the operational debt exceeds Rs. 1 lakh.3. Whether there is a pre-existing dispute between the parties.Detailed Analysis:Issue 1: Whether the claim raised by Respondent No. 1 is an operational debt under IBC.The primary issue revolves around the nature of the claim made by Respondent No. 1, whether it constitutes an operational debt. According to Section 5(21) of the IBC, an operational debt is defined as a claim in respect of the provision of goods or services, including employment or dues arising under any law payable to the government. The agreement between the parties describes them as 'general profit sharing partners' in the Cathlab and Cardiac Surgery department. The agreement outlines shared responsibilities and investments, indicating a partnership rather than a service provider and recipient relationship. The tribunal concluded that the relationship between the parties was one of joint control and shared liabilities, thus not fitting the definition of an operational debt under IBC.Issue 2: Whether the operational debt exceeds Rs. 1 lakh.The tribunal did not need to delve deeply into this issue since it determined that the claim did not constitute an operational debt. However, it was noted that the Corporate Debtor had made payments of Rs. 5 lakhs on two occasions, which the Adjudicating Authority had used to justify the existence of a debt. The tribunal emphasized that the nature of transactions should be properly examined to prevent misuse of IBC provisions.Issue 3: Whether there is a pre-existing dispute between the parties.The tribunal noted that there were several disputes between the parties, including differences over profit-sharing calculations, responsibilities, and performance under the agreement. The existence of arbitration proceedings and police complaints further supported the presence of pre-existing disputes. The tribunal highlighted that the Adjudicating Authority had overlooked these disputes and had erroneously admitted the Section 9 application under IBC.Conclusion:The tribunal held that the claim made by Respondent No. 1 did not constitute an operational debt under IBC. Consequently, the question of whether the debt exceeded Rs. 1 lakh and whether there was a default did not arise. The tribunal set aside the Adjudicating Authority's order, released the Corporate Debtor from CIRP, and allowed it to function independently through its board of directors. The appeal was allowed, and all related orders were declared illegal and set aside.