Failure or breach of a Profit Sharing Agreement cannot be a ground to trigger CIRP – Prashanth Shekara Shetty Vs. Alcuris Healthcare Pvt. Ltd. – NCLAT New Delhi

NCLAT held that when shared control of interest or enterprise and shared liability for profit and losses is so clearly manifested, it cannot be denied that both parties are implicit partners and co-adventurers in the Cathlab venture rather than one being a consumer and the other a service provider. 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”. 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.

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