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Judgment
Chandra Bhan Singh, Member (Technical)
This Application CP(IB)-3447/2019 has been filed by M/s Atlanta Global Advisors Private Limited, New Delhi on 05.09.2019 (Applicant/ Operational Creditor) in Form 5 to initiate Corporate Insolvency Resolution Process (CIRP) against M/s Ebix Technologies Private Limited, Pune-411021, Maharashtra for an outstanding Success Fee amount of Rs.4,57,54,500/- inclusive of interest. The amount pertains to Success Fee calculated at 2% of the Enterprise Valuation of the transaction (i.e. 2% of USD 27.5 million).
BRIEF HISTORY OF THE CASE:-
The Petitioner/ Operational Creditor submits that they entered into an Acquisition Service Agreement with Indus Software Technologies Pvt Ltd (Indus) on 17.11.2016 for the purpose of introducing certain target entitles (Target Entity) to Indus. Pursuant to this Agreement, the Operational Creditor was to provide qualified acquisition targets and assist Indus throughout the acquisition process which would include the identification of potential acquisition opportunities and review with Indus of the suitability of such opportunities (Acquisition Transaction).
2.1. The Petitioner submits that, as per Clause 2.2.2 of the terms of the Agreement it was agreed that upon completion of an Acquisition Transaction between Indus and Target Entity, a success fees shall be payable by Indus to the Operational Creditor, which will be calculated @ 2% of the Enterprise Value of each transaction (Success Fee). The Success Fee was agreed to be of USD 225,000 for each transaction in addition to all applicable taxes (service tax and other taxes/ levies) and shall be calculated as a percentage of each Enterprise Value. As per the Petitioner, in the said clause it has been categorically agreed that the Success Fee shall be payable if an Acquisition Transaction is completed with any company introduced by the Operational Creditor at any time within 2 (two) years from the date of introduction.
2.2. The Petitioner/ Operational Creditor submits that, as per Clause 3 of the Agreement, the term of the Agreement shall be two years from the date of the signature, i.e., from 17.11.2016. As per Clause 3.3 of the Agreement, the payment obligations set forth under Clause 2 of the Agreement shall survive any termination. The Petitioner submits that the Agreement was never terminated.
2.3. According to the Petitioner/Operational Creditor, vide an email dated 23.02.2017, introduced a potential Target Entity viz. Miles Software (Miles/ Target Entity) to Indus. Several communications were exchanged by the Petitioner and the Respondent/ Corporate Debtor between 01.03.2017 and 11.04.2017 where, the Petitioner says, Indus showed interest and inclination in the prospective acquisition of Miles.
2.4. The Petitioner/ Operational Creditor further submits that a "non-disclosure agreement" (NDA) was entered on 08.03.2017 between Miles and Indus, to disclose certain proprietary and confidential information to one another for the purposes of exploring the business opportunities regarding the potential acquisition of Miles by Indus.
2.5. The Petitioner/ Operational Creditor submits that pursuant to and as required under the terms of the Agreement, the Operational Creditor rendered full assistance and services to Indus on the prospective acquisition of Miles. The Petitioner found out around July 2018 Indus has been acquired by EBIX Inc., a United States of America based NASDAQ listed Company on 01.07.2018. EBIX also issued a Press Release on 20.07.2018 about the acquisition of Indus for approximately $29 million including $5 million of contingent earn out.
2.6. The Petitioner claims that with the acquisition of Indus, the Corporate Debtor stepped into the shoes of Indus and consciously acquired and assumed all the rights and obligations of Indus, arising out of and in connection with the Agreement, towards the Operational Creditor.
2.7. Thereafter, on 01.08.2018, the Corporate Debtor acquired Miles. A Press Release dated 04.09.2018 was issued which, inter alia, mentioned that the Corporate Debtor would acquire Miles for an amount of USD 19 million (approximately), with an additional contingency earn out of up to USD 8.5 million payable after 2 years (i.e., the enterprise value). Miles was acquired within 2 months from the date of acquisition of Indus. Therefore, the Petitioner/Operational Creditor claims that the investors of Indus, i.e. the Corporate Debtor, acquired Miles/ Target Entity. The Petitioner therefore pleads that the Corporate Debtor first acquired Indus and thereafter Miles. Thus, the acquisition of Indus and subsequently Miles led to completion of an acquisition transaction envisaged under the Agreement.
2.8. The Operational Creditor sent a demand notice on 03.04.2019 to the Corporate Debtor u/s 8 of the Code for an amount of INR 4,28,56,764/- along with Goods and Service Tax @ 18% and such other taxes as applicable, along with other taxes applicable thereon calling upon the Corporate Debtor to pay the Success Fee. As per the Petitioner, reply to the demand notice was sent by the Corporate Debtor on 16.04.2019 which is allegedly in a non-coherent manner, inter alia raising contentions that the demand notice lacks specific authorization for the advocate to send the demand notice on behalf of the Operational Creditor. The Petitioner/ Operational Creditor submits that the Corporate Debtor has become legally and contractually obliged to pay the Success Fee (as contemplated and defined in the Agreement) amounting to an amount of INR 4,57,54,500/- which included applicable Goods and Service Tax (GST) at 18% thereon to the Operational Creditor as mentioned in the Agreement.
Submissions by the Respondent/ Corporate Debtor
The Respondent/ Corporate Debtor submits that the Petitioner M/s Atlanta Global Advisors Pvt Ltd filed the impugned Petition on the basis of some alleged services rendered under the alleged Acquisition Services Agreement dated 17.11.2016, entered into between the Operational Creditor and Indus Software Technologies Pvt Ltd ('Indus") for the purpose of introducing certain alleged target entitles to Indus.
3.1. According to the Corporate Debtor/ Respondent, Indus executed the Agreement with the Operational Creditor in order to find an entity to acquire. The Operational Creditor undertook to provide qualified acquisition target and assist throughout the acquisition process in exchange for a success fee of 2% of the Enterprise Value or a minimum success fee of US$ 225,000. The Operational Creditor introduced Miles Software (Miles) to Indus for the purpose of acquisition. However, pursuant to independent negotiations, Indus was acquired by Ebix Inc, a USA based Company, and its name was changed to Ebix Technologies Pvt Ltd (Corporate Debtor). Thereafter, the Corporate Debtor acquired Miles.
3.2. The Corporate Debtor further submits that Ebix Inc in 2018 before acquisition of Indus, independently entered into discussions with Miles through a third-party agent (Aaaraya Advisory Services Pvt Ltd) appointed by Miles and Operational Creditor did not facilitate the acquisition. Corporate Debtor also submits that while acquiring Indus, the Ebix Inc carried out extensive due diligence and no Agreement or any Resolution with respect to the Agreement came to light.
3.3. The Respondent also submits that the present Petition is not maintainable for the reasons that there is no privity of contract between EBIX Inc. having its headquarters in Atlanta, Georgia on one hand and Atlanta on the other hand and no services were provided by Atlanta to Ebix Inc to acquire Miles Software Solutions Pvt Ltd (Mils) in any manner whatsoever. The Respondent also pleads that no invoice whatsoever had been raised by Atlanta on either Ebix Inc or Ebix India.
3.4. Accordingly, the Respondent Debtor submits that there is no debt/ 'Operational debt' within the meaning of Section 5(21) of the Code is outstanding. Respondent also submits that the Operational Creditor (i.e., Atlanta) has no locus and is not an Operational Creditor within the meaning of Section 5(20) of the Code.
3.5. The Corporate Debtor also submits that Ebix Inc entered into independent discussions with Mils Software Solution Private Limited so as to expand and further augment Ebix Inc's technological capabilities. These discussions between Ebix Inc. and Miles were arranged through a third-party investment banker "Aarayaa Advisory Services Private Limited" acting as Financial Advisors to the shareholders of Miles. All such negotiations to conduct the acquisition of Miles were undertaken by Ebix Inc. out of its offices outside India.
3.6. The Corporate Debtor submits that the decision to acquire Miles was an independent decision of Ebix Inc., citing the Non-Disclosure Agreement dated 30.06.2018 and Letter of Intent dated 18.07.2018. The Corporate Debtor further submits that Atlanta never introduced Miles to Ebix Inc and never facilitated any acquisition of Miles by Ebix Inc. The negotiations for acquisition of Milers were facilitated by an independent third-party investment banker appointed by Miles and that too from the offices in USA.
3.7. As per the Respondent Debtor, the entire case of Atlanta is dependent on the purported Agreement dated 17.11.2016 with Indus to which Ebix Inc is not a party. Therefore, under no circumstance, Atlanta have any cause of action or locus to seek any reliefs against Ebix or its subsidiaries or its acquired companies on the basis of any such alleged Agreement in any manner whatsoever.
3.8. The Corporate Debtor submits that since existence of any alleged debt itself is in serious dispute, Atlanta cannot be termed as an Operational Creditor within the meaning of Section 5(20 of the Code.
FINDINGS
CP 3447/2019 has been filed by M/s Atlanta Global Advisors Private Limited, Operational Creditor, u/s 9 of the Insolvency & Bankruptcy Code, 2016 against M/s Ebix Technologies Private Limited, the Corporate Debtor for a total amount of about Rs.4.57 crore which includes interest.
As per the Operational Creditor, on 17.06.2016 it had entered into an Acquisition Service Agreement with Indus Software Technology Private Limited for the purpose of introducing certain target entities for Acquisition of Indus for a period of two years, i.e., between 17.11.2016 to 16.11.2018. As per Clause 2.2 of the Agreement between the parties, a Success Fee was to be calculated @ 2% of the Enterprise value of each transaction subject to a minimum Success Fee of USD 2,25,000/-. The Operational Creditor mentions that he had introduced Mile Software to Indus on 23.02.2017 as a potential target. However, on 01.07.2018, Indus itself was acquired by Ebix Inc's, a US based Company. On 04.09.2018 under the instructions of Ebix Inc the Corporate Debtor/ Respondent entered into a definitive Agreement to acquire Miles.
This Bench notes that on 18.07.2018 a Letter of Intent was entered into by Ebix Inc with Miles expressing its intention to acquire 100% shareholding of Miles. Around the same time, Ebix Inc entered into a discussion with Indus Software Technology Pvt Ltd (Indus) with the intention of Ebix Inc acquiring Indus to expand their operations in India. The Ebix Inc acquired Indus on 20.07.2018 and thereafter changed its name on 23.10.2018 from Indus to Ebix Technologies Pvt Ltd after appropriate filing and approval from the RoC. It is, therefore, clear to the Bench that for acquisition of Miles by Ebix Inc on 18.07.2018 was prior to and around the same time the acquisition of Ebix Inc of Indus on 20.07.2018. Therefore, this Bench is of the view that in the acquisition of Miles by Ebix Technologies Pvt Ltd, there was no contribution of Indus and, therefore, no role for Atlanta Global Advisors Private Ltd in the acquisition of Miles. The Letter of Intent undertaken by Ebix Inc and shareholders of Mile was signed before acquisition of Indus by Ebix Inc. The Bench in this regard also notes that all negotiations with respect to acquisition of Miles were undertaken by Ebix Inc by its office in USA and not in any manner through Indus. Therefore, this Bench is of the view that the acquisition of Miles were undertaken not by Indus but independently by Ebix Inc.
This Bench also notes that this Petition is also not maintainable for the reason that there is no privity of contract between Ebix Inc and Atlanta and no service were provided by Atlanta to Ebix Inc to acquire Miles Software.
This Bench also notes that no invoices whatsoever has been raised by Atlanta either on Ebix Technologies Pvt Ltd. Therefore, there is no operational debt as mentioned in Section 5(21) of the IBC.
The entire case of Atlanta is based on the Agreement dated 17.11.2016 with Indus to which Ebix Inc is not a party. Therefore, under no circumstance Atlanta has any cause of action or locus to seek any relief against Ebix Inc and its subsidiaries or its acquired Companies.
This Bench also notes that demand notice was issued by the Petitioner in Form 3 on 03.04.2019. The Respondent, on 16.04.2019 had sent a detailed reply rejecting the claims after giving due reasons for the same. This Bench is of the view that it is a settled principle of law set out in the judgment of Mobilox Innovations Pvt Ltd Vs Kirusa Software Ltd (2018) 1 SCC 353 passed by the Apex Court, categorically laying down that, "A dispute is said to exist, so long as there is a real; dispute as to payment between the parties that would fall within the inclusive definition contained in Section 5 (6)". "So long as a dispute truly exists, in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application".
The Bench is of the view that there are very pertinent and real disputes regarding the claims etc, therefore, the Petition, in addition to other things, deserves dismissal under Section 9 of the IBC, 2016.
In view of the above, CP(IB)-3447/2019 filed u/s 9 of IBC stands "dismissed".