Hospital contractors Vitals chose refusing to pay €8.4 million tax bill

Indian engineering giant will not exhibit Vitals hospitals contract due to confidential contents that could cause ‘controversy of a political nature’ 

The Maltese Courts will begin holding sittings in May in a case filed by Indian engineering giant Shapoorji Pallonji (Malta), in which it is contesting an €8.39 million tax bill under an invoice Shapoorji says was left unpaid by Vitals Global Healthcare.

The Malta subsidiary of Dubai-based Shapoorji Pallonji International FZC had signed a contract with Vitals Global Healthcare and Vitals Global Healthcare Management in 2016.

Under the terms of the contract, Shapoorji was engaged to design and build projects at St. Luke’s Hospital, Karin Grech Hospital and Gozo General Hospital. The agreement was, unusually, not exhibited in court together with the sworn application due to its confidential contents, which head of HR Hemnath Kathiresan explained could cause “controversy of a political nature.”

The plaintiff company was incorporated in Malta on 8 February 2016, with the intention of carrying out works agreed in the contract, as well as subcontracting out aspects of the job, as required.

Eventually Steward Health Care International Holdings took over control of Vitals in Malta and declared that it wanted to renegotiate the contract with Shapoorji.

Subsequent to this, Steward unilaterally terminated the agreement, leading to more controversy, which Shapoorji said was being discussed by the parties out of court.

The Indian company claims that under a clause in the contract, Vitals had bound itself to pay a €25 million advance as a guarantee. The clause reads: “such advance shall be repaid by deducting an amount in proportion to the progress of work from each Bill until such advance has been repaid in full. If on the date of issuance of the Certificate of Substantial Completion the entire amount of the advance has not been repaid, the Employer may deduct the balance from any payments due to the Contractor thereafter. If the balance exceeds the payments then due, the Contractor shall promptly pay such excess to the Employer. If the Contract is terminated... any underpaid balance of the Advance shall be repaid promptly to the Employer.”

The company’s lawyer Marlon Borg, argued that the first instalment paid was “effectively a security deposit and not payment for services or products consigned. Ergo, this invoice is defective in its form and was issued through a technical error.”

Shapoorji also alleged that Vitals had never paid the amount due to the company.

American company Specialized Engineering Solutions, along with a design consortium that included architects Heery International, Mediterranean Technical Services, and Shapoorji Pallonji, were hired on a €250 million redesign of the St Luke’s and Gozo hospital campuses.

In January 2018, the Tax Commissioner wrote to Shapoorji asking for a meeting as part of a credit control exercise. The company supplied copies of all the invoices in question.

Shapoorji claims that in subsequent correspondence it became evident that Vitals had arbitrarily decided to renege on the contract and work directly with subcontractors. It also claims to have evidence that these subcontractors were paid directly by Vitals. This is the subject of a separate lawsuit.

In February 2021. The Tax Commissioner issued a notice under the VAT Act, claiming that the department was due €8,394,294.94 in unpaid tax.

Shapoorji subsequently filed the case in order to stop the notice from becoming an executive title, arguing that the Commissioner enjoys discretion as to whether or not to issue an estimatetogetherbeforethe notice. This had not been issued, depriving the debtor of the opportunity to appeal the tax estimate, said the company.

The plaintiff said it could not understand under what reasoning the Commissioner had decided to issue the notice, asking the court to declare the notice issued by the Tax Commissioner as irregular and null due to the discretion being exercised unreasonably.

It also requested the court to declare that the notice does not constitute an executive title and therefore that the Tax Commissioner had no legal right to pursue legal action to enforce this vaunted right against the company.

Shapoorji in Malta

In May 2016, Daphne Caruana Galizia published a damning due diligence report on Vitals Global Healthcare, prepared by a leading consultancy firm on behalf of one of VGH’s potential clients.

The report claimed that Joseph Muscat’s chief of staff Keith Schembri and Malta’s ambassador to Dubai, Anthony Tabone, had been in cahoots with Vitals’s front-man Ram Tumuluri and Pakistani businessman Shaukat Ali Chaudry – a former Gaddafi ally who relocated from Libya to Malta after 2011 where he set up his business network.

According to the report, Schembri and Tabone promised Shapoorji Pallonji and UAE-based Global Health Care that they would be awarded the hospitals privatisation project if they worked with Tumuluri and Shaukat. Despite initial misgivings over Tumuluri’s shady finance structures, both companies eventually complied following a visit to Dubai by a “very senior former Maltese minister”.

Caruana Galizia claimed this was former European Commissioner John Dalli, who had personally known Shaukat Ali from his time working in Libya. Dalli denied that such a meeting ever took place.

While Vitals had no history in healthcare, the due diligence report had noted that Shapoorji had not been paid by VGH which had failed to raise any money as “no lenders are willing to lend to a shell company with no experience”.