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NCLT initiates bankruptcy proceedings against Kerala entrepreneur

The Rs 72 crore loan was tagged as NPA in 2017. Following this, banks moved debt recovery tribunal and ultimately NCLT seeking recovery.​

January 31, 2022 / 07:01 PM IST

The National Company Law Tribunal at Kochi has initiated insolvency proceedings against Sahadulla MI, the Chairman and Managing Director of KIMS Healthcare Management Ltd for standing as a personal guarantor to a loan of over Rs 72 crore that was given to Green Gateway Leisure Ltd. by a clutch of lenders including State Bank of India. The accounts of this company were declared as non-performing asset (NPA) in 2017. Banks classify a loan as NPA if there is no repayment of interest or principal for a period of 90-days. Banks need to set aside more money against potential losses from such loans called as provisions. High provisions impact the profitability of a bank.

While insolvency proceedings under the Insolvency and Bankruptcy Code had already been initiated against the company which is the corporate debtor, the lender also sought to hold Sahadulla responsible for the guarantee furnished by him for the defaulted amount exceeding Rs 72 crore. A guarantor is a person entity that promises to pay back the loan amount if the borrower fails to do so. In the event of a loan default, banks can hold the guarantor as a responsible party.

How does it work?

On initiation of insolvency proceedings, the resolution professional appointed by the insolvency court is required to issue public notices informing about the resolution process and a moratorium in terms of all debts is put in place for a stipulated period of time. No lenders can initiate any legal proceedings against Sahadulla in relation to any debt until the time such a moratorium is in place. Additionally, Sahadulla is barred from alienating or disposing of any of his assets and properties till the time such proceedings are underway. All the claimants will submit their debt claims to the resolution professional following which a repayment or resolution plan will have to be drawn up.

The NCLT in its order passed on January 21 notes that according to the lender, the banks that were owed the monies had sought recovery of debt through other means under the law including proceedings under the SARFAESI Act. Applications were filed before the debt recovery tribunals to recover the amount from the corporate debtor as well as Sahadulla in his capacity as the guarantor.


It was only after their failure to pay that the applications for insolvency proceedings under the IBC came to be filed.

Who is Sahadulla MI?

Sahadulla is a Kerala-based well-known entrepreneur who founded KIMS Healthcare Management Ltd. Practicing professional in the healthcare sector for over 40 years, Sahadulla serves as the Managing Director of the facility he founded. The KIMS Healthcare group has a prominent presence not only in India but also in GCC countries such as Oman and Bahrain. The celebrated physician has received numerous honours and recognitions for his contributions and has also engaged in charitable work to provide medical care for the needy as well as facilitating free heart surgeries for patients unable to afford the same.

According to a statement purportedly issued by Sahadulla, he was formerly a director in Green Gateway Leisure Ltd due to which his name finds a mention in the insolvency case.

Pertinently, Sahadulla disputed his liability in the insolvency case primarily on the grounds that the signature present on the relevant documents is forged, an argument that the NCLT did not accept. “We presumed that the averment of forgery is only a contention raised by him to escape from the clutches of admission of this application and initiate CIRP against him,” the NCLT said noting that no legal action or police complaint on the issue of forgery has been filed by the physician.

What happens next?

A statement purportedly issued by Sahadulla sought to clarify that KIMS Healthcare Management Ltd is not involved or related to the insolvency case.

The statement issued by Sahadulla also suggests that the initiation of insolvency proceedings against him is an issue that may be agitated before the appeals tribunal - National Company Law Appellate Tribunal now. “This financial matter is being disputed in the NCLAT court, and the court has given 6 months’ time to pay off the debts incurred by the founders,” the statement purportedly issued by Sahadulla says.

“The matter is still under the consideration of the appropriate Courts for legal settlement,” the statement reads further.

Under the IBC, order passed by the NCLT can be appealed against before the NCLAT with the final stage of appeal being the apex court.

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