Resolution Plan Involving 49% Promoter Share Dilution and Priority Payment to Operational Creditors Sanctioned; Implementation and Monitoring Committee to Oversee Execution
In a significant development for the corporate insolvency landscape, the National Company Law Tribunal (NCLT), Bengaluru Bench, has approved the resolution plan submitted by the promoters and new investors of Sanjeevni Medlife Hospitals (India) Private Limited, an MSME unit, thereby paving the way for the revival of the corporate debtor with a total capital infusion of Rs.18.70 crores.
The case, registered as I.A (IBC) (Plan) No.02/2025 in CP (IB) No.64/BB/2022, was adjudicated by a bench comprising Mr. Sunil Kumar Aggarwal, Member (Judicial), and Mr. Radhakrishna Sreepada, Member (Technical). The resolution plan was presented by the Resolution Professional, Shri Hari Babu Thota, and involved the promoters Dr. G.R. Subhash Kumar Reddy and Dr. Premlata Subhash, who have a combined experience of over 50 years in the healthcare sector.
The Corporate Debtor had been admitted into the Corporate Insolvency Resolution Process (CIRP) following a petition by Canara Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) due to a default of Rs.35.53 crores dating back to 2014. The hospital is recognized for tertiary care in obstetrics, gynecology, and neonatal care, and is an important MSME unit with the Udyog Aadhar Number KR03F0032839.
Key features of the approved resolution plan include a capital restructuring that entails dilution of the existing promoters' shareholding by 49% to accommodate new investors, S Nanjundaiah and K Vijay Prasad Reddy, who will inject fresh equity totaling Rs.2.53 crores and provide Rs.13.76 crores as an interest-free loan over ten years. The promoters themselves have committed Rs.2.40 crores, which have already been deposited as Earnest Money Deposit (EMD) and Performance Guarantee.
The Committee of Creditors (CoC), consisting solely of Canara Bank with 100% voting share, approved the plan unanimously. The plan ensures the payment of insolvency resolution costs, prioritizes operational creditors over financial creditors as per Regulation 38 of the CIRP Regulations, and provides a detailed business plan for the hospital's operation as a going concern. The Resolution Applicants have also proposed working capital of Rs.11 lakhs and capital expenditure of Rs.18 lakhs for repairs and operational logistics.
Importantly, the resolution plan includes the establishment of an Implementation and Monitoring Committee (IMC) comprising representatives from the financial creditor, resolution applicants, and the Resolution Professional, to supervise the execution of the plan and manage the day-to-day affairs of the hospital until full implementation.
The NCLT's order clarifies that while the resolution plan has been approved, it does not exempt the corporate debtor from compliance with statutory dues and taxes under applicable laws, as reinforced by the Supreme Court judgment in Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited.
The moratorium imposed at the commencement of the CIRP will cease from the date of the order, and the Resolution Professional has been directed to hand over management control to the Successful Resolution Applicants immediately.
Failure to comply with or implement the resolution plan may lead to forfeiture of the EMD and performance guarantee, and the applicants may be liable to compensate for any delay or damage caused.
This approval is a positive step towards the revival of an important MSME healthcare provider, ensuring continuity of services and safeguarding stakeholder interests in a financially stressed corporate entity.
Bottom Line:
Corporate Insolvency Resolution Process - Approval of Resolution Plan submitted by promoters as Successful Resolution Applicants for a Corporate Debtor under CIRP, with detailed capital restructuring, funding commitments, and compliance with IBC provisions and regulations.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 7, 29A, 30, 31; Insolvency and Bankruptcy Board of India (Insolvency Process for Corporate Persons) Regulations, 2016 Regulation 38
