The Supreme Court has asked the official liquidator of Chennai-based Santosh Hospitals Pvt Ltd to hand over the building to former promoter-director Dr P Mahalingam, who promised to pay ₹10 crore to Muthoot Fincorp Ltd. This is an interim relief and will not interfere with the ongoing dispute under the Insolvency and Bankruptcy Code.
Justices Dinesh Maheshwari and Hrishikesh Roy made it clear they were dealing with the appellant Dr Mahalingam’s prayer for interim relief, and “would not make any comments on the merits of the respective contentions, which shall be examined at the final hearing”. The judges only wanted “an opportunity (to) be extended to the appellant to use the building for the purpose it is meant” — a hospital.
The respondents, Muthoot Fincorp and DCB Bank, see the offer of ₹10 crore as a delaying tactic, given Dr Mahalingam’s track record of not paying.
The Chennai bench of the National Company Law Tribunal had, on December 4, 2019, noted that the “suspended directors and their counsel have kept on saying that money would come from various sources so as to avoid sending this company to liquidation, we have also believed... waited again and again, hoping that this money, which the suspended directors promised to bring in, would come”. Dr Mahalingam had promised to pay ₹57.55 crore to Muthoot Fincorp, but didn’t. (The amount owed to Muthoot Fincorp is nearly ₹100 crore.) The tribunal then ordered the liquidation of the company, which Dr Mahalingam unsuccessfully challenged before the National Company Law Appellate Tribunal.
Dr Mahalingam then appealed to the Supreme Court under Sec 62 of the IBC, which is invoked when there is a question of law involved. The appellants argued that the building, which was taken over by the official liquidator under the SARFAESI Act, did not belong to the corporate debtor, Santosh Hospitals (it was only offered as security), and hence was outside resolution/liquidation proceedings.