In a major victory for serial entrepreneur C Sivasankaran, the Supreme Court on Friday overturned the National Company Law Appeal Tribunal (NCLAT) order for the liquidation of Siva Industries & Holdings (SIH). The order, experts said, is significant because it reiterates the limits of judicial intervention by the NCLT and NCLAT and the need not to upset the fundamental principles of the Insolvency and Bankruptcy Code (IBC).
RCK Vallal, shareholder of SIH and father of Sivasankaran, challenged the order of the NCLAT, which upheld the order of the National Company Law Tribunal (NCLT) to liquidate SIH.
“I am happy and humbled by the judgment. The company will be placed under new management and will focus on settling its creditors as soon as possible so that a new chapter can begin for the business,” Vallal, 94, said. . Activity area on the order of the Supreme Court issued by Judge BR Gavai and Judge Hima Kohli.
The court reiterated its own observation in Arun Kumar Jagatramka v Jindal Steel and Power Ltd, in which it stated that the need for judicial intervention or innovation on the part of NCLT and NCLAT should be kept to an absolute minimum and should not disturb the fundamental principles of the IBC. The CoC’s commercial wisdom was given paramount status without any judicial intervention to ensure the completion of the stated processes within the timeframe prescribed by the IBC, the court said.
A brief question that needs to be considered in this appeal is whether the adjudicating authority NCLT or NCLAT can sit in an appeal on the commercial wisdom of the Committee of Creditors (CoC) or not, the order made by the judge of the Supreme Court BR Gavai said.
The CoC’s decision was made after the members duly deliberated to consider the pros and cons of the settlement plan and reached a decision by exercising their commercial wisdom. Neither the NCLT nor the NCLAT was justified in disregarding the commercial wisdom of CoC, the Supreme Court said.
The NCLAT stated that the contracting authority had correctly reached the legitimate and reasonable conclusion that the debtor company should be ordered into liquidation. The NCLT, in August 2021, ordered the liquidation of SIH and denied the claim filed by Resolution Professional (RP) of Siva Industries.
Promoters of Siva Industries have offered to pay ₹328.21 crore to the consortium of lenders led by IDBI Bank as a one-time settlement plan to remove the company from proceedings under the IBC at NCLT.
Siva Industries’ debt is around ₹4,863 crore and the settlement plan amounted to a discount of around 93.5% for the banks. The order was approved by lenders in early April, with the promoters paying only ₹5 crore upfront and the balance within 180 days of approval.
The Supreme Court ordered that the appeals be allowed; the judgment of the NCLAT of January 28, 2022 and the order of August 12, 2021 rendered by the NCLT are quashed and set aside.
June 03, 2022