Supreme Court suspends liquidation of Siva Industries after promoters appeal

The Supreme Court (SC) stayed an order from the National Company Law Appellate Tribunal (NCLAT) liquidating C Sivasankaran promoted Siva Industries & Holdings (SiH), further dragging out the already delayed two-and-a-half-year bankruptcy case.

In a one-line decision, the two bench judges of L Nageswara Rao and BR Gavai suspended the Chennai NCLAT judgment dated January 28, 2022 until further notice. The next court date is set for the last week of April.

Bankers said the SC’s stay has ensured further delay in a case where the chances of recovery are already low. “In a sense, we are back to square one in this matter. We had tried to settle this with the developer under 12A last year due to what we thought was a good price. Now, after almost a year, all work done on liquidation may also need to be stopped. All of these things have a very negative impact on recoveries,” said a person involved in the case.

Section 12A of the Insolvency and Bankruptcy Code (IBC)
allows the debtor company to withdraw from insolvency proceedings through a single settlement if 90% of the creditors’ committee (CoC) agrees. Last year, the lenders agreed to settle SIH’s Rs 4,864 crore debt with an offer of Rs 328 crore at a 93% discount. The settlement drew a lot of attention because it’s rare for high-profile cases to be settled with such a deep haircut.

IDBI Bank is the lead lender in the deal among a consortium of nine creditors. Private equity giant Blackstone controlled by International Asset Reconstruction Co Ltd (IARC) has the largest exposure among creditors with Rs 1,148 crore after buying loans from banks over the past few years. IDBI is the second largest creditor with an exposure of Rs 876 crore, followed by UAE-based Masdar Energy, which admitted claims of Rs 777 crore. Union Bank of India, Central Bank of India, Punjab National Bank, State Bank of India, LIC and Bank of India are the other creditors.

When contacted, IARC President KA Menon said he could not discuss company-specific cases. SIH liquidator AV Arun said he was seeking legal advice following the suspension of CS to clarify the impact of the order on the ongoing liquidation process.

Sivasankaran’s father, RCK Vallal, also a shareholder of SIH, challenged the NCLAT’s decision ordering the liquidation of the company. In January, the NCLAT upheld the Chennai NCLT court’s order to liquidate SIH, rejecting a settlement proposal approved by the majority of lenders, saying the plan had been submitted to court after 330 days, the maximum time allowed for solve a case. under the CIB. Earlier in August 2021, the NCLT rejected Vallal’s resolution plan, saying it was just a corporate restructuring plan rather than a 12A settlement. The NCLT had said the lenders should only have approved the developer’s proposal if the money had been received in full and raised questions about the poor recovery.

At a hearing earlier this week, Vallal was represented by former attorney general Mukul Rohatgi and SC lead lawyers KV Vishwanathan and PH Arvind Pandian, among others.

Lenders fear that if the business is liquidated or a new plan is sought, the recovery will fall apart further for all financial and non-financial creditors. The company was returned to bankruptcy court in July 2019 after defaulting on loans to operational and financial creditors.


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