The Supreme Court (SC) has stayed a National Company Law Appellate Tribunal (NCLAT) order liquidating C Sivasankaran promoted Siva Industries & Holdings (SiH) further dragging the already delayed two and a half-year-old bankruptcy case.
In a one line ruling, the two judge bench of L Nageswara Rao and BR Gavai stayed the Chennai NCLAT judgment dated January 28, 2022 until further orders. The next hearing date is set in the last week of April.
Bankers said the SC stay has ensured a further delay in a case where the chances of recovery are already dim. “In a sense we are back to square one in this case. We had tried to settle this with the promoter under 12A last year because of what we thought was a good price. Now after almost a year all the work done on liquidation may also have to be stopped. All these things impact recoveries very badly,” said a person involved in the case.
Section 12A of the Insolvency and Bankruptcy Code (IBC) allows the corporate debtor to withdraw from insolvency proceedings through a one time settlement if 90% of the committee of creditors (CoCs) agree to it. Last year lenders had agreed to settle SIH’s Rs 4864 crore debt with an offer of Rs 328 crore a 93% haircut. The settlement attracted a lot of attention because it is rare for high profile cases to be settled at such a deep haircut.
IDBI Bank is the lead lender in the case in a consortium of nine creditors. Private equity giant Blackstone controlled International Asset Reconstruction Co Ltd (IARC) has the largest exposure among creditors with Rs 1148 crore after it bought loans from banks over the last few years. IDBI is the second largest creditor with a Rs 876 crore exposure, followed by UAE based Masdar Energy which has 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 cannot discuss company specific cases. SIH liquidator AV Arun said he is seeking legal opinion after the SC stay to clarify the impact of the order on the ongoing liquidation process.
Sivasankaran’s father RCK Vallal who is also a shareholder in the SIH had challenged the NCLAT ruling ordering a liquidation of the company. In January the NCLAT had upheld the Chennai NCLT court order to liquidate SIH, rejecting a settlement proposal endorsed by a majority of the lenders, saying that the plan was submitted to the tribunal after 330 days, which is the maximum time permitted to resolve a case under the IBC. Earlier in August 2021, the NCLT had rejected the resolution plan by Vallal saying it was just a business restructuring plan rather than a 12A settlement. The NCLT had said that lenders should have approved the promoter’s proposal only if the money would be received in full and raised questions over the low recovery.
In a hearing earlier this week, Vallal was represented by former attorney general Mukul Rohatgi and senior SC advocates K.V. Vishwanathan and PH Arvind Pandian, among others.
Lenders fear that if the company is liquidated or a fresh plan sought the recovery will fall further for all financial and non-financial creditors. The company was sent to bankruptcy court in July 2019 after it defaulted on loans to both operational and financial creditors.