The Chennai Bench of the National Company Law Tribunal (NCLT) on Thursday ordered the liquidation of Siva Industries and Holdings Ltd. It also rejected IDBI Bank-led lenders' proposal to withdraw the company from bankruptcy proceedings, and the application filed by Resolution Professional of Siva Industries. Reacting to the judgment, C. Sivasankaran, promoter of Siva Industries, told them that he will appeal against the order.
In the order pronounced by R Sucharitha, Member (Judicial), and B Anil Kumar, Member (technical), the Bench said, "the purported settlement plan proposed by the promoter of the corporate debtor is not a settlement simpliciter as envisaged under Section 12A of IBC, 2016 rather than its a business restructuring plan."
The Bench also said as per the settlement plan, there is no final offer made by the promoter of the corporate debtor and also the acceptance made by the CoC in this regard. There is no finality reached between the promoter of the corporate debtor and the CoC as per Clause 2 of Chapter VIII of the settlement proposal; hence based on the ambiguity of terms of the settlement, we can not order for withdrawal of the CIRP," said the order, which comes as a big setback to C Sivasankaran and the lenders.
The Bench concluded saying the prayer seeking for liquidation of the corporate debtor in case of any default in the proposed settlement plan transcends beyond the scope of IBC, 2016.
"We are of the view that the settlement proposal as given. by the corporate debtor and the approval of withdrawal of the CIRP in relation to the corporate debtor by the CoC in its 17 meetings, is not in conformity with the provisions of IBC, 2016 and also not in line with the judicial conscientiousness of this Adjudicating Authority and also transcends beyond the scope of IBC, 2016, said the order, which noted that State Bank of India had opposed the settlement plan, claiming that the proposed repayment of Rs. 27 crore to the bank was below the amount of mortgaged asset with it of Rs. 32 crore.
The promoters of Siva Industries had proposed to pay Rs. 328.21 crore to IDBI Bank-led consortium of lenders as a one-time settlement plan to withdraw the company from proceedings under the Insolvency and Bankruptcy Code (IBC) at NCLT. Siva Industries debt is about Rs. 4,863 crore and the settlement plan amounted to a haircut of about 93.5 of about per cent for banks. Under the offer, which was approved by the lenders in early April, the promoters would pay only Rs. 5 crore upfront and the balance within 180 days of approval.