BIG setback to C Sivasankaran and lenders! NCLT orders LIQUIDATION of Siva Industries and Holdings

(Story by Brajesh Kumar& Anurag Shah)  

Siva Industries and Holdings Case: In a big setback to C Sivasankaran and lenders, NCLT, Chennai bench, has ordered for liquidation of Siva Industries and holdings. In the order pronounced on Thursday, the bench rejected the application filed by Resolution Professional of Siva Industries and Holdings. The bench observed, “We conclude that this is not a proposal under Section 12A, but rather a restructuring proposal. There is no offer, nor a final acceptance. There is only ambiguity about the offer, hence this application stands dismissed.”  The detailed order will come later.   

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NCLT was hearing an application filed by resolution professional of Siva Industries for withdrawal of the case under 12A of IBC. RCK Vallal, father of borrower C  Sivasankaran,  had offered to settle the dues of Rs 4863 crore for Rs 323 crore, where the upfront amount was just Rs 5 crore and lenders were expected to get the rest of the dues in 6 months post-NCLT approval. In Siva Industries and Holding case, the lenders' committee is led by IDBI Bank.  Other lenders include Central Bank of India, Union Bank of India, PNB, LIC, SBI, IARCL, Bank of India and Masdar Energy (UAE).       

In this case, Canara Bank had sold its assets to the tune of Rs 1148 crore to International Asset Reconstruction Company Pvt. Ltd. (IARCPL), which is getting only Rs 15 crore in the proposed plan.     

In NCLT, SBI was against the withdrawal of the application and proposed settlement, saying it was against the interest of the bank. SBI has RS 32.51 crore worth of mortgaged assets but under the settlement proposal, it was offered only Rs 25 crore. SBI had given a loan to the subsidiary of Siva Industries and Holdings.   

In NCLT hearings, Siva Industries tried to justify the withdrawal and settlement citing that the settlement proposal was approved by 93% of lenders and informed the bench that liquidation value is lower than the settlement value. Siva Industries said the liquidation value is Rs 229 crores and lenders are getting Rs 323 crores in the proposed settlement. Such withdrawals can be allowed under the law, it said.      

Questions were raised against this withdrawal application as the settlement amount proposed was a meager 6.5% of the dues. As there was huge hair cut in the proposal and such settlements can go against the soul of Insolvency and Bankruptcy Code 2016, questions are also being raised against IDBI Bank because CBI had filed a case against the same C Sivasankaran along with then officials of IDBI Bank for causing fraud to the tune of Rs 600 crore to the bank.                        

The proposed settlement plan itself showed the kind of hair cut lenders were ready to take, barring SBI who is opposing the move. 

This was the Bank wise settlement proposal:   

Siva Industries and holdings is promoted by C Sivasankaran, who was once promoter of coffee chain Barista and later floated telecom company Aircel, which he sold to Maxis of Malaysia. His name also cropped up between Tata Vs Mistry dispute in NTT Docomo issue.     

Parliamentary Standing Committee on Finance had made critical observations about the code of conduct of the Committee of Creditors (CoC) and huge haircuts accepted by banks. It has observed that: "Keeping in mind the experience gathered so far, there is an urgent need to have a professional code of conduct for the CoC, which will define and circumscribe their decisions as these have a larger implication for the efficacy of the code”.   

Committee also observed about setting a benchmark for haircuts."The Code of Conduct for the Committee of Creditors, the capacity building of the Committee of Creditors, the quality of decision making for the Committee of Creditors and their professionalism we have to work out. So, we are working with Banks association also,” it observed.  

NCLT order in the Siva Industries and Holdings case can be a reference for other cases also where lenders are ready to take huge haircuts and settle the case indirectly with the defaulting promoters.