Siva Industries bidder Vallal RCK to move SC after NCLAT rejects offer

NCLAT says will send company to liquidation as deadline of 330 days as per IBC Code is breached

The liquidation proceedings of Siva Industries and Holdings, a Chennai-based firm, is all set to land in the Supreme Court after the National Company Law Appellate Tribunal (NCLAT) rejected a settlement offer made by one of the shareholders, Vallal RCK.

In its order, the NCLAT said as the mandatory deadline of 330 days as per the Insolvency and Bankruptcy Code, 2016 is breached, the liquidation of the company can go ahead. “Timely liquidation is preferred over fruitless and endless resolution proceedings,” the NCLAT said in its order dated January 28th.

Earlier, nine financial creditors of the company led by IDBI Bank had agreed to receive a settlement amount of Rs 328.21 crores from Vallal, as against the total admitted claims of Rs 4,864 crores – which amounted to 93 per cent haircut for the lenders. This settlement proposal, however, was rejected by the National Company Law Tribunal, Chennai in August last year which slammed the lenders for the huge haircut saying it would rather go by its “judicial wisdom” rather than approving the “commercial wisdom” of the CoC and sent the company for liquidation.  The NCLT had said the application made by RCK Vallal, father of founder of Siva group, C Sivasankaran, is not conforming to the Section 12A of the Insolvency and Bankruptcy Code. The Section 12A of the IBC gives an opportunity to the promoters to get back their companies if 90 per cent of the lenders agree and the promoters' clear their past dues.

The lenders had informed the NCLT that if a company is liquidated or in a resolution plan involving a third party, all claims made by the operational creditors including tax authorities will be wiped out. Hence, they had approved the 12A petition by the promoters.

In its order, the NCLT had said the 12A proposal from the promoter was not voted at all by the CoC and instead banks only voted on the withdrawal of bankruptcy proceedings. Vallal moved the NCLAT saying the NCLT did not consider that the view of the majority of the members of CoC who have unanimously taken a commercial decision to recover more than the amount they would be able to receive in the event of liquidation of Siva Industries and the dismissal of withdrawal application under the guise of judicial wisdom' will infringe upon their "commercial wisdom".

But the NCLAT said If the time period for bankruptcy proceedings was extended and the resolution plan was not accepted by the NCLT, then the liquidation of the company can be ordered under Section 33 of the I&B Code, 2016.

The company was sent to bankruptcy court in July 2019 after it defaulted on loans to both operational and financial creditors. The liquidator of the company till date has received claims worth Rs 8,085 crores. Of this, Rs 6,515 crores claims were admitted.

Siva Industries was set up by Chennai-based serial entrepreneur, C Sivasankaran who disassociated himself from the company a decade ago and the company is now run by his extended family members.

The story so far

• July 2019: Lenders send Siva Industries to bankruptcy court for debt resolution
• August 2020:  Promoter family offers settlement offer asking banks to take 93% haircut
• April 2021: Lenders agree to settlement offer and agree withdraw court proceedings
• August 2021:  NCLT Chennai rejects promoter's settlement offer; promoter family appeals to NCLAT