The National Company Law Tribunal (NCLT), Chennai, has rejected a one-time settlement offer made by the erstwhile promoters of Siva Industries and Holdings Ltd. to its lenders, citing that the proposal was not in conformity with the provisions of the Insolvency and Bankruptcy Code, 2016.
The tribunal also ordered liquidation of the company.
In 2019, NCLT had admitted insolvency proceedings against the C. Sivasankaran-promoted company in a case filed by IDBI Bank Ltd.
Later, a majority of the committee of lenders had approved a one-time settlement offer from RCK Vallal, father of Mr. Sivasankaran, which had been filed before the NCLT as per 12-A of the Insolvency and Bankruptcy Code (IBC). As a result, withdrawal from the insolvency process was also sought.
The NCLT noted that nine lenders had accepted the settlement offer and agreed to receive ₹328.21 crore against their admitted claims of ₹4,863.88 crore. State Bank of India had voted against the settlement proposal.
The settlement proposal given by the erstwhile promoters appears to be more like a corporate business restructuring plan and resolution plan rather than a settlement simpliciter, the NCLT noted.
The tribunal said it was of the view that the committee of lenders ought to have voted for the proposal only if they had received their money in full as per the settlement proposal.
No money has been paid as on date to financial creditors. “This tribunal would be in lurch when there arises a default on the part of the promoters, since it would be uncertain as to how to proceed thereon when the company is out of the insolvency process and hence there arises a legal quagmire,” the NCLT said.
Sources said Mr. Vallal would appeal against the order.
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