siva: Supreme Court Approves Siva Industries Promoters Loan Settlement Offer

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The Supreme Court on Friday approved a loan settlement offer made by the promoters of Siva Industries, while quashing a liquidation order issued by the National Company Law Tribunal (NCLT) and upheld by the appellate authority.

The Siva Group founder’s father, C Sivasankaran, RCK Vallal, proposed the settlement under Section 12A of the Insolvency and Bankruptcy Code, which allows lenders to seek NCLT approval to withdraw their request for corporate insolvency resolution procedure (CIRP) provided that 90% of them accept the proposal.

Although 94% of creditors by value accepted Vallal’s settlement offer, the NCLT and the National Company Law Appellate Tribunal (NCLAT) rejected it and ordered liquidation.

The Siva Group is best known for its investments in the Barista coffee chain and Aircel, a telecom operator that went bankrupt.

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A Supreme Court bench consisting of Justices BR Gavai and Hima Kohli said neither the NCLT nor the NCLAT were “justified for disregarding the commercial wisdom of the Committee of Creditors (CoC)”.

The court observed that the CoC made the decision after deliberation, considering the pros and cons of the settlement plan, and after exercising its commercial wisdom.

A settlement of Rs 333.21 crore from the promoters of Siva Industries was equivalent to a 93.5% haircut for the lenders.

“Where 90% or more of the creditors, in their wisdom after deliberation, believe that it will be in the interest of all parties to permit settlement and withdraw the CIRP, in our opinion, the contracting authority or the appeal authority cannot sit appeal on the commercial wisdom of the CoC,” the court observed in its decision.

“Interference would only be justified when the adjudicative authority or the appeal authority finds that the decision of the CoC is totally capricious, arbitrary, irrational and outside the provisions of the statute or the rules,” he said. added.

Abhijit Guhathakurta, the firm’s Deloitte-backed resolution professional, admitted Rs 4,863 crore in financial creditor claims. The developers have offered to pay Rs 5 crore in advance and the balance within 180 days of approval by the contracting authority.

The Supreme Court also observed: “The court has consistently held that the commercial wisdom of the CoC was given paramount status without any judicial intervention to ensure the completion of the stated processes within the timeframe prescribed by the IBC. It was held that ‘there is an inherent assumption that financial creditors are fully informed of the viability of the debtor company and the feasibility of the proposed resolution plan.’

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