“Decision of the creditors (to settle up) was taken after … exercising commercial wisdom. Neither the bankruptcy appeals tribunal nor the lower tribunal was justified in not giving due weightage to the wisdom,” the court says.
Supreme Court
A judgment ordering liquidation of Siva Industries & Holdings has been tossed out by the Supreme Court with the observation that the bankruptcy appeals tribunal should have respected the creditors’ decision to settle with promoters as part of the debt resolution process.
“It is clear that the decision of the committee of creditors (CoC) was taken after … exercising commercial wisdom. Neither the National Company Law Appellate Tribunal (NCLAT) nor the lower tribunal was justified in not giving due weightage to the commercial wisdom,” the court said.
Quashing the NCLAT order dated January 28, the apex body added that, time and again, it has emphasised the need for minimal judicial interference by NCLAT and the lower tribunal in the Insolvency and Bankruptcy Code (IBC).
This comes after RCK Vallal, a shareholder in Siva Industries and the father of serial entrepreneur and company promoter C Sivasankaran, had challenged the NCLAT order which had upheld the lower tribunal’s judgment dated 12 August 2021 to liquidate the firm.
“I am pleased and humbled by the judgment. The company will be placed under new management and will focus on settling its creditors as soon as possible so that a new chapter can begin for the firm,” the 94-year-old Vallal said.
Both NCLAT and the lower tribunal had rejected the application by the bankruptcy resolution professional for withdrawal of the plea that started insolvency proceedings in view of the settlement plan okayed by the creditors. The NCLAT, in fact, went on to order liquidation proceedings against Siva Industries.
The latest verdict by the Supreme Court reiterates its observation in the Arun Kumar Jagatramka versus Jindal Steel and Power case where it urged minimum intervention or innovation from NCLAT and lower tribunal so as not to disturb the foundational principles of IBC.
The promoters of Siva Industries had proposed to pay Rs 328.21 crore to an IDBI Bank-led consortium under a one-time settlement plan involving a haircut of about 93.5 percent for lenders.
