Explain logic in one-time settlement of Siva Industries: NCLT to lenders

PSU banks to get 26% of dues after third party guarantor payments

The National Company Law Tribunal (NCLT), Chennai, has asked lenders to explain the rationale behind the one-time settlement (OTS) offer made by Siva Industries under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016. The lenders have also been asked to give the timeline of cash flow to all the creditors. 

In a hearing held on Friday, the public sector undertaking (PSU) lenders informed the court that they will get 26 per cent of their dues after taking into account third-party guarantor payments. Also, operational creditors will get part of their dues under the settlement plan.

Until the last payment is made to the lenders within the deadline of 180 days set in the OTS application, the liabilities of the company will remain and not be extinguished, said a banker close to the development.

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 dues.

The lenders informed the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out. Hence, they approved the 12A petition by the promoters. Incidentally, Chennai-based entrepreneur C Sivasankaran is not a director, guarantor or a shareholder in the company and it is now being run by other family members.

According to court documents, IDBI Bank's claim of Rs 644 crore will be paid subject to ongoing court proceedings while Blackstone-backed International ARC will get an additional amount of Rs 510 crore by selling land.

According to the OTS application, UAE-based Masdar and IARC currently own 40 per cent of Siva Industries’ Rs 4,800-crore debt and PSU banks have Rs 3,442-crore exposure.  Voting on the proposal was completed only after approval from respective boards of banks and the application is now pending with the NCLT. The liquidation value of the company has been pegged at Rs 209 crore.

The NCLT has adjourned the matter to June 24.