Our Bureau | Chennai, June 3 |
Order reiterates the limits to judicial intervention by NCLT and NCLAT and the need to not disturb the foundational principles of IBC
In a major victory for serial entrepreneur C Sivasankaran, the Supreme Court on Friday quashed the National Company Law Appellate Tribunal (NCLAT) order for liquidation of Siva Industries & Holdings (SIH). The order, experts said, is important as it reiterates the limits to judicial intervention by NCLT and NCLAT and the need to not disturb the foundational principles of the Insolvency and Bankruptcy Code (IBC).
RCK Vallal, a shareholder in SIH and father of Sivasankaran, challenged the order of NCLAT, which upheld the National Company Law Tribunal’s (NCLT) order to liquidate SIH.
“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 company,” Vallal, 94, told BusinessLine on the apex court’s order issued by Justice BR Gavai and Justice Hima Kohli.
The court reiterated its own observation in Arun Kumar Jagatramka vs Jindal Steel and Power Ltd wherein it said the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC. The commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC, the court said.
A short question that falls for consideration in the present appeal is as to whether the adjudicating authority NCLT or NCLAT can sit in an appeal over the commercial wisdom of the Committee of Creditors (CoC) or not, the order issued by Supreme Court Justice BR Gavai said.
The decision of the CoC was taken after the members had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. Neither the NCLT nor the NCLAT were justified in not giving due weightage to the commercial wisdom of CoC, the apex court said.
The NCLAT said the Adjudicating Authority had rightly come to the legitimate and reasonable conclusion that the corporate debtor was required to be ordered for liquidation. The NCLT, in August 2021, ordered liquidation of SIH and rejected the application filed by Resolution Professional (RP) of Siva Industries.
Siva Industries’ promoters proposed to pay ₹328.21 crore to IDBI Bank-led consortium of lenders as a one-time settlement plan to withdraw the company from proceedings under the IBC at NCLT.
Siva Industries’ debt is about ₹4,863 crore and the settlement plan amounted to a haircut of about 93.5 per cent for banks. The order was approved by the lenders in early April, wherein the promoters would pay only ₹5 crore upfront and the balance within 180 days of approval.
The apex court ordered that the appeals be allowed; the NCLAT’s judgment of January 28, 2022 and the order dated August 12, 2021 passed by NCLT are quashed and set aside.