Synopsis–The creditors, which include State Bank of India and Malaysia’s Maxis Communications Bhd, the former owner of telecom operator Aircel, have accepted Sivasankaran’s offer to pay them Rs 500 crore in return for cancelling all outstanding claims and withdrawing legal proceedings against his company, according to the people cited above. The creditors voted in favour of the withdrawal last week.
Creditors have agreed to withdraw bankruptcy proceedings against Siva Industries and Holding, the group holding company of businessman C Sivasankaran, and accept an out-of-court offer from him, according to people familiar with the matter. Bankruptcy experts termed the development unusual, citing the rejection of such offers by promoters in the past.
IDBI Bank, one of the financial creditors, confirmed the development.
“It’s a fact that the majority of the creditors have voted in favour of the resolution plan under Section 12A of Insolvency and Bankruptcy Code (section dealing with withdrawal of bankruptcy proceedings against a company). National Company Law Tribunal approval is awaited in the matter,” IDBI Bank said in a statement.
The creditors, which include State Bank of India and Malaysia’s Maxis Communications Bhd, the former owner of telecom operator Aircel, have accepted Sivasankaran’s offer to pay them Rs 500 crore in return for cancelling all outstanding claims and withdrawing legal proceedings against his company, according to the people cited above. The creditors voted in favour of the withdrawal last week.
“It is uncommon for banks and financial institutions to accept a settlement from promoters once a company has been admitted for bankruptcy proceedings,” said Umesh Ved, an Ahmedabad-based resolution professional. “Bankruptcy is usually a last resort and secured creditors exhaust all options before they take a company to court. That is why such settlements are rare.”
The holding company owes financial and other creditors about Rs 5,000 crore. Tata Sons had filed a claim of Rs 863 crore against the Sivasankaran group company but that was rejected by the latter’s interim resolution professional as per data published on January 20 on the website of Insolvency and Bankruptcy Board of India (IBBI).
Siva Industries and Holding, State Bank of India, Maxis Communications and Tata Sons didn’t respond to queries.
The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.
Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.
Sivasankaran, who was the founder of Aircel before he sold it to Malaysia’s Maxis Communications, is no stranger to controversy.
The South India-based businessman has been at the centre of a probe by the Central Bureau of Investigation (CBI) over alleged irregularities in loans obtained from IDBI Bank. Sivasankaran was accused of obtaining loans from IDBI Bank’s overseas branches and using the proceeds to repay loans obtained from the bank in India which had turned non-performing.
He was also accused by Cyrus Mistry of receiving favours from Ratan Tata such as the grant of a loan to buy a stake in Tata Teleservices. But these allegations were rejected by the Supreme Court in its verdict on the Tata-Mistry dispute delivered on March 26.
Siva Industries and Holding was admitted for bankruptcy proceedings on July 4, 2019, as per a public announcement uploaded on the website of the IBBI.
The creditors received an offer from Mauritius-based Royal Partner for the company but that was rejected on the grounds that the investor had been unable to demonstrate its seriousness in completing the deal.
Several of the claims that are filed against the holding company are on account of corporate guarantees it had provided for loans obtained by other Sivasankaran group companies, according to an executive in the know. For instance, Tata Sons is also said to have filed an overlapping claim of the same amount that it claims was due to it from Siva Industries and Holding against another Sivasankaran group company.
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