Lenders will recover only 6.5 per cent of the total debt of ₹4,863 crore from the settlement offer made by C Sivasankaran, promoter of Siva Industries. The settlement offer will be heard by NCLT on June 18.
Under the offer, which has been approved by the lenders, Sivasankaran has offered to pay only ₹5 crore upfront and the balance within 180 days of approval.
According to sources, instead of invoking personal guarantees of promoters of Siva industries, some banks have privately sold its exposure of nearly ₹1,148 crore to a foreign-owned ARC. Earlier, a Mauritius-based investor, Royal Partners Investment Fund Ltd had bid for Siva Industries but this was not accepted by the banks.
“Application for withdrawal of insolvency proceedings is shrouded in mystery since it neither discloses the amount of the resolution plan which was presented by Royal Partners for Siva Industries nor does it says why the proposal was rejected,” said an industry source.
Lenders of Siva Industries and Holdings Limited have filed an application under Section 12A of Insolvency and Bankruptcy Code 2016 (IBC) for withdrawing the insolvency proceedings and settle with Sivasankaran for ₹318 crore.
Siva Industries was admitted to Corporate Insolvency Resolution Process on July 5, 2019. But CoC in its meeting held on April 1 approved the one-time settlement offer from Siva and the Resolution Professional was authorised by IDBI Bank to file an application under Sec. 12A of IBC for withdrawal application.
Settlement amount
As per OTS, settlement amount will be paid from the funds/debt to raised by the promoter either on its own or out of the proceeds from either sale of assets, raising debt or external capital raise using the assets offered as security to lenders.
Bharat Chugh, Independent Counsel and former judge, said these settlements may create perverse incentives for defaulters who can get away with a mere rap on the knuckles after defaulting on millions of dollars worth of loans, which is all public money. This would neither lead to responsible banking and lending, nor responsible repayment, and creates a bad precedent, he said.