Siva Industries case: Banks to settle bad loans worth Rs 4863 crore for just Rs 323 crore

All the members of the Committee of Creditors (CoC) are yet to grant their blessings to the out of court settlement. SBI is standing against the settlement proposal which is all set to result in a loss of approximately Rs 4,700 crore in public money.

New Delhi: Public sector banks have agreed to settle bad loans worth Rs 4,863 crore at just Rs 323 crores in the Siva Industries and Holdings case. With the recovery rate standing at just 6.5%, many are raising serious questions regarding how banks are making their way out of the disaster. 

However, all the members of the Committee of Creditors (CoC) are yet to grant their blessings to the out of court settlement that is facing criticism for allegedly eloping the rules under the Bankruptcy Act. 

For instance, India’s largest state-owned bank and a CoC member, SBI, is standing against the settlement proposal which is all set to result in a loss of approximately Rs 4,700 crore in public money.  

On the other hand, the likes of Canara Bank has reportedly sold its exposure worth Rs 1,148 crore privately to International Asset Reconstruction Company Private Limited (IARC), which is an asset reconstruction company, according to a report by ZeeBusiness. Also Read: Businessman arrested for Rs 101 crores GST fraud in Ghaziabad

IDBI Bank is settling the Siva Industries case as the lead banker. Other lenders of the firm which have agreed to the settlement include the Central Bank of India, LIC and PNB, among others. However, many are fearing that the case is expected to set a bad precedent of the Insolvency and Bankruptcy Code, 2016. 

The out of court settlement also defeats the purpose of the code brought to protect public money with banks. If more cases are settled out of court, then there’s no point in having IBC. 

The National Company Law Tribunal (NCLT), Chennai Bench, is examining the application for withdrawing insolvency proceedings. The next hearing is on June 18, 2021. The application was filed by lenders of Siva Industries and Holdings Limited under 12A of Insolvency and Bankruptcy Code 2016 (IBC). 

The lead banker of CoC IDBI Bank has noted that "there was no successful resolution applicant that’s why the OTS route is adopted for resolution of debt but as per reports the bidder Royal Partners Investment Fund alleged that the bid was deliberately ignored,” according to a report by ZeeBiz. Also Read: Cafe Coffee Day on the verge of bankruptcy? India's popular hangout chain has a debt of Rs 280 crore