The National Company Law Appellate Tribunal (NCLAT) has directed Axis Bank Ltd and other creditors of the bankrupt Siti Networks, a subsidiary of the Essel Group, to maintain ₹143 crore in a separate interest-earning account. This ruling followed a challenge to an order from the National Company Law Tribunal (NCLT) in Mumbai, issued on October 1, which required the lenders to return this sum to Siti Networks, which is currently in insolvency proceedings. The NCLAT agreed to hear the lenders’ appeal against the NCLT’s decision but emphasized the importance of safeguarding Siti Networks’ interests by keeping the funds in a separate account until a final verdict is made. In its ruling, the NCLAT mentioned that since the appellants are banks and financial institutions, there should be no concern about them failing to return the amount to the corporate debtor’s account if the final decision in the appeal calls for it. “The interim management will guarantee the protection of all parties’ interests during this process,” stated the NCLAT in its order. The NCLT directed the repayment of ₹143 crore to Siti Networks after a petition from Asset Reconstruction Company (India) Ltd, a creditor that claimed other creditors had illegally taken funds from Siti Networks while a stay on the insolvency proceedings was in place. Also read | Mint Explainer: How can voluntary group insolvency facilitate IBC proceedings. The Mumbai bench of the NCLT, presided over by Justices Laxmi Gurung and Charanjeet Singh Gulati, ordered that all transactions and appropriations made from March 2023 to August 2023 during the stay period be reversed and returned to Siti’s account within four weeks. After taking control of the company’s operations in August 2023, resolution professional Rohit Ramesh Mehra found that Axis Bank had withdrawn funds from Siti and paid out approximately ₹143 crore to various lenders, including IndusInd Bank, RBL Bank, Aditya Birla Finance, and IDBI Bank, despite the ongoing stay. The insolvency proceedings against Siti Networks began on February 22, 2023, when IndusInd Bank filed a petition with the NCLT over an alleged default of ₹148 crore. After the NCLT accepted the case, Mehra called on creditors to present their claims by 8 March 2023. Shilpi Asthana, a suspended director of Siti, contested the NCLT’s decision in the NCLAT, which temporarily halted the insolvency process. After a comprehensive hearing, the NCLAT rejected Asthana’s appeal due to its lack of merit. The Supreme Court later confirmed this dismissal. Additionally, bankruptcy resolution professionals are facing anger from creditors as cases go to court. In August 2023, after regaining control of Siti, the resolution professional asked for clarification on the start date of the insolvency, which the NCLAT confirmed as 22 February 2023. Mehra noted that there were significant financial transactions between Siti Networks and its creditors during the stay period, resulting in major changes to the company’s financial status without his supervision. By 5 September, both financial and operational creditors had submitted claims against Siti Networks amounting to ₹1,206 crore. Also read | Insolvency: Are recoveries from avoidance transactions disappearing?. Stay updated with all the business news, corporate news, breaking events, and the latest updates on Live Mint.
