NCLAT asks creditors of Axis Bank and Siti Network to hold Rs 143 crore in separate interest-bearing accounts

The National Company Law Appellate Tribunal (NCLAT) has ordered Axis Bank Ltd and other creditors of insolvent Essel Group subsidiary Siti Networks to remain $Rs 143 crore is kept in a separate interest-bearing account.

The decision came in response to a challenge to an October 1 order by the National Company Law Tribunal (NCLT) in Mumbai, which directed lenders to repay the amount to Siti Networks, which is currently undergoing insolvency proceedings.

NCLAT agreed to hear the lenders’ challenge to the NCLT ruling but noted the need to protect Siti Networks’ interests by keeping the funds in a separate account until a final decision is taken.

“NCLAT said in its ruling that since the appellants are banks and financial institutions, there is no need to worry that they will not transfer the amount to the account of the corporate debtor if the final decision of the appeal calls for such action. The interim management will ensure that during this process to protect the interests of all parties,” NCLAT said in its order..

NCLT has ordered repayment $Siti Networks was awarded Rs 143 crore following a petition filed by Asset Reconstruction Company (India) Ltd, which alleged that other creditors illegally withdrew funds from Siti Networks during the stay of insolvency proceedings.

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The NCLT Mumbai bench headed by Justices Laxmi Gurung and Charanjeet Singh Gulati has directed that all transactions and grants made during the moratorium between March 2023 and August 2023 must be reversed and refunded to Siti’s account within four weeks.

After taking over the company’s operations in August 2023, solutions professional Rohit Ramesh Mehra discovered that Axis Bank had withdrawn funds from Siti and allocated approx. $Despite the stay of proceedings, Rs 143 crore was provided to various lenders including IndusInd Bank, RBL Bank, Aditya Birla Finance and IDBI Bank.

Insolvency proceedings against Siti Networks were initiated on February 22, 2023, after IndusInd Bank petitioned NCLT over alleged defaults. $148 Crores. After NCLT took up the case, Mehra invited creditors to submit their claims before March 8, 2023.

Siti’s suspended director Shilpi Asthana had challenged the NCLT order in the NCLAT, which had initially stayed the insolvency proceedings. However, after a detailed hearing, the NCLAT dismissed Asthana’s appeal citing lack of evidence. The Supreme Court subsequently upheld the dismissal.

In August 2023, after regaining control of SITI, resolution professionals sought clarification on the bankruptcy commencement date, which NCLAT confirmed as February 22, 2023.

Mehra reported significant financial transactions between Siti Networks and its creditors during his stay, resulting in significant changes in the company’s financial position without his oversight.

As of September 5, financial and operational creditors have filed claims against Siti Networks totaling $1,206 Crores.