NCLAT asks Axis Bank, Siti Network’s creditors, to keep ₹143 crore in a separate interest-bearing account

National Company Law Appellate Tribunal (NCLAT) to Axis Bank Ltd and other creditors of bankrupt Siti Networks, a subsidiary of Essel Group. ₹143 crore in a separate interest-bearing account.

This decision comes in response to the October 1 order of the National Company Law Tribunal (NCLT) in Mumbai, which mandated the lenders to repay the amount to Siti Networks, which is currently undergoing insolvency proceedings.

The NCLAT agreed to hear the lenders’ appeal against the NCLT’s decision but noted that the interests of Siti Networks should be protected by keeping the funds in a separate account until a final decision is reached.

“NCLAT in its judgment stated that considering the appellants are banks and financial institutions, there should be no apprehension that they will not convert the amount into the account of the corporate debtor if the final order in the appeal requires such action. In its order, NCLAT stated that the interim administration will ensure that the interests of all parties are protected during this process..

NCLT had ordered refund ₹143 crore to Siti Networks Following a petition by a creditor, Asset Reconstruction Company (India) Ltd, alleging that other creditors had unlawfully withdrawn funds from Siti Networks during the stay of the bankruptcy case.

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NCLT’s Mumbai bench, led by Justices Laxmi Gurung and Charanjeet Singh Gulati, had directed that all transactions and allowances made during her stay between March 2023 and August 2023 be withdrawn and refunded to Siti’s account within four weeks.

Solutions expert Rohit Ramesh Mehra said that after taking over the company’s operations in August 2023, Axis Bank withdrew money from Siti and around ₹143 crore to various lenders, including IndusInd Bank, RBL Bank, Aditya Birla Finance and IDBI Bank, despite stay of proceedings.

Bankruptcy proceedings against Siti Networks began on February 22, 2023, after InduInd Bank filed a petition with the NCLT for alleged default. ₹148 crore. After the NCLT accepted the case, Mehra invited the creditors to submit their demands by March 8, 2023.

Siti’s suspended director Shilpi Asthana has challenged the NCLAT’s order, which initially stayed the insolvency proceedings, in the NCLAT. However, after a detailed hearing, the NCLAT dismissed Asthana’s appeal as lacking merit. The Supreme Court later upheld this dismissal decision.

In August 2023, after regaining control of Siti, the resolution professional sought clarification on the bankruptcy start date, which NCLAT confirmed as February 22, 2023.

Mehra reported that during his stay there were significant financial transactions between Siti Networks and its creditors that resulted in significant changes in the company’s financial condition outside his supervision.

As of September 5, both financial and operational creditors filed a total lien against Siti Networks. ₹1,206 crore.