London court directs ex-Aircel promoter Sivasankaran to pay IDBI Bank ₹1,250 crore

Mumbai: A London court has ruled in favour of IDBI Bank, directing a firm linked to former Aircel promoter Chinnakannan Sivasankaran to pay $143.7 million (about ₹1,250 crore) towards principal and interest on a defaulted loan.

The dispute stems from a $67 million loan taken in 2014 by Axcel Sunshine Ltd, a British Virgin Islands-based subsidiary of Siva Industries and Holdings Ltd. Siva Industries had provided a letter of comfort for the loan, which was issued by the now-defunct Dubai International Financial Centre branch of IDBI Bank.

Sivasankaran is the promoter of the Siva Group, of which Siva Industries is a part. Axcel is a subsidiary of Siva Industries.

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As part of the loan agreement, Axcel pledged shares of Tata Teleservices Ltd (TTSL) as collateral, valued at ₹106 per share, to secure an $86 million loan from IDBI Bank. However, after Axcel defaulted, Siva Industries refused to honour the loan, arguing that a letter of comfort does not impose liability in the same way a corporate guarantee does.

In an order dated 27 February, the England and Wales High Court rejected this argument, with judge Lionel Persey KC ruling that the letter of comfort imposed explicit legal obligations, effectively serving as both a guarantee and an indemnity.

Representing itself in court, Siva Industries had claimed that IDBI Bank had only required the letter of comfort as a procedural formality to internally justify offloading a distressed loan. 

The court rejected this defence, upholding IDBI Bank’s claim.

Can the UK judgement be enforced in India?

While IDBI Bank has won the case in the UK, recovering the dues in India involves legal hurdles.

Legal experts explain that foreign judgments must be filed in an Indian court for verification and compliance with Indian legal standards. However, since the UK is a reciprocating territory, the judgment from the high court of England and Wales is enforceable in India, said Tushar Kumar, an advocate at the Supreme Court of India.

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That said, enforcement could be delayed if Siva Industries appeals on grounds such as fraud, jurisdictional issues, or violation of natural justice. “Despite these hurdles, Indian courts generally uphold foreign commercial judgments, especially when based on clear contractual obligations, such as the legally binding letter of comfort found by the UK court,” Kumar said.

The recovery process could be complicated if both Axcel Sunshine and Siva Industries are undergoing insolvency.

“IDBI Bank’s recovery options depend on insolvency proceedings. It can file a claim with the resolution professional and await distribution based on priority. If the company goes into liquidation, IDBI will receive payments only if assets remain after secured creditors are paid,” said Kumar.

If Siva Industries is found to have diverted assets to evade repayment, IDBI Bank could challenge fraudulent transactions under the Insolvency and Bankruptcy Code (IBC), seeking to claw back misappropriated funds before insolvency proceedings, Kumar added.

The UK court also flagged questionable fund transfers. The money borrowed by Axcel Sunshine was transferred through intermediaries to Siva Industries, which then used it to repay IDBI Bank on behalf of three of its group companies—Finland-based WinWind OY, and India-based Planet Pickles Pvt. Ltd and Sterling Agro Product Processing Ltd.

These companies had previously defaulted on loans guaranteed by Siva Industries.

IDBI bank declined to comment. Emails sent to Siva Industries’ resolution professional and liquidator remained unanswered.

Experts also noted that if recovery from Siva Industries proves impossible, IDBI could attempt to hold the promoters personally liable by piercing the corporate veil.

“IDBI Bank may pursue the promoters if there is evidence of fraudulent transactions or unjust enrichment. Legal avenues could include actions under the Prevention of Money Laundering Act or the Insolvency Code, particularly if assets are being wrongfully retained,” said Ketan Mukhija, senior partner at Burgeon Law.

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Given the UK court’s finding of unjust enrichment, IDBI has several legal avenues to recover its dues. 

“It can pursue civil recovery under the IBC, target the personal assets of promoters, or use international enforcement mechanisms if the promoters hold overseas assets,” Mukhija added.