NCLAT orders liquidation of Amtek Auto

The NCLAT on Friday ordered the liquidation of debt-ridden Amtek Auto as it declined lenders' request for extension of insolvency resolution process deadline after they failed to find a buyer within the stipulated time. Amtek Auto, which has a total debt of Rs 12,603 crore, was in the first list of 12 companies that were referred by the Reserve Bank of India in 2017 for initiation of the insolvency process.

UK-based Liberty House was selected as the successful resolution applicant with bid of Rs 4,025 crore for Amtek Auto by the committee of creditors (CoC). However, it later backed out citing various reasons, following which the lenders requested 90 days more time to find a new buyer and start the process afresh. A three-member bench headed by Chairperson Justice S J Mukhopadhaya directed the Chandigarh bench of the National Company Law Tribunal (NCLT) to pass an order of liquidation as 270 days, mandated under the IBC for finalizing a resolution plan, have already lapsed.

"We are neither inclined to give any direction as was sought for by the CoC nor to exclude any period calling for fresh Resolution Plan," the NCLAT said in an order on Friday. It further said, "more than 270 days having passed, the Adjudicating Authority (NCLT) will pass appropriate order of liquidation, which will be in accordance with law".

The Insolvency and Bankruptcy Code (IBC) mandates completion of insolvency process within 180 days with an extension of 90 days, failing which liquidation has to be initiated against the corporate debtor. The National Company Law Appellate Tribunal (NCLAT) also observed that there was no extraordinary situation in the resolution process of Amtek Auto to exclude 90 days period.

"In absence of any extraordinary situation and the fact that more than 270 days have already passed, we find no ground to exclude any period," it said adding "once a plan is approved by the NCLT under Section 31, if it is not implemented, that cannot be a ground to exclude any period." The appellate tribunal also observed that the CoC could request the NCLT for considering a pending resolution plan or to call for a fresh one, only if the earlier resolution plan is approved within the stipulated deadline.

Corporate Insolvency Resolution Process of Amtek Auto was initiated on July 24, 2017 by the NCLT and lenders of the company had selected the resolution plans by two firms - Liberty House Group Pte Ltd and Deccan Value Investors LP. Later, Deccan Value Investors withdrew from the race, and a revised plan of Liberty House was selected by the CoC on April 2, 2018 with 94.20 per cent votes.

Liberty House also backed out from the race, and refused to furnish the performance guarantee as well as other terms, which were earlier approved. Following this, the CoC encashed Liberty House's Rs 50 crore bid bond guarantee and requested the NCLT to grant another 90 days to the resolution professional (RP) to make another attempt for a fresh process and to debar the UK-based firm from submitting a new resolution plan.

This was rejected by the NCLT, saying there was no scope for going beyond 270 days, as the IBC mandates time-bound resolution. Liberty House had contended before the NCLT that it had found discrepancies in the condition of machineries, valuations and representations made in the Information Memorandum and found it to be incorrect, false and reflecting inflated values.

It alleged that the RP was to provide Information Memorandum with the relevant information, including the liquidation value of Amtek Auto. The group further argued that investment of Amtek Auto was overvalued in the liquidation reports, and it wanted to submit fresh plan after knowing about the discrepancies.

However, the NCLT rejected all pleas, following which all parties approached the appellate tribunal, which also declined to extend the deadline. The NCLAT also set aside the order of NCLT, which had on February 13, 2019 allowed the plea of lenders and the RP of Amtek Auto to approach the Insolvency and Bankruptcy Board of India (IBBI), or the central government, to initiate criminal proceedings against Liberty House under section 74(3) of IBC.

Section 74 (3), which defines punishment for contravention of moratorium or the resolution plan, says that when officers or any person on whom the approved resolution plan is binding "knowingly and wilfully contravenes" the terms, could be imprisoned for a minimum of one year with a maximum tenure of 5 years or with a fine of Rs one lakh-1 crore. The appellate tribunal said before referring the matter to IBBI or central government, the NCLT is "required to provide reasonable opportunity of hearing to the parties concerned/alleged offenders provisions … and if satisfied may request the Central Government to investigate the matter by an Inspector or Inspectors".

The NCLAT also said the issue "cannot be deliberated by this Appellate Tribunal" as the grounds shown by Liberty House were genuine, otherwise it will attract punishment. It has given liberty to the RP and CoC of Amtek Auto to move an application before the NCLT "to decide as to whether the matter is required to be referred to the Insolvency and Bankruptcy Board of India or the central government for taking any action".