Corporate Insolvency Resolution Process was initiated against Amtek Auto Limited pursuant to an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. In 2017, ‘Resolution Applicants’ (bidders) were invited for resolution of insolvency of Amtek.
M/s. Liberty House Group Pte Ltd. (Liberty House) and Deccan Value Investors LP were considered by the Committee of Creditors (CoC). Deccan Value Investors LP withdrew its Resolution Plan. Thereafter, Liberty House was considered by the CoC which approved the plan with majority voting shares of 94.20%.
Liberty House sent a letter assuring that an escrow account would be set up but refused to give effect to the Resolution Plan. In the meantime, Liberty House filed a suit for injunction before the Hon’ble Delhi High Court seeking encashment of the Bid Bond Guarantee. The CoC invoked the Bid Bond Guarantee of Rs.50 Crores. However, the Barclays Bank on rejected the invocation of Bid Bond Guarantee on the ground that the invocation was not as per the prescribed format.
The CoC filed an application under before the National Company Law Tribunal, Chandigrah (Adjudicating Authority) with prayer to declare that Liberty House and its promoters upon whom the Resolution Plan was binding under Section 31 of the Insolvency and Bankruptcy Code (I&B Code) knowingly contravened the terms of the Resolution Plan having failed to implement the same.
An appeal was made to grant 90 days to the Resolution Professional to make another attempt for a fresh process rather than forcing Amtek Auto into liquidation on account of fraud committed by Liberty House.
The Adjudicating Authority on 13th February 2019 held that in view of the principle laid down by the Hon’ble Supreme Court in Arcelormittal India Pvt. Ltd., certain period can be excluded from the total period of 270 days but there is no scope of granting extension beyond 270 days under any circumstances.
Liberty House shortlisted plant and machinery of Amtek Auto and reached out to suppliers and sought quotations for the specific machines. The liquidation value of the plant and machinery of Amtek Auto, was in the range of Rs.400-500 Crores, an amount significantly lower than the liquidation value of Rs. 1,284 Crores attributed to the plant and machinery in the RBSA Valuation Report.
When the Resolution Plan was filed by the Resolution Professional, the Letter of Intent was not signed by Liberty House and escrow terms and conditions were still under negotiations. Liberty House challenged the order passed by NCLT on 13th February 2019 before the National Company Law Appellate Tribunal, New Delhi (NCLAT).
The question that arose for consideration in the appeal before the NCLAT was whether a case has been made out to exclude any period for the purpose of counting 270 days of the Corporate Insolvency Resolution Process. The NCLAT held that in absence of any extraordinary situation and the fact that more than 270 days had passed, the NCLAT found no ground to exclude any period. Further, once a plan is approved by the Adjudicating Authority under Section 31 of the I&B Code if it is not implemented, that cannot be a ground to exclude any period.
The NCLAT noted that more than 270 days were completed and no case was made out to exclude any period. The Adjudicating Authority had no other option but to pass order of liquidation. It also held that it is the Adjudicating Authority who is required to refer such matter to the Insolvency and Bankruptcy Board of India or the Central Government to take up the matter to the Special Court if on investigation, any case of offence under Chapter VII, including Section 74(3) of the I&B Code is made out.
In view of such observations, the NCLAT noted that since more than 270 days were passed, the Adjudicating Authority will pass appropriate order of liquidation, which would be in accordance with law.