The NCLAT on August 16 had directed the Chandigarh Bench of the National Company Law Tribunal to pass an order of liquidation as 270 days mandated under the IBC for finalising a resolution plan had already lapsed
The Supreme Court on Friday stayed the National Company Law Appellate Tribunal (NCLAT)’s decision ordering liquidation of debt-ridden Amtek Auto. A Bench led by Justice Arun Mishra while seeking responses from UK-based Liberty House Group PTE, Deccan Value Investor LP, resolution professional Dinkar Venkatsubramanian and ex-promoter Arvind Dham stayed the liquidation of Amtek Auto, which was among the first list of the 12 companies that were referred by the RBI for initiation of insolvency process in 2017.
Liberty House was selected as the highest bidder by the Committee of Creditors (CoC) of Amtek Auto. However, it later backed out citing some reasons, following which lenders requested for another 90 days to find a new buyer. However, the NCLAT had last month declined CoC’s request for extension of the insolvency resolution process deadline.
Challenging the August 16 liquidation order, the lenders led by Corporation Bank told the SC that the appellate tribunal had failed to uphold the tenets of IBC to resolve a financially viable entity. It said Amtek Auto being a financially viable entity was being pushed into liquidation merely on account of the fact that Liberty House, the successful resolution applicant, had defaulted in implementing the resolution plan.
“Resolution of the financial affairs of a distressed company is the primary aim of IBC and a failure/frustration of the processes on account of the conduct of a resolution applicant ought not to undermine the primary objective sought to be achieved,” the lenders said.
“The deliberate failure to implement the RP is a fraud committed on the process carried under the Code” and in such circumstances the NCLAT should have allowed the CoC’s request to invite and evaluate fresh RPs and ensure that a financially viable entity is not liquidated, the CoC said in its appeal.
It further said “maximisation of the value of the assets of the corporate debtor is embedded in the Code” and, therefore, an opportunity should be given to CoC to make an attempt at resolution, especially keeping in view the availability of suitable resolution applicants in the market.
The 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 and Deccan Value, which later withdrew from the race. A revised plan of Liberty House was selected by the CoC on April 2, 2018 with 94.20% votes and the same was upheld by the NCLT on July 25,2018.
However, Liberty House backed out from the race and even refused to furnish the performance guarantee and other terms and conditions which were approved.
The NCLAT on August 16 had directed the Chandigarh Bench of the National Company Law Tribunal to pass an order of liquidation as 270 days mandated under the IBC for finalising a resolution plan had already lapsed. It has given liberty to 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”.
The Code 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.