13 February 2019: The Chandigarh bench of the National Company Law Tribunal (NCLT), on Wednesday, allowed the financial creditors of Amtek Auto Ltd. to start the resolution process from scratch, more than 18 months after it was first initiated.
According to three people in the know, the tribunal ordered that the process be restarted and completed within a short time frame of approximately 140 days. The Chandigarh bench decided to give additional time based on the period between the date of submission of the first set of resolution plans in March 2018 and the date on which the bench approved Liberty House UK as the winning bidder for Amtek Auto.
The people quoted above requested anonymity as they are not allowed to speak to the press.
According to the people quoted above, the committee of creditors to the auto parts manufacturer and the resolution professional Dinkar V had approached the NCLT after Liberty House refused to honor its payments despite receiving the tribunal’s approval.
Liberty House had alleged that the process followed during resolution was flawed and that the resolution professional did not share adequate information about the company at the beginning.
Amtek Auto owes nearly Rs 12,312 crore to its financial creditors. In its plan, Liberty House had agreed to pay around Rs 4,100 crore, implying a 75 percent haircut to lenders. The creditors approved the plan in April last year, while the NCLT gave its final nod in July.
Moving Against Liberty House
The Chandigarh bench also allowed the creditors and the resolution professional to move against Liberty House, under Section 74(3) of the Insolvency and Bankruptcy Code (IBC), for defaulting on repayments. Under this section, a person who does not honor the covenants of the resolution plan can be subjected to a fine of up to Rs 1 crore, imprisonment between one to five years, or both.
Under the procedure laid down by the Insolvency & Bankruptcy Board of India (IBBI), the committee of creditors will now approach the board with the facts of the case. Once IBBI is convinced of the contravention, it will refer the matter to the NCLT for punitive action.
A spokesperson for Liberty House did not immediately reply to an email sent regarding the NCLT proceedings.
Amtek Auto was one of the 12 large corporate accounts identified by the Reserve Bank of India (RBI) in June 2017 for immediate insolvency proceedings. While most of the process had run on time, delays crept in later when Amtek Auto lenders found out that Liberty House had defaulted on some repayments to EXIM Bank. The UK-based investor subsequently cleared the dues and argued it was eligible to submit a bid. It eventually failed to pay the agreed amount to lenders.
Liberty House had also bid for subsidiaries of Amtek Auto under the IBC, as part of its strategy to take over the entire business. However, it had to later withdraw these bids.