BQ: Delhi High Court Asks Liberty House To Pay Rs 50 Lakh To SBI

23 February 2019: The Delhi High Court, in an order on Friday, asked U.K.-based Liberty House Group to pay Rs 50 lakh to State Bank of India within four weeks, as penalty for forcing the bank to engage in legal proceedings with respect to two insolvent subsidiaries of Amtek Auto Ltd.

Liberty House approached the high court, seeking that SBI be barred from encashing the bid bond guarantees provided by the U.K.-based investor when bidding for Castex Technologies Ltd. and ARGL Ltd. In 2017, both these companies entered insolvency resolution proceedings, and in each case the Committee of Creditors approved Liberty House as the winning bidder. However, the bidder eventually changed its mind. It did the same in the case of parent company Amtek Auto.

According to the details available in the court order, Liberty House had provided bid bond guarantees worth Rs 40 crore when bidding for Castex Technologies and Rs 10 crore for ARGL. These were issued by Barclays Bank and Bank of Baroda, respectively.

On being approved as the winning bidder, the resolution professional of each company asked Liberty House to also submit performance bank guarantees—Rs 100 crore in the case of Castex Technologies and Rs 60 crore for ARGL. The performance guarantees were to be submitted within 10 days of the bidder receiving the letter of intent from the CoCs, failing which its resolution plan would be considered non-responsive and the CoC would be free to invoke the bid bond guarantees submitted earlier.

Liberty House asked the creditors to offset the bid bond guarantees towards the amounts owed as performance guarantees and open escrow accounts for the remaining. The creditors, however, rejected the proposal and asked for performance guarantees to be submitted in full.

Liberty House did not submitted the performance bank guarantees, thereby SBI, the lead lender for both Castex Technologies and ARGL, invoked the bid bond guarantees, and received Rs 50 crore from Barclays Bank and Bank of Baroda.

In November 2018, Liberty House approached the Delhi High Court and sought that:

  • SBI be barred from invoking the bid bond guarantees
  • Barclays Bank and Bank of Baroda be barred from paying the amounts to SBI

Liberty House’s arguments didn’t succeed at the high court. The court upheld the invocation of the guarantees, admonished Liberty House for wasting time and fined it a total Rs 50 lakh for doing so.

Bloomberg Quint reported

Categories: General News, India Bankruptcy

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