Amtek Auto's lenders invoke personal guarantee of former promoter

Lenders of Amtek Auto, one of the top twelve non-performing assets in RBI’s list, have filed a petition invoking the personal guarantee of the company’s former promoter Arvind Dham, according to people in the know.

Banks recently filed a writ petition in the matter at the National Company Law Tribunal’s Chandigarh bench. Two public sector bank executives told Business Standard that even though they have filed their plea, they are ‘very sceptical of meaningful recoveries’ from the ex-promoter. “We still have to make all efforts and exhaust the legal option at our disposal,” a senior bank executive said.

The bank executive also said that the structure of the company is very complicated and includes units that are spread across the globe.

Dham has become one of the latest businessmen whose personal guarantee has been invoked by banks to recover dues. Others include Anil Ambani, chairman of ADA group, Sanjay Singhal of Bhushan Power and Steel and Punj Lloyd’s founder Atul Punj.
 

Earlier, personal guarantees could be evoked in the debt recovery tribunals. The new rules introduced by the Insolvency and Bankruptcy Board of India (IBBI) in November last year say that if a company is undergoing corporate insolvency resolution process (CIRP) then matters relating to personal guarantee will be dealt at the concerned NCLT bench. The corporate insolvency process has made things even more complicated.

“It is complicated because it involves recalling advances, sending notice and appointing a resolution professional. Then comes the admission of application, which could take two-three months. In some cases where banks have attempted, courts have granted stay,” official said.

The issue of personal guarantee of a corporate debtor under Insolvency and Bankruptcy Code has been challenged in various high courts. A batch of these petitions is likely to be transferred to Supreme Court and an order in this matter is expected today.

Amtek is one of the few IBC cases where the CIRP was re-opened after an order by the Supreme Court. The bid amounts have declined and so have the company’s standalone revenues, casting a shadow on the prospects of the resolution process.

The process for Amtek’s resolution should have been completed by April 2018 according to timelines set by IBC. However, Liberty House could not implement its plan of Rs 4,025 crore and an upfront payment of Rs 3,310 crore citing misrepresentation and irregularities in the information relating to the corporate debtor.

This had prompted the National Company Law Appellate Tribunal to order liquidation of the company. The Supreme Court, however, allowed the resolution professional to invite fresh offers after an appeal from the committee of creditors.

The admitted claims by lenders are over Rs 12,000 crore in Amtek’s case. Bank officials say that his (promoter) net-worth is not up to that level. “The networth statement could also be more than 2-3 years old. We do not know what the net worth is currently.”

“The invocation of personal guarantees is one of the methods to try to get whatever net worth possible.  It is not an alternative to recover the full amount. It is also a long drawn process,” official added.