NCLAT's dismissal of DVI appeal may pave the way for Amtek resolution

Amtek owes lenders Rs 12,641 cr and was on RBI's first list of NPAs mandated for resolution under Bankruptcy Code. The DVI bid is said to be Rs 2,615 cr, of which Rs 500 cr is upfront cash

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal made by US-based hedge fund, Deccan Value Investors (DVI), on Friday, over a mortgaged property, that may pave the way for implementation of the resolution plan in a corporate insolvency resolution process (CIRP) that has been running for more than three and a half years.

DVI had appealed against a National Company Law Tribunal (NCLT) order approving its resolution plan on grounds that the condition precedent around a long-term lease for the Ace Complex land – a mortgaged property – had not been met.

However, the NCLAT order said the execution of the long-term lease for the Ace Complex land with acceptable terms was not a condition precedent in regard to approval of resolution plan but only in regard to effective date.

The appellate tribunal found the appeal to not only lack merit, but also “frivolous”. While dismissing the appeal, the NCLAT imposed costs of Rs 1 lakh on DVI.

DVI’s main argument was that the resolution plan was contingent on the execution of a long-term lease for the Ace Complex land on acceptable terms, which is a prior written consent of mortgagee, Vistra ITCL (India), security trustee of KKR India Financial Services and L&T Finance.

The lease for the land – that accounted for 42 per cent of Amtek’s machining capacity and 23 per cent of revenues – had expired on March 31, 2019. DVI said that the resolution professional (RP) executed the lease on January 28, 2020 without prior consent of Vistara. The NCLT had, however, concluded that the requirement of prior consent of the mortgagee had been rendered infructuous, which led DVI to appeal in the appellate tribunal.

However, the NCLAT order said, the condition with regard to execution of long-term lease for the land having already been compiled by the RP – who executed the lease on January 28, when the prior lease expired on March 31, 2019 –  and Vistra not having assailed the impugned order for any material irregularity in the insolvency resolution process resulting in prejudice, the appellant would not be justified in assailing the impugned order.

Anoop Rawat, partner, Shardul Amarchand Magladas, said, “NCLAT has decisively dismissed the appeal and has set a right precedent. This case has seen multiple litigation in various forums and I hope to see the implementation of the plan soon.”

Amtek owes lenders around Rs 12,641 crore and was on the first list of non-performing assets mandated for resolution by the Reserve Bank of India under the Insolvency and Bankruptcy Code (IBC). The DVI bid is believed to be Rs 2,615 crore, of which Rs 500 crore is the upfront cash component, the balance is to be paid from future cash flows.

On February 23, 2021, the Supreme Court had passed an order that the appeal filed by DVI against the approval of the resolution plan by the NCLT should be disposed of by the NCLAT within one month. The committee of creditors (CoC) had filed a contempt petition against DVI for violation of an order passed by the apex court on June 18 that rejected an application for withdrawal of offer.

However, the Supreme Court dropped contempt proceedings on the condition that DVI would not set-up plea for force majeure in NCLAT proceedings. Last September, DVI had invoked force majeure in view of the Covid-19 pandemic and its adverse impact on the business of Amtek.