Wait for Amtek Auto resolution may get longer over mortgaged property

Bone of contention is long-term lease of ACE Complex Land. Resolution applicant has moved NCLAT, which is likely to start hearing on Thursday against NCLT order

The three-year CIRP (corporate insolvency resolution process) for Amtek Auto is likely to get delayed further over mortgaged property.

Resolution applicant Deccan Value Investors (DVI) has moved the National Company Law Appellate Tribunal (NCLAT), which is likely to start hearing on Thursday its plea against the National Company Law Tribunal (NCLT) order approving its plan. DVI had moved the appellate tribunal last month.

At the heart of the matter is a long-term lease of the ACE Complex Land. Under DVI’s resolution plan, the execution of long-term lease of the complex in favour of Amtek Auto is one of the imperative/integral conditions for continuing business and growth of the company, and non-fulfillment of this condition would lead to the inevitable termination of the resolution plan.

The matter had come up during the NCLT hearing. Vistra ITCL (India), as security trustee of KKR India Financial Services and L&T Finance Limited, had filed an interlocutory application before the NCLT against the resolution professional (RP) and the committee of creditors (CoC) for the ACE Complex land, over which it has mortgage rights.

It had sought relief that the land -– a secured property/mortgaged property -– should be kept outside the CIRP of the corporate debtor as well as outside the confines of any resolution plan.

However, the owner of the land, Gateway Impex, executed a lease deed in January. The NCLT order had not considered the validity of the lease agreement. The DVI plan got NCLT approval in July. 

The RP filed for final approval with the NCLT in June. Around mid-June, DVI responded to the RP, asking it to discuss among other things, the status of conditions precedent. A few days later, DVI filed an application with the Supreme Court asking for an extension for time to discuss the terms with the CoC and assess impact of Covid-19. The application however was dismissed. DVI has filed a rectification order subsequently.

A source close familiar with the matter said, “A bid for an IBC asset must be commercially viable. That is why DVI sought and gained the agreement of the creditors to include certain commercial protections at the outset.”

“The reality is the plan cannot move forward if the commercial conditions have not been resolved by the CoC. Ignoring contractual provisions would undermine foreign investor perceptions about the IBC, just as it was gaining recognition for being a credible bankruptcy framework,” the source added.

Amtek Auto – one of the first 12 cases mandated for resolution by the RBI under IBC – has been dragging for more than three years. The CIRP for the company was started afresh after non-implementation of Liberty House plan. Apart from LHG, DVI was the other bidder.

Four plans were submitted in the second round and DVI was finally selected as the H1 bidder. 

The DVI bid is understood to be Rs 2,700 crore of which Rs 500 crore is the cash component; the balance Rs 2,200 crore would be paid from future cash flows. The plan secured 70.07 per cent votes of lenders. Amtek’s borrowings are at Rs 12,500 crore.

Timeline

July 24, 2017: NCLT admits Amtek Auto

August 16, 2019: NCLAT orders liquidation after non-implementation of Liberty House plan

December 2, 2019: SC directs RP to invite fresh bids

January 17, 2020: CoC approves DVI plan

July 9, 2020: NCLT approves DVI plan