Lenders of insolvent Amtek Auto will look to invoke Section 74 under the Insolvency and Bankruptcy Code (IBC) to prosecute the London-based Liberty House if it defaults on its final payment due on November 22. The London-based group had won the race to acquire Amtek Auto for Rs 44 billion in July this year but failed to make any payments to the banks.
“The company has already missed the payment of 15 per cent of the total bid amount to an escrow account. We are not hopeful that it (Liberty) will be able to make its payment on November 22. If they fail, we will invoke Section 74 (3) of the IBC Act,” banking sources close to the development told Business Standard. Amtek Auto was sent for debt resolution under IBC in the first list of 12 companies identified by the Reserve Bank of India.
Under Section 74 of the IBC, if any such officer/ corporate knowingly or willfully contravenes the resolution plan, it shall be punishable with imprisonment for a term which shall not be less than three years, but may extend to five years or with fine which shall not be less than Rs 100,000, but may extend to Rs 300,000, or with both.
“The information is completely incorrect. With regard to escrow, our negotiations are very much on,” said a Liberty House source.
According to the resolution plan, it was expected to make an upfront payment to the banks - starting with 15 per cent of the bid amount. "By bidding for multiple assets, Liberty had emerged as the favourite of bankers. But now it looks like the bids were not backed by cash and have derailed the entire IBC process," said a source close to the development.
Liberty House had actively participated in bidding for debt-laden assets and managed to bag Adhunik Metaliks along with its Zion Steel unit. The company is also eyeing ABG Shipyard which is also part of National Company Law Tribunal (NCLT) list.
The company has also bid for Odisha-based Bhushan Power & Steel along with Tata Steel and Sajjan Jindal-led JSW Steel.
“They have also missed payment deadlines for Adhunik Metaliks. The lenders are currently mulling what step to take next,” banking sources explained.
Liberty House has been on an acquisition spree across the globe for a while now. Apart from India, Australia and the US, the company in the last few months has also made announcements with regard to its inorganic expansion plans in parts of Europe.
Liberty House has made these acquisitions via its parent, GFG Alliance and is also setting up an office in Mumbai after having appointed Mahendra Singh Mehta as its India head to oversee its Indian strategy.
GFG has spent roughly $2 billion on deals and capital expenditure in the past few years, a Financial Times report said. GFG entities typically arrange finance at the company level, through both conventional and more creative methods, for investment and day-to-day operations, said the report.
Among the more typical techniques are asset-backed lending facilities with banks such as ABN Amro; in effect, loans secured against tangible assets like machinery. Another is the management of “working capital” — money that a business has tied up in everyday items like stock or unpaid customer bills, also known as receivables, said the Financial Times report.