The Committee of Creditors (CoC) of Amtek Auto have sought to bar Liberty House from bidding for any insolvent company. In their application seeking to invoke section 74 of Insolvency and Bankruptcy Act (IBC) against Liberty House in National Company Law Tribunal (NCLT), Chandigarh, CoC has said that there is “lack of bonafide” intent on part of the company to follow the terms of resolution plans approved by the adjudicating authority.
Section 74 (3) says that officials of successful resolution applicants can be imprisoned for a minimum of one year with a maximum tenure of five years, and fined a minimum of Rs 100,000 with the maximum penalty of up to Rs 10 million if they violate terms of the plan approved by the adjudicating authority under Section 31 of the IBC. Section 60 (5) deals with the jurisdiction of NLCT.
Amtek Auto was referred to NCLT in July last year, after the company defaulted on loans worth Rs 123 billion. Liberty House was declared the successful resolution applicant for the company in July this year, with a winning bid of Rs 42 billion. The company had, however, made no payments despite repeated requests from the Resolution Professional (RP) to do so, the lenders said.
Liberty House, the lenders have alleged, is seeking to “manipulate the statutory mandate of the code and reintroduce the mischiefs into the insolvency regime of the country which the code has sought to eradicate”. The committee of creditors also plan to file a civil suit before appropriate court for seeking damages from Liberty House as the company had failed to comply with the terms within the stipulated time.
According to the terms of the plan, Sanjeev Gupta-led Liberty House had to pay Rs 33.10 billion up-front, along with fresh infusion of Rs 3.5 billion by November 22, which was within 90 days of the approval of the plan. The London-based company had to furnish a performance guarantee of Rs 1 billion against the committed amount of Rs 44.04 billion, and create an escrow account which would have 15 per cent of the up-front cash pay-out mentioned in the plan.
Though Liberty House had on September 24 assured the RP of Amtek Auto that it would set up an escrow account with Rs 5 billion within “1-2 weeks”, it had not taken any action on that, the lenders said. The company also wanted to set up an escrow account with Greensill Capital UK and deposit the required amount in that, instead of the Citibank account suggested by the lenders. The request was, however, turned down by lenders since Greensill was not within the country’s jurisdiction and would leave the committee of creditors with no control over the amount.
What’s in the clause
Section 74 (3): Officials of successful resolution applicants can be imprisoned for a minimum of one year, a maximum of five years, and fined a minimum of Rs 100,000, with the maximum penalty of up to Rs 10 million if they violate terms of the plan approved by the adjudicating authority under Section 31 of the IBC