The Supreme Court has agreed to hear on Tuesday a plea moved by the Insolvency and Bankruptcy Board of India (IBBI) in which the insolvency regulator has sought go-ahead to initiate criminal proceedings against Liberty House Group for failing to go through with its resolution plan for Amtek Auto.
The apex court, while agreeing to hear the IBBI, said there would be no persecution of Liberty House group for now. The IBBI has approached the SC against the National Company Law Appellate Tribunal’s (NCLAT’s) order. The appellate tribunal had said the regulator needed permission from the National Company Law Tribunal (NCLT) to initiate proceedings against Liberty House and other such errant firms.
On September 6, the SC had, on a plea moved by the Amtek Auto lenders, stayed the firm’s liquidation. The New Delhi-based integrated component maker was headed for liquidation after the NCLAT judgment on August 16. The appellate tribunal, in its judgment, had cleared the way for liquidation of the firm, and said since there remained no approved resolution plan for the firm despite the passage of the statutory period of 270 days, Amtek Auto must be liquidated.
Amtek Auto has a debt of Rs 12,603 crore. The liquidation value of its assets was determined at Rs 4,119 crore. The NCLT had initiated the Corporate Insolvency Resolution Process against the firm on July 24, 2017. On July 25, 2018, the adjudicating authority approved Liberty House’s Rs 4,025-crore resolution plan, which included an upfront payment of Rs 3,225 crore and a fresh infusion of Rs 500 crore for stabilising and improving operations.
However, when the committee of creditors (CoC) and the Resolution Professional (RP) of Amtek Auto moved applications for the implementation of the resolution plan, Liberty House backtracked, citing “blatant discrepancies in the condition of machineries, valuations, and representations made in the information memorandum and valuation reports”.
Following this, the RP and the CoC had approached the NCLT with a plea to extend the CIRP period beyond 270 days and sought to restart the bidding process.
The lenders and the RP had sought more time to make another attempt for a fresh bidding rather than forcing Amtek Auto into liquidation on account of ‘fraud’ committed by Liberty House.
In their submission, the RP and the CoC had said there were seven parties, including the promoters of Amtek Auto, which had shown an interest in making bids, after Liberty House withdrew its offer. They had also sought the NCLT’s permission to consider the resolution plan submitted by Deccan Value Investors, which had submitted a bid but withdrawn it after a better plan submitted by Liberty House. All these pleas were, however, rejected by the tribunal.
Amtek Auto lenders had also 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 the NCLT, Chandigarh, the CoC had said there was “lack of bona fide” intent on part of the company to follow the terms of resolution plans approved by the adjudicating authority.
According to Section 74(3), 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 1 crore if they violate terms of the plan approved by the adjudicating authority.