Supreme Court stays liquidation of debt-laden Amtek Auto on lenders' plea

NCLAT had cleared Amtek Auto liquidation after no appropriate resolution plans remained for the company

The Supreme Court on Friday stayed the liquidation of debt-laden Amtek Auto on a plea moved by lenders of the company, and issued notice to the Resolution Professional, seeking his response. The New Delhi based integrated component manufacturer was headed for liquidation following a judgment of the National Company Law Appellate Tribunal (NCLAT) on August 16.

As there remained no approved resolution plan for the company despite the passage of the statutory period of 270 days, the company must head for liquidation, the appellate tribunal had held in its judgment.  

"As we have noted that more than 270 days have been completed much earlier and no case is made out to exclude any period, we hold that the adjudicating authority has no other option but to pass order of liquidation,” a two-judge Bench, headed by Chairperson Justice S J Mukhopadhaya, had then said.

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 (CIRP) against the auto components maker 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 process rather than forcing Amtek Auto into liquidation on account of “fraud” committed by Liberty House.

The lenders and the RP had then moved an application seeking to bar Liberty House from applying for a fresh resolution plan and sought the NCLT’s directions to the Insolvency and Bankruptcy Board of India (IBBI) for initiating proceedings under Section 74(3) of the Insolvency and Bankruptcy Code.

Section 74(3) says 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.