Will take action against firms such as Liberty House: NCLAT

NCLAT observations came during insolvency hearing of ARGL, a subsidiary of Amtek Group

The National Company Law Appellate Tribunal (NCLAT) on Tuesday came down hard on companies such as Liberty House Group, which successfully bid for debt-ridden firms under the corporate insolvency resolution process but later withdrew citing one reason or the other. “We will decide what action needs be taken against such companies,” said a two-member Bench led by Chairperson Justice S J Mukhopadhaya.

The observations by the NCLAT came during a plea moved in the insolvency resolution process of ARGL, which is a subsidiary of debt-ridden Amtek Group. Liberty House had emerged the highest bidder for ARGL, following which the resolution professional of the company sought a bank guarantee of Rs 50 crore. Liberty House, however, contented it would be economical and feasible for it to go ahead with the resolution process only if it was allowed to bid for all the three group companies of Amtek Group undergoing corporate insolvency. In its plea, Liberty House said it should be allowed to bid for these companies as they were interdependent on each other. The company also requested the NCLAT to transfer all the resolution process before one Bench of the National Company Law Tribunal (NCLT).

The Bench, however, declined both the requests of Liberty House and said the resolution processes of companies “cannot be conditional”. On February 5, the next date of hearing, the NCLAT said it would pass an order in this regard where companies file “frivolous” bids in the corporate insolvency resolution process and then fail to conclude it. During the last hearing on January 7, the NCLAT had asked Liberty House if it wanted to go ahead the resolution plan it had submitted for ARGL. It had then said the Committee of Creditors (CoC) and other creditors should not suffer for one reason or the other.

ARGL was referred to the NCLT in March last year after the company had defaulted on loans worth Rs 360 crore given to it by State Bank of India’s then sister banks such as State Bank of Mysore and State Bank of Hyderabad, among others.

ARGL is among the subsidiaries of Amtek Group, which have been referred to the corporate insolvency resolution process. The group’s flagship concern, Amtek Auto, was also referred to the NCLT in July last year after the company had defaulted on loans worth Rs 12,300 crore.

Liberty House, with a winning bid of Rs 4,200 crore, was declared the successful resolution applicant for this company as well. According to the terms of the plan, Sanjeev Gupta-led Liberty House had to pay Rs 3,310 crore upfront, along with fresh infusion of Rs 350 crore by November 22, which was within 90 days of the approval of the plan.

The company had, however, made no payments despite repeated requests from the resolution professional to do so, following which the CoC moved NCLT-Chandigarh seeking to invoke Section 74 of the Insolvency and Bankruptcy Act against the company. The CoC had also sought to bar Liberty House from bidding for any insolvent company as there was “lack of bona fide” intent on the part of the company to follow the terms of resolution plans approved by the adjudicating authority.