Supreme Court: The Division Bench of M.R. Shah* and Sanjiv Khanna, JJ., directed to speed up the insolvency resolution process of Amtek Auto Ltd., one of the largest integrated automotive component manufacturers in India. Pointing at the long litigation delay, the Bench stated that any further delay would defeat the very object and purpose of providing specific time limit for completion of the insolvency resolution process, as mandated under Section 12 of the IBC.
Initiation of Insolvency Process
Pursuant to an application made under Section 7 of the Insolvency and Bankruptcy Code, 2016, the corporate insolvency resolution process was initiated against Amtek Auto Limited – Corporate Debtor. Accordingly, the resolution professional invited prospective resolution applicants to submit a Resolution Plan. The Resolution Plans submitted by Deccan Value Investor LP (DVI) and M/s Liberty House Group Private Limited (Liberty) were considered by the Committee of Creditors of Amtek (COC). However, DVI withdrew its Resolution Plan and therefore the revised plan of Liberty was considered.
DVI’s attempt to Renege
Subsequently, Liberty did not acted as per the approved plan and a prayer was made by the COC before the Adjudicating Authority to grant 90 days to the resolution professional to make another attempt for a fresh process. The Adjudicating Authority, though granted liberty to the COC and the resolution professional to approach the appropriate authority under the IBC for the determination of the wilful default by Liberty, it did not accede to the request for carrying out a fresh process by inviting the plans again but directed the reconstitution of the COC for re-consideration of the Resolution Plan submitted by DVI. The appeal of COC got rejected by NCLAT as well and the NCLAT virtually ordered the liquidation of the Corporate Debtor.
Noticeably, the liquidation proceeding was stayed by the Supreme Court’s interim order dated 06-09-2019. Similarly, the Court permitted the resolution professional to invite fresh offers within a period of 21 days. DVI also submitted the fresh resolution plan which was approved by the COC with 70% majority. Later on, DVI tried to withdraw from resolution plan, which was disallowed by the Court.
Since the approved resolution plan submitted by the DVI was not acted upon, the COC filed Contempt Petition before the Supreme Court. Similarly, DVI also filed an application for rectification of the earlier order dated 18-06-2020 by which the Supreme Court had rejected DVI’s prayer for withdrawal of the offer. The Supreme Court rejected both the application observing that DVI’s application for rectification was an attempt to renege from the resolution plan which it submitted and to resale from its obligations.
Grievances of the Parties
The appellant contended that was not acting as per the approved resolution plan. Under the Resolution Plan, the one of the steps to be undertaken by the DVI was to deposit Rs.500 crores “Upfront Cash Amounts” but the same was not done.
The submission on behalf of the DVI was that the said amount was lying in a deposit account in India with their custodian Standard Chartered Bank and was ready for disbursement to lenders but unless and until the other steps were undertaken as per the Resolution Plan, the aforesaid amount of Rs.500 crores would not be transferred to Amtek Auto Limited.
Findings and Decision
Considering that that contentions of the respective parties was that the obligations be performed mutually and simultaneously, the Bench held that the Corporate Debtor had also to perform its obligations simultaneously so that the amount of Rs.500 crores be transferred to the financial creditors/lenders of the Corporate Debtor.
The Bench reminded the parties that the approved resolution plan had to be implemented at the earliest and that is the mandate under the IBC. As per Section 12 of the IBC, subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application to initiate such process, which can be extended by a further period of 180 days.
Thus, the Bench stated that entire resolution process had to be completed within the period stipulated under Section 12 of the IBC and any deviation would defeat the object and purpose of providing such time limit. Therefore, the Bench directed the parties concerned to the approved resolution plan and/or connected with implementation of the approved resolution plan to complete the implementation of the plan within a period of four weeks, without fail.
[Committee of Creditors of Amtek Auto Ltd. v. Dinkar T. Venkatsubramanian, 2021 SCC OnLine SC 1151, decided on 01-12-2021]
Kamini Sharma, Editorial Assistant has put this report together
*Judgment by: Justice M. R. Shah
