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IBC Section 74: Amtek Auto – Banks move NCLT against Liberty House

Delhi-based Amtek Auto’s insolvency resolution process was initiated by Corporation Bank.

Lenders to the bankrupt Amtek Auto have approached the Chandigarh bench of National Company Law Tribunal (NCLT) seeking invocation of Section 74 of the Insolvency and Bankruptcy Code (IBC) against the UK-based Liberty House for its failure to comply with the approved resolution plan for the automotive component maker.

Liberty House had won the bid under the IBC process by offering to pay financial creditors  Rs 3,225 crore upfront and make a fresh infusion of Rs 500 crore into Amtek Auto for improving its operations. It, however, failed to fulfil its commitment.

Confirming the lenders’ move, Amtek Auto’s resolution professional Dinkar Venkatasubramanian told FE that the matter is scheduled for hearing on admission by the tribunal on Friday.
Section 74 provides for stringent penalties for wilful non-implementation of approved resolution plan, including a jail term.

As FE reported earlier, while the government is cognizant of Section 74, it is also considering amending the law to bar such violators from participating in the IBC auction for stressed assets in future and change regulations to mandate that bidders have to deposit earnest money that can be forfeited in case of such violations.

Delhi-based Amtek Auto’s insolvency resolution process was initiated by Corporation Bank.

Amtek’s total dues to lenders at the time when the case was admitted by the NCLT was `12,603 crore. Liberty’s House bid was approved by the lenders on April 4, 2018, by a 94.2% vote.
According to Section 74 of IBC, if ‘any person’ bound by an approved resolution plan “knowingly and wilfully contravenes any of the terms of (such plan)… (she) shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both.”

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Source: Financial Express