COMMITTEE OF CREDITORS OF AMTEK AUTO LIMITED THROUGH CORPORATION BANK versus DINKAR T. VENKATSUBRAMANIAN AND OTHERS on 1 December 2021

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 16.08.2019 passed by the National Company LawAppellate Tribunal, New Delhi (hereinafter referred to as the ‘AppellateBAuthority’) in Company Appeal (AT) (Insolvency) No. 219 of 2019, theCommittee of Creditors of Amtek Auto Limited through CorporationBank (hereinafter referred to as the ‘COC’) has preferred the presentappeal.

2. The present appeal, as such, has a chequered history.C

3. Pursuant to an application made under Section 7 of theInsolvency and Bankruptcy Code, 2016 (hereinafter referred to as the‘IBC’), the corporate insolvency resolution process was initiated againstAmtek Auto Limited – Corporate Debtor on 24.07.2017. A resolutionprofessional was appointed. An advertisement was published by theDresolution professional inviting prospective resolution applicants to submita Resolution Plan by 31.08.2017. The Resolution Plans submitted byrespondent No.3 herein – Deccan Value Investor LP (hereinafterreferred to as the ‘DVI’) and respondent no.2 herein – M/s LibertyHouse Group Private Limited (hereinafter referred to as the “Liberty”)Ewere considered by the COC. However, DVI withdrew its ResolutionPlan and therefore the revised plan of Liberty was considered andapproved by the COC on 2.4.2018. Subsequently, the Resolution Plansubmitted by Liberty came to be approved by the National CompanyLaw Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred toas the “Adjudicating Authority”) vide order dated 25.07.2018. However,Fthe successful resolution applicant – Liberty did not act as per theapproved Resolution Plan. Thereafter, number of proceedings wereinitiated against the successful resolution applicant – Liberty.

3.1 An application under Section 60(5) read with Section 74(3) ofthe IBC was filed by the COC/financial creditors before the AdjudicatingGAuthority informing that the successful resolution applicant – Libertyhas failed to act as per the approved Resolution Plan and it was prayedto reinstate the COC and the resolution professional to ensure that theCorporate Debtor remain as a going concern. Further prayer was madeto grant 90 days to the resolution professional to make another attempt H

for a fresh process rather than forcing the Corporate Debtor into liquidationon account of fraud committed by Liberty.

3.2 The Adjudicating Authority held that Liberty has defaulted inits obligation under the approved Resolution Plan and granted liberty tothe COC and the resolution professional to approach the appropriateauthority under the IBC for the determination of the wilful default. TheAdjudicating Authority did not accede to the request for carrying out afresh process by inviting the plans again but directed the reconstitutionof the COC for re-consideration of the Resolution Plan submitted byDVI. The Adjudicating Authority disposed of the said application/appealaccordingly.

3.3 Feeling aggrieved and dissatisfied with the order passed bythe adjudicating authority dated 13.02.2019, the COC filed an appealbefore the appellate authority – NCLAT. That thereafter, the resolutionprofessional invited fresh applications from prospective resolutionapplicants and called upon them to submit their resolution plans. Overand above two other resolution applicants, an interest was also receivedfrom DVI on 31.05.2019. However, the same was rejected and DVIwas declared as an ineligible resolution applicant. Against the saidrejection, DVI filed an appeal before the appellate authority. Vide orderdated 26.06.2019, the appellate authority held that in light of the earlierorder dated 20.05.2019 the COC was required to consider all resolutionplans subject to the pending appeal. The DVI submitted the revisedresolution plan. However subsequently, the appellate authority by theimpugned judgment and order disposed of the appeal filed by the COCand rejected the prayer for exclusion of time. Consequently, virtuallyordered the liquidation of the Corporate Debtor.

4. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 16.08.2019 passed by the appellate authority, the COChas preferred the present appeal contending inter alia that (a) theCorporate Debtor is financially viable entity and there is enough interestin the market for submission of a resolution plan for the Corporate Debtor;(b) Resolution of the financial affairs of a distressed company is primaryaim of the Code and a failure/infirmity on the part of a resolution applicantought not to undermine the primary mischief sought to be resolved; (c)Maximisation of the value of the assets of the Corporate Debtor isimbedded in the Code and even forms the part of its Preamble andtherefore, an opportunity ought to be granted to the Committee of A

B

C

D

E

F

G

H

ACreditors to make an attempt at resolution specially keeping in view theavailability of suitable resolution applicants in the market; and (d) Liberty,by its deliberate failure in implementing the Approved Resolution Plan,has defrauded the Adjudicating Authority, the Committee of Creditorsand all the stakeholders of the Corporate Debtor, hence, the periodextended in proceeding with the CIR Process with Liberty as a ResolutionBApplicant ought to be excluded to uphold the principles underlining theCode.5. By order dated 6.9.2019, while issuing notice in the presentappeal, this Court stayed the liquidation proceedings, until further orders.

C5.1 When the appeal was taken up for further hearing on24.09.2019, it was submitted on behalf of the COC that the resolutionprofessional may be permitted to invite the fresh offers within a periodof 21 days. This Court permitted the resolution professional to invitefresh offers within a period of 21 days. This Court further passed anorder that within two weeks thereafter, the COC shall take a final call inDthe matter and the decision of the COC and the offers received beplaced before this Court. DVI also submitted the fresh resolution planwhich was approved by the COC with 70% majority. By order dated8.6.2020, this Court relegated the matter of IA No. 48906/2020 filed bythe COC for appropriate directions/orders to the adjudicating authorityEto consider the same and pass appropriate orders, after hearing theparties. This Court also observed that the time spent before theadjudicating authority and before this Court be excluded for calculatinglong stop date. DVI tried to withdraw from resolution plan. The samecame to be specifically rejected by this Court vide order dated 18.06.2020.This Court further observed that in case the DVI indulges in such kindFof practice, it will be treated as contempt of this Court in view of thevarious orders passed by this Court at its instance.

5.2 That the resolution plan submitted by the DVI came to beapproved by the adjudicating authority – NCLT in the month of July,2020. Since the approved resolution plan submitted by the DVI was notGacted upon by the DVI, the COC filed Contempt Petition No. 524/2020before this Court. DVI also filed an application for rectification of theearlier order dated 18.06.2020 by which this Court rejected the prayerof the DVI for withdrawal of the offer and observed that in case theDVI indulges in such kind of practice, it will be treated as contempt ofHthis Court. Both the contempt petition filed by the COC as well as the application for rectification filed by the DVI were heard together. By adetailed order dated 23.02.2021, this Court dismissed the application forrectification filed by the DVI of the order of this Court dated 18.06.2020instituted by the DVI.

5.3 While rejecting the said application, this Court specificallyobserved that DVI’s application for rectification is an attempt to renegefrom the resolution plan which it submitted and to resile from itsobligations. It was further observed that this is a devious attempt whichmust be disallowed. Simultaneously, this Court also dismissed thecontempt petition. However, while dismissing the contempt petition, it isobserved in para 38 as under:

“38 The issue which needs to be addressed is whether recourseto the contempt jurisdiction is valid and whether it should beexercised in the facts of this case. Undoubtedly, as we have notedearlier, the conduct of DVI has not been bona fide. The extensionof time in the course of the judicial process before this Courtenures to the benefit of DVI as a resolution applicant whoseproposal was considered under the auspices of the directions ofthe Court. DVI attempted to resile from its obligations and a readingof its application which led to the passing of the order of thisCourt dated 18 June 2020 will leave no doubt about the fact thatDVI was not just seeking an extension of time but a re-negotiationof its resolution plan after its approval by the CoC. Then again,despite the order of this Court dated 18 June 2020 rejecting theattempt of DVI, it continued to persist in raising the same pleaswithin and outside the proceedings before the NCLAT. Theconduct of DVI is lacking in bona fides. The issue however iswhether this conduct in raising the untenable plea and in failing toadhere to its obligations under the resolution plan can per se beregarded as a contempt of the order of this Court dated 18 June2020. DVI was undoubtedly placed on notice of the order thatshould it proceed in such terms, it would invite the invocation ofthe contempt jurisdiction. Having said that, it is evident that theorder of this Court dated 18 June 2020 rejected the IA moved byDVI and as a necessary consequence, the basis on which thereliefs in the IA were sought. Therefore correctly, it has beennow stated on behalf of the DVI that it will not set-up a plea offorce majeure in view of the dismissal of its IA on 18 June 2020.

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

A29 However lacking in bona fides the conduct of DVI was, wemust be circumspect about invoking the contempt jurisdiction assetting up an untenable plea should not in and by itself invite thepenal consequences which emanate from the exercise of thecontempt jurisdiction. Likewise, the default of DVI in fulfilling theterms of the resolution plan may invite consequences as envisagedBin law. On the balance, we are of the considered view that itwould not be appropriate to exercise the contempt jurisdiction ofthis Court. During the course of the hearing, Dr Abhishek ManuSinghvi, learned Senior Counsel has relied on the affidavit filed inresponse to the contempt petition while seeking to urge that DVICwill be within in its rights to urge whether the conditions precedentto the enforcement of the resolution plan have been fulfilled. SinceDVI is in appeal before the NCLAT, we express no opinion onthe merits of the submission. The NCLAT will take a view on thetenability and merits of the submission of DVI that the conditionsprecedent under the resolution plan have not been fulfilled afterDhearing the parties. This is not an issue which arises before theCourt in the present proceedings either upon the application forrectification moved by DVI or the contempt petition moved bythe CoC.”

5.4 While dismissing the application for rectification and disposingEof the contempt proceedings, this Court ultimately concluded and directedas under:

“39 For the above reasons, our conclusions and directions arethat:

F(i)There is no merit in the application for rectification movedby DVI. IA No. 58156 of 2020 in Civil Appeal No 6707 of2020 shall stand dismissed;

(ii) It is not expedient in the interest of justice to pursue thecontempt proceedings. The Contempt Petition (C) No. 524Gof 2020 in Civil Appeal No. 6707 of 2019 shall accordinglystand dismissed, subject to (iii) below;

(iii) In terms of the submission which has been made by DVIbefore this Court and even otherwise, as a consequence ofthe dismissal of its IA on 18 June 2020, it 30 shall not set-upa plea for force majeure in the proceedings which areH

pending before the NCLAT in appeal against the order ofthe NCLT approving the resolution plan; and

(iv) The appeal filed by DVI against the approval of theresolution plan by the NCLT shall peremptorily be heardand disposed of by the NCLAT not later than within a periodof one month from the date of the present judgment.”

This Court also directed that the appeal filed by the DVI againstthe approval of the resolution plan shall peremptorily be heard anddisposed of by the appellate authority within a period of one month fromthe date of the said judgment.

5.5 That thereafter, by a detailed judgment and order dated16.04.2021, the appellate authority dismissed the appeal preferred bythe DVI which was filed against the order passed by the adjudicatingauthority dated 9.7.2020 approving the resolution plan submitted by theDVI itself. Thus thereafter, the Resolution Plan submitted by thesuccessful resolution applicant – DVI was to be implemented and actedupon by the DVI. However subsequently when the present appeal wastaken up for further hearing, it was pointed out that the DVI – successfulresolution applicant is not acting as per the approved resolution plan.However, it was pointed out that the implementation of the successfulresolution plan has been commenced. Therefore, this Court directed theparties to submit the status report on implementation of the approvedresolution plan submitted by DVI.

6. Status Report filed by DVI – successful resolution applicantwas produced before this Court on 23.11.2021, when this Court passedthe following order:

“We have heard Shri Tushar Mehta, learned Solicitor Generalappearing on behalf of the Appellant, Ms. Shikha Tandon, learnedcounsel appearing on behalf of the DVI/successful resolutionapplicant and Shri Sanjay Bhatt, learned counsel appearing onbehalf of the Resolution Professional.

It is not in dispute that the Resolution Plan submitted by the DVIhas been approved by the NCLAT as far as back in July, 2020.Earlier, the attempts were made to resile from the Resolution planwhich has not been accepted by this Court by detailed orders.Thereafter, the matter has been adjourned time and again so as to A

B

C

D

E

F

G

H

Aenable the DVI to act as per the Resolution Plan. Today, a statusreport has been filed on behalf of the respondent no.3 – DVI.

In paragraph 2, it is stated as under –

“At the outset, it is submitted that DVI has been committedtowards implementation of DVI’s Resolution Plan and has beentaking active steps towards its implementation. In furtheranceof the same, DVI and/ or its affiliate (“DVI Affiliate”) hasalready remitted amounts aggregating to INR 500 Crore, i.e.,the upfront infusion amount (“Upfront Cash Amounts”) underDVI’s Resolution Plan to the Indian branch of StandardChartered Bank (DVI Affiliate’s custodian bank) for settlementof debt under DVI’s Resolution Plan. DVI is currently awaitingdetails of Amtek’s designated accounts in which such UpfrontCash Amounts are to be remitted on the closing date, as maybe agreed to between the members of the IMC forimplementation of DVI’s Resolution Plan. It is further statedthat DVI undertakes to disburse this money in accordance withthe terms of DVI’s Resolution Plan, as and when such closingdate is achieved.”

B

C

D

Under the Resolution Plan, the following steps are to beundertaken–

E

“a) Delisting of Amtek’s equity share capital from the stockexchanges – Completed.

b) Increase of authorised share capital of Amtek and completionof necessary filings – Completed.

F

c) DVI and/or its affiliate to subscribe to the equity shares ofAmtek by infusing nominal amounts of INR 5,00,000 (“NominalInfusion”) - Ongoing.

d) Debt identified as unsustainable to be converted into equityand equity to be issued and allotted to the creditors(“Unsustainable Equity Allotment”) - Ongoing.

G

e) Reduction in pre-CIRP sharesholding of Amtek and equityheld by way of Unsustainable Equity Allotment – This actionis pending and can be undertaken only upon Nominal Infusionand Unsustainable Equity Allotment.

H

f) Issuance and allotment of 90% of equity share capital toDVI and/or its affiliates – Ongoing.

g) Issuance and allotment of 10% of equity share capital tofinancial creditors – Ongoing.

h) Issuance and allotment of non-convertible debentures toDVI Affiliate – Ongoing DVI vide its emails dated 18.11.2021had informed the IMC members that:

(a) Upfront Cash Amounts have currently been remitted byDVI Affiliate to the Indian branch of the DVI Affiliate’scustodian bank for settlement of debt under the ResolutionPlan; and (b) details of the designated accounts in which such amountsare to be deposited have not been provided to DVI.”

One of the steps to be undertaken by the DVI is to deposit Rs.500crores “Upfront Cash Amounts”. As per the communication dated18.11.2021 addressed by DVI a sum of Rs.500 crores is lying in adeposit account in India with their custodian Standard CharteredBank and the money is ready for disbursement to lenders. Thesubmission on behalf of the DVI is that unless and until the othersteps are undertaken as per the Resolution Plan, the aforesaidamount of Rs.500 crores may not be transferred to Amtek AutoLimited. The aforesaid is just contrary to their own communicationdated 18.11.2021. Therefore, when even according to the DVI asum of Rs.500 cores is lying in a deposit account in India withtheir custodian and even as per the said communication the moneyis ready for disbursement to lenders, we direct that the aforesaidamount of Rs.500 crores to be transferred to the Bank Accountof Amtek Auto Limited by 24.11.2021, the particulars of the BankAccount are as under –

Bank Name – State Bank of India A/c No. - 32985171467IFSC - SBIN0004109 Beneficiary – Amtek Auto Limited Branch- 12th Floor, STC Building, 1, Tolstoy Marg, Jawahar VyaparBhawan, New Delhi Put up on 25.11.2021.”

7. Today, when the present appeal is taken up for further hearing,Shri Tushar Mehta, learned Solicitor General of India appearing on behalf A

BC

DE

F

G

H

Aof the COC has submitted that an amount of Rs. 500 crores aretransferred to the bank account of the Corporate Debtor – Amtek AutoLimited. It is to be noted that even in the status report the DVI hasstated that DVI has been committed towards its approved resolutionplan and has been taking active steps towards its implementation.B8. Under the approved resolution plan, both the parties have tofulfil their obligations. The Corporate Debtor has also to perform itsobligations simultaneously so that the amount of Rs.500 crores betransferred to the financial creditors/lenders of the Corporate Debtor. Itis the case on behalf of the respective parties that the aforesaid obligationsare to be performed mutually and simultaneously. It is reported thatCImplementation and Monitoring Committee (IMC) has been constitutedcomprising of resolution professional, three identified lenders of theCorporate Debtor and nominee of DVI to supervise the implementationof the resolution plan.

9. The approved resolution plan has to be implemented at theDearliest and that is the mandate under the IBC. As per Section 12 of theIBC, subject to sub-section (2), the corporate insolvency resolutionprocess shall be completed within a period of 180 days from the date ofadmission of the application to initiate such process, which can beextended by a further period of 180 days. As per proviso to Section 12Eof the IBC, which has been inserted by Act 26 of 2019, the insolvencyresolution process shall mandatorily be completed within a period of 330days from the insolvency commencement date, including any extensionof the period of corporate insolvency resolution process granted underSection 12 of the IBC and the time taken in legal proceedings in relationto such resolution process of the Corporate Debtor. As per the thirdFproviso to Section 12 of the IBC, which is also inserted by Act 26 of2019, where the insolvency resolution process of a Corporate Debtor ispending and has not been completed within a period stated hereinabove,i.e., within a period of 330 days, such resolution process shall be completedwithin a period of 90 days from the date of commencement of the IBCGamendment Act, 2019, i.e., 16.08.2019.

10. Thus, the entire resolution process has to be completed withinthe period stipulated under Section 12 of the IBC and any deviationwould defeat the object and purpose of providing such time limit. However,by earlier order, the time limit has been condoned in view of the variousHlitigations pending between the parties and in the peculiar facts and circumstances of the case. Therefore, any further delay in implementationof the approved resolution plan submitted by DVI which as such hasbeen approved by the adjudicating authority in the month of July, 2020and even the appeal against the same has been dismissed subsequently,any further delay would defeat the very object and purpose of providingspecific time limit for completion of the insolvency resolution process, asmandated under Section 12 of the IBC. Therefore, we direct all theconcerned parties to the approved resolution plan and/or connected withimplementation of the approved resolution plan including IMC to completethe implementation of the approved resolution plan, within a period offour weeks from today, without fail. It is further directed and it goeswithout saying that on implementation of the approved resolution planand even as per the approved resolution plan, an amount of Rs. 500crores now deposited by DVI-successful resolution applicant betransferred to the respective lenders/financial creditors as per theapproved resolution plan and/or as mutually agreed. Any lapse on thepart of any of the parties in implementing the approved resolution planwith the time stipulated hereinabove shall be viewed very seriously.

11. With the above observations and directions, the present appealstands disposed of. Pending applications, if any, also stand disposed of.

Ankit Gyan

Appeal disposed of.

A

BC

D

E

F

G

H