The Supreme Court on Tuesday dropped the contempt proceedings initiated by lenders of bankrupt Amtek Auto against US-based hedge fund Deccan Value Investors (DVI) on the condition that it does not raise the force majeure clause before the National Company Appellate Law Tribunal (NCLAT). The NCLAT is hearing DVI’s appeal against approval granted to its bid for takeover of the auto parts maker.
The apex court also rejected DVI’s application for rectification, terming it to be “an attempt to renege from the resolution plan which it submitted and to resile from its obligations. This is a devious attempt which must be disallowed,” the court said.
Amtek Auto’s lender wanted DVI to be prosecuted for trying to wriggle out of its obligation to acquire the bankrupt auto parts maker after emerging as the successful resolution applicant. DVI’s Rs 12,700-crore bid was approved by NCLT, Chandigarh, on July 9, 2020. However, the US firm had challenged it in the NCLAT by invoking the force majeure clause during the pandemic, which had drastically altered the financial calculations that formed the basis for its previous offer. The hedge fund had said its commercial assumptions for the sick manufacturer had been rendered redundant due to the prevailing market conditions.
In 2019, UK-based Liberty House, which had been the successful bidder, had backed out citing technical reasons.
A bench led by Justice DY Chandrachud, while dismissing the contempt petition filed by the Committee of Creditors, held that “it is not expedient in the interest of justice to pursue the contempt proceedings, which stand dismissed” subject to the condition that DVI “shall not set up a plea for force majeure in the proceedings which are pending before the NCLAT in appeal against the order of the NCLT approving the resolution plan”.
“Undoubtedly, the conduct of DVI has not been bona fide … DVI attempted to resile from its obligations and a reading of its application which led to the passing of the order on June 18, 2020, will leave no doubt about the fact that DVI was not just seeking an extension of time but a re-negotiation of its resolution plan after its approval by the CoC. Then again … it continued to persist in raising the same pleas within and outside the proceedings before the NCLAT. The conduct of DVI is lacking in bona fides,” the bench said.
It asked the appellate tribunal to decide DVI’s appeal in a month’s time.
Amtek Auto, which owes Rs 12,800 crore to banks and others, featured on the first list of 12 companies referred by the RBI to initiate insolvency proceedings in 2017.
The ruling will also have an impact on other cases where bidders have invoked force majeure clauses to get rid of their previous commitments due to financial constraints imposed by the pandemic.