The Supreme Court on Monday agreed to hear the Insolvency and Bankruptcy Board of India’s (IBBI) appeal to initiate criminal proceedings against UK-based Liberty House Group for backing out of the deal to take over debt-laden Amtek Auto.
A Bench led by Justice Arun Mishra, however, stayed the prosecution of Liberty House, which was selected as the highest bidder by the committee of creditors (CoC) of Amtek Auto, till further orders.
The apex court had on September 6 stayed the NCLAT decision that ordered liquidation of debt-ridden Amtek Auto, which was among the first list of the 12 companies that were referred by the RBI for initiation of insolvency process in 2017.
The UK-based firm had backed out of the deal citing some reasons, following which lenders requested 90 days more to find a new buyer.
Solicitor General Tushar Mehta and ASG Madhvi Divan, appearing for the IBBI, argued that the August 16 order of the National Company Law Appellate Tribunal (NCLAT) had rendered them powerless and taken away its and the government’s power to grant sanction before initiating trial under Section 236 of the IBC before a special court.
“The finding rendered will have a direct bearing on the implementation of the CIRPs and in turn will affect all resolutions,” the IBBI said, adding that the ruling will have huge ramifications on criminal trials initiated by the board and the government before the special courts.
However, senior counsel Mukul Rohtagi and counsel Mahesh Agarwal opposed the IBBI’s request to initiate criminal proceedings against the firm.
The NCLAT had in its August 16 order ruled that the NCLT has to satisfy itself first after giving an opportunity of being heard to the accused, request the government to investigate and then decide on such an opinion whether or not to refer the matter for trial.
Seeking setting aside of the NCLAT’s order, the IBBI said such power given to the NCLT was not provided under the Code.
According to the petition, the NCLAT has also attempted to relate Section 213 of the Companies Act, 2013 to the Code to hold that the NCLT can pass order under the Companies Act provision, which provides for a special procedure for investigation, after giving a reasonable opportunity to the person concerned who has contravened the law before any such order is passed.
“However, under the Code, there is no provision for investigation since the same is not required, and hence, there is no necessity to give an opportunity to the person who has contravened the provisions,” the IBBI stated, adding that there is no provision in the Code for conducting parallel proceedings before the NCLT and the special court constituted for the purpose under the 2103 law.
Earlier, the lenders led by Corporation Bank told the SC that the appellate tribunal had failed to uphold the tenets of IBC to resolve a financially-viable entity. It said Amtek Auto being a financially-viable entity was being pushed into liquidation merely on account of the fact that Liberty House had defaulted in implementing the resolution plan.
Hearing in both the cases will continue on Tuesday.
The CIRP of Amtek Auto was initiated on July 24, 2017 by the NCLT and lenders of the company had selected the resolution plans by two firms – Liberty House and Deccan Value, which later withdrew from the race. A revised plan of Liberty House was selected by the CoC on April 2, 2018 with 94.20% votes and the same was upheld by the NCLT on July 25,2018.
However, Liberty House backed out from the race and even refused to furnish the performance guarantee and other terms and conditions which were approved.
Source: Financial Express, September 24, 2019