The Cuttack bench of the National Company Law Tribunal (NCLT) on Monday ordered liquidation of the bankrupt Adhunik Metaliks (AML) after cancelling the resolution plan of UK-based Liberty House Group (LHG).
The order comes after the Sanjeev Gupta-led LHG failed to implement the plan submitted by it for AML under the corporate insolvency resolution process.
As Liberty House failed to make the upfront cash payment of `410 crore even within the extended timeline to acquire the debt-ridden steelmaker, the committee of creditors (CoC) filed an application before the Bench to cancel the resolution plan of LHG, stating that it had "committed breach".
In his submission before justice Madan B Gosavi of the NCLT Cuttack bench, Joy Saha, the counsel for CoC, appealed to revive the CIRP by excluding the period vested by LHG by not implementing the resolution plan as the group had not paid the required upfront cash payment to lenders within the stipulated deadline set by the National Company Law Appellate Tribunal (NCLAT).
The CoC's counsel also requested the bench to allow them to consider the resolution plan submitted earlier by the H2 bidder, Maharashtra Seamless.
There had been only two resolution applicants for the steel manufacturing company - Liberty House and Maharashtra Seamless of the DP Jindal Group. LHG was identified as the highest bidder (H1) by the creditors, while Maharashtra Seamless's plan was rejected as it had been offering less value than the liquidation value of the company.
During the hearing by the Cuttack bench, Liberty House counsel Arvind Kumar Gupta requested the Bench to give directions to CoC, monitoring and managing committees for the corporate debtor to cooperate with them in implementing the resolution plan as per the terms laid down in the plan. LHG's counsel contended that CoC and the monitoring committee did not issue in their favour offer letter of equity shares of AML. Unless such a letter was issued, it was difficult for the group to invest the funds as per the plan, the counsel added.
In his order, justice Gosavi observed: "It was obligatory on part of the Liberty House Group to make upfront cash payment within 30 days from the date of the order of NCLAT. They did not make it… It is now held that the Liberty House Group, the successful resolution applicant, committed the breach of the terms of resolution plan approved by the committee of creditors of the corporate debtor. It is nothing but contravention of terms of the resolution plan within meaning of Section 74 (3) of Insolvency and Bankruptcy Code, 2016."
On the issue of offer letter of equity shares, he said: "It is raised deliberately at a belated stage. They (LHG) could have raised this issue of offer letter earlier and not after almost one year after the approval of their resolution plan."
The Kolkata bench of NCLT had in July last year approved the resolution plan submitted by Liberty House, with lenders agreeing to take a haircut of around 92% and settling for `410 crore against their outstanding dues of `5,370 crore.
Lenders to Adhunik Metaliks are State Bank of India, Punjab National Bank, ICICI Bank, IFCI, Punjab & Sind Bank, UCO Bank, Allahabad Bank, Bank of Baroda, Corporation Bank and SREI Infrastructure Finance, among others.
Justice Gosavi also rejected CoC's appeal to allow it to consider the resolution plan submitted earlier by Maharashtra Seamless, the H2 bidder. "Their plan was rejected by CoC because they had offered the investment in the corporate debtor below the liquidation value. In such a situation, the authority cannot reset the clock back to day one. I cannot allow the CoC to restart the corporate insolvency resolution period afresh," he stated.
"I cancel their (LHG's) resolution plan and proceed to pass order of liquidation of corporate debtor as contemplated under Section 33 of Insolvency and Bankruptcy Code, 20L6," Justice Gosavi said. Sumit Binani, erstwhile resolution professional (RP) for AML, has been appointed the liquidator.
As there are still over 1,500 employees and workers at the steel company, the Bench directed the liquidator to liquidate/sale the company as a going concern as per Regulation 32 (f) of the Insolvency and Bankruptcy Board of India (Liquidation Process Regulation, 2016).
Earlier, LHG had also failed to meet the deadline for payment under CIRP within the stipulated time for Amtek Auto, prompting the Chandigarh bench of the NCLT to allow its lenders to go for a fresh round of bidding.
The Insolvency and Bankruptcy Board of India (IBBI) had also filed a criminal complaint against LHG for withdrawing after successfully bidding for Amtek Auto.