The Supreme Court has refused to initiate contempt proceedings against US-based hedge fund Deccan Value Investors (DVI) for trying to renege on its bid to acquire the bankrupt Amtek Auto Limited. However, the court made it clear that this order will remain subject to DVI not raising "force majeure" clause while challenging the approval granted to its bid.
The court noted there was no need for a contempt case as DVI had already been disallowed from withdrawing its offer on 18 June 2020, and asked NCLAT to decide the appeal filed by the US-based hedge fund in a month's time.
The top court held that lenders can't initiate contempt of court proceedings against the applicant if it doesn't claim before the NCLT that the pandemic had drastically altered the financial calculations that formed the basis for its previous offer. The court ruling took note of instances of various bidders invoking "force majeure" clauses to get rid of their previous commitments due to financial constraints imposed by the pandemic.
Petitions in the apex court filed by lenders of Amtek Auto wanted to prosecute DVI for trying to wriggle out of its obligation to acquire the bankrupt auto parts maker after emerging as the successful resolution applicant. On September 25 last year, the top court had issued a contempt notice to DVI for trying to avoid the takeover of Amtek Auto after its Rs. 2,700 crores bid was approved by NCLT.
DVI had invoked the force majeure clause in view of slump in industrial activity during the pandemic, claiming that their commercial assumptions for the auto parts maker had been rendered as redundant due to the prevailing market conditions.
With a resolution process dating back to 24 July 2017 when the Corporation Bank moved NCLT, Amtek Auto is one of the longest cases which is still awaiting resolution under the IBC. Owing over Rs. 12,800 crores to financial and operational creditors, Amtek Auto was identified among 12 large corporate defaulters by the RBI in June 2017.