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 situation that it does not raise the force majeure clause prior to 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 components 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 stated.
Amtek Auto’s lender wanted DVI to be prosecuted for attempting to wriggle out of its obligation to obtain the bankrupt auto components maker soon after emerging as the effective resolution applicant. DVI’s Rs 12,700-crore bid was authorized by NCLT, Chandigarh, on July 9, 2020. However, the US firm had challenged it in the NCLAT by invoking the force majeure clause for the duration of the pandemic, which had drastically altered the economic calculations that formed the basis for its preceding present. The hedge fund had stated its industrial assumptions for the sick manufacturer had been rendered redundant due to the prevailing market place circumstances.
In 2019, UK-based Liberty House, which had been the effective bidder, had backed out citing technical causes.
A bench led by Justice DY Chandrachud, although 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” topic to the situation 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 stated.
It asked the appellate tribunal to choose DVI’s appeal in a month’s time.
Amtek Auto, which owes Rs 12,800 crore to banks and other folks, featured on the initial list of 12 providers referred by the RBI to initiate insolvency proceedings in 2017.
The ruling will also have an influence on other instances exactly where bidders have invoked force majeure clauses to get rid of their preceding commitments due to economic constraints imposed by the pandemic.