Case Note & Summary
The appeal arose from the corporate insolvency resolution process of Amtek Auto Limited, initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 on 24 July 2017. The Committee of Creditors, through Corporation Bank, challenged the order of the National Company Law Appellate Tribunal dated 16 August 2019, which had rejected the prayer for exclusion of time and effectively directed liquidation. The factual background involved two resolution applicants: Deccan Value Investor LP and Liberty House Group Private Limited. Liberty's plan was approved by the National Company Law Tribunal on 25 July 2018, but Liberty failed to implement it. The COC then sought to reinstate the resolution process, but the NCLT directed reconsideration of DVI's plan. DVI submitted a revised plan, which was approved by the COC with 70% majority. However, DVI attempted to withdraw, leading to contempt proceedings. The Supreme Court, by order dated 6 September 2019, stayed liquidation and permitted the resolution professional to invite fresh offers. The Court observed that the corporate debtor was financially viable and there was market interest. The Court excluded the time spent before the adjudicating authority and the Supreme Court for calculating the long stop date. DVI's attempt to withdraw was rejected, and the Court noted that DVI's conduct lacked bona fides but declined to invoke contempt jurisdiction, leaving the matter to be dealt with under law. The resolution plan submitted by DVI was eventually approved by the NCLT in July 2020. The Supreme Court dismissed DVI's rectification application and the contempt petition, directing that DVI shall not set up a force majeure plea in pending proceedings. The appeal was disposed of with directions to the NCLAT to hear DVI's appeal against the approval of the resolution plan expeditiously.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Default by Resolution Applicant - Sections 7, 60(5), 74(3) Insolvency and Bankruptcy Code, 2016 - The Committee of Creditors sought to reinstate the resolution process after Liberty House Group failed to act on the approved plan. The Supreme Court allowed fresh offers and excluded time spent in litigation to preserve the corporate debtor as a going concern and maximise asset value. Held that the primary aim of the Code is resolution, not liquidation, and failure of one applicant should not force liquidation (Paras 1-5). B) Insolvency Law - Exclusion of Time - Judicial Proceedings - Section 12 Insolvency and Bankruptcy Code, 2016 - The Court excluded the period during which proceedings were pending before the adjudicating authority and the Supreme Court for calculating the long stop date. Held that time consumed in bona fide litigation should not prejudice the resolution process (Para 5.1). C) Insolvency Law - Conduct of Resolution Applicant - Contempt - The Supreme Court dismissed DVI's attempt to withdraw from its approved resolution plan, observing that such conduct lacked bona fides and amounted to a devious attempt to renege. However, the Court declined to invoke contempt jurisdiction, leaving consequences to be determined under law (Paras 5.2-5.4).
Issue of Consideration
Whether the Committee of Creditors should be permitted to carry out a fresh resolution process after the successful resolution applicant failed to implement the approved resolution plan, and whether the time spent in litigation should be excluded from the corporate insolvency resolution process timeline.
Final Decision
The Supreme Court allowed the appeal, stayed liquidation, permitted the resolution professional to invite fresh offers, and excluded the time spent before the adjudicating authority and the Supreme Court for calculating the long stop date. The Court dismissed DVI's rectification application and contempt petition, directing that DVI shall not set up a force majeure plea. The NCLAT was directed to hear DVI's appeal against the approval of the resolution plan expeditiously.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 7
- Section 60(5)
- Section 74(3)
- Resolution Plan
- Committee of Creditors
- Corporate Insolvency Resolution Process
- Exclusion of Time
- Maximisation of Value
- Going Concern
