NCLAT orders liquidation of Amtek Auto; lenders blame Liberty House for withdrawal of winning bid

Lenders lost all hope of recovering the dues worth INR 12,603 crore owed by the once thriving auto parts maker Amtek Auto after the National Company Law Appellate Tribunal (NCLAT) had ordered liquidation of debt-ridden Amtek Auto on August 15. The tribunal court declined the lenders' request to extend the insolvency resolution process deadline. It was one of the largest integrated automotive component manufacturers in India with expertise in forging, grey and ductile iron casting, gravity and high-pressure aluminium die casting and assembling.

Amtek’s lenders are blaming Sanjeev Gupta, chairman of London-based metals company Liberty House, which backed out after placing a winning bid to acquire Amtek Auto in March 2019, leading to bankruptcy filing. The Insolvency and Bankruptcy Code (IBC) mandates completion of insolvency process within 180 days with an extension of 90 days, failing which liquidation has to be initiated against the corporate debtor. Lenders requested 90 days more time to find a new buyer and the request was declined.

Lenders claim that Liberty House follows a pattern of backing out after placing a winning bid.  It has done the same with ABG Shipyard and Adhunik Metaliks Ltd.

Lenders have since sued Liberty House and want the firm barred from bidding for distressed assets in India under the Insolvency and Bankruptcy Code (IBC).

In May, 2019, the Insolvency and Bankruptcy Board of India, charged Liberty House and its senior executives with wilfully breaching the terms of the Amtek Auto resolution plan. The court imposed a cost of ₹1 lakh on Liberty House for its casual approach to the resolution process, but allowed withdrawal.

One year back, Gupta, the London-based entrepreneur talked about his plan to make an investment of as much as $10 billion to India.

“I believe Liberty House found it difficult to raise the funds needed to follow through on their resolution commitments," said an investment banker, who advises several resolution applicants.  He also pointed towards the slowdown of Indian auto sector as a factor that influenced Liberty’s decision.

“With the massive slowdown in the automobile sector in India, auto component makers have been hit hard. It’s a bad time to put money into the business and easier to let the resolution plan lapse," he added.