Amtek Auto Ltd. Restarts Insolvency Proceedings- Did Liberty House escape the Liability?

IBC encompasses the provision of an early insolvency process, the process for insolvency of a company which can be initiated at the time when an alarm is raised as to the default in repayment of loans by the Company. The provision is a boon to the creditors as they can claim for a resolution for payment of their debts well in advance instead of waiting for the news of liquidation of the company

The capital strategy for most of the big firms is Debt-Capital. These companies in a lot of cases turn out to have their liability side of the Balance Sheet overburdened with the creditors which leads to a scenario where the payment of principal amount and interest to the creditors is at stake. Amtek is one such company which has been in news for its early insolvency process on account of a default of payment to its creditors. Amtek Auto was one of 12 major companies that the Reserve Bank of India identified in June 2017 for bankruptcy. It was brought to Bankruptcy Court in July 2017 by State Corporation Bank. The company owes its financial creditors about 12,600 rupees. It also owes its operational creditors around Rs. 206 crores.

The Insolvency Timeline

Amtek group has a number of subsidiary companies; one of them is Amtek Auto which defaulted on bond repayments of close to Rs 800 Cr. in September 2015. Since then Amtek has been trying to sell various group businesses to reduce the debt in its books.

In 2017, an application was filed at NCLT for early insolvency process in respect of Amtek Auto on default of payment of INR 12,300 Cr. . Its unit, Amtek Global Technologies Pvt. Ltd, agreed to sell its plants in the UK to Liberty House group, the firm said in a filing to the stock exchanges on Friday.

In 2018, Amtek Auto Ltd became the first among the 12 large insolvency cases referred to the National Company Law Tribunal to get finalized, as the UK-based industrial conglomerate Liberty House emerged as the preferred bidder to acquire the debt-laden auto components firm.

NCLT Chandigarh approved UK based Liberty House’s resolution plan whereby Liberty House took up the responsibility to pay Rs 3,225 Cr. upfront to the financial creditors and proposed to infuse Rs 500 Cr. for stabilizing and improving operations. The resolution plan submitted by Liberty House Pvt. Ltd was duly approved by the Tribunal vide order dated 25th July 2018

The order was followed by a default in payment by the Liberty House in furtherance of which the Committee of creditors sought to invoke section 74[1] and 60(5) of the Insolvency and Bankruptcy Code, 2016 in accordance with the resolution plan and contended that there is a lack of bonafide intent on the part of the company to execute the terms of the resolution passed by the adjudicating authority.

The Liberty House to justify such default came up with frivolous arguments. NCLT declined to entertain the application by the Liberty House contending that the difference between the book value and the liquidation value of Amtek Auto Ltd. is immoderate and the issue came in light for them only after the resolution was passed.

The committee of creditors refuted the allegations and stated that such Company bidding the highest to pay off the debt of Amtek Auto should itself have gotten the assets evaluated before undertaking the resolution

“Liberty House, the lenders have alleged, is seeking to “manipulate the statutory mandate of the code and reintroduce the mischief into the insolvency regime of the country which the code has sought to eradicate”. The committee of creditors also plans to file a civil suit before the appropriate court for seeking damages from Liberty House as the company had failed to comply with the terms within the stipulated time.”[2]

The beginning of this year witnessed the Liberty House being questioned as tot he compliance of the resolution by the National Company Appellate Tribunal and the Creditors of Committee were asked if they had any higher bid than the Liberty House as an option.

The scenario was followed by an application being filed by the financial creditors of the Corporate debtor with NCLT, Chandigarh claiming that the corporate debtor has failed to honor its commitment to comply with the requirements for the implementation of the approved plan and expressed its inability to comply with the commitment on one pretext or other.

The court held that there was clear default in implementing the Plan within the time stipulated in the Resolution Plan and the application was allowed in their favor.

The highlight of the year in respect to Amtek is that the lenders of Amtek Auto asked for the restart of insolvency proceedings following the act of default in payment by the lone bidder- Liberty House and the application was approved by NCLT, Chandigarh

The current situation is that the Amtek Auto Ltd. after almost two years of its first insolvency proceedings has started a fresh bidding process this month and gave out time till 28th, 2019 to the prospective bidders to come up with their resolution plans.

What happened to Liberty House?

Now, that Amtek Auto has been allowed by the court to restart the insolvency proceedings, does the liability of Liberty House end?

Well, the news has it that IBBI i.e. The Insolvency and Bankruptcy Board of India is seeking action against the Liberty house by moving to the Bankruptcy court for default in payment for Amtek Auto.

As mentioned above, the lenders filed an application for invoking Section 74 of the Code against the Liberty House and thus, the board moved to the Court against Liberty House under Section 74.

This is not the only incident where the Liberty House failed to make the payment but also in case of stressed steel company Adhunik Metaliks. The action against Liberty House is justified as it could not manage to pay the debt of the firms it planned to take over and failed to comply with the resolution plans, the non-compliance of which is punishable.


IBBI is out there to get hold of all the frivolous bidders fiddling with the due process of law and to help quicken the recovery of banking funds locked in bad loans. This is an open warning to all the bidders in the market and the result of which will hopefully be Amtek Auto bagging a serious bidder and the financial creditors’ finally receiving their due.

Author: Vidushi Trehan, LL.M from Symbiosis Law School, Pune , Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at




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