The jinxed over-three-year-old insolvency proceedings against Amtek Auto seems to be headed for liquidation for the second time as the successful bidder, Deccan Value Investors, triggering the force majeure clause in its resolution plan, has expressed its inability to close the deal.

Citing the deteriorating prospects of the automobile sector on the back of the pandemic outbreak, US-based investment fund Deccan Value said it would not be able to execute its ₹2,700-crore resolution plan even though the upfront cash component in the whole process is just ₹500 crore while the rest is to be recovered from sales of surplus land and other non-core assets.

Divyanshu Pandey, Partner at J Sagar Associates, said if the court upholds Deccan’s position to revoke its resolution plan, then liquidation appears to be the most likely outcome.

Given that the timelines under the Insolvency and Bankruptcy Code (IBC) for the Amtek resolution have already been extended, the possibility of another extension to explore other resolution plans appears remote, he added.

However, Pandey said, the key issue which needs to be examined is how force majeure is worded in the resolution plan and how the courts will interpret it.

Last year, the National Company Law Appellate Tribunal (NCLAT) had ordered the liquidation of Amtek after Liberty House refused to execute its resolution plan as it found discrepancies in the disclosure statement. However, it was stopped by the Supreme Court and another round of bidding was ordered.

Following this, Amtek’s Committee of Creditors (CoC) in January approved Deccan Value's resolution plan with the force majeure option for the first time ever, and the NCLT approved it in July.

Legal views

Daizy Chawla, Senior Partner, Singh & Associates, said if a resolution plan is considered as a contract between the resolution applicant and the CoC, then force majeure can be invoked. However, in general parlance, force majeure cannot be termed as the end of a contract or an option for the resolution applicant to terminate the contract. It only reflects incapability to execute the deal during such period when the force majeure event continues, she said.

The chances of rebidding look bleak as the Supreme Court had already once stayed the order of liquidation passed against Amtek Auto (when Liberty House failed to act upon its plan), said Chawla.

More interestingly, Deccan Value recently moved the NCLAT, claiming that a part of the Amtek Auto factory land was mortgaged with private equity company KKR. It contended that the mortgage could create problems in future and would impede the resolution plan. The NCLAT is expected to start hearing in the case soon.

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