Resolution of Amtek Auto may be delayed

The three-year CIRP (corporate insolvency resolution process) for Amtek Auto is likely to get delayed further because of a dispute over mortgaged property.

Resolution applicant Deccan Value Investors (DVI) moved the National Company Law Appellate Tribunal (NCLAT) late July against the National Company Law Tribunal (NCLT) order approving its plan. Vistra ITCL has filed a caveat and the appellate tribunal on Thursday allowed it to filed an application for seeking impleadment within one week. The matter has been next listed for September 14.

At the heart of the matter is a long-term lease for the ACE Complex land. Under DVI’S resolution plan, the execution of long-term lease for the complex in favour of Amtek Auto is one of the imperative/integral conditions for continuing business and growth of the company and non-fulfilment of this condition would lead to the inevitable termination of the resolution plan.

Amtek’s factories — five separate units that account for about 40 per cent capacity — are on this land.

The matter had come up during the NCLT hearing. Vistra ITCL (India), as security trustee of KKR India Financial Services and L&T Finance, had filed an interlocutory appli- cation before the NCLT against the resolution professional (RP) and the committee of creditors (COC) for the ACE Complex land, over which it has mortgage rights.

It had sought relief that the land — a secured property/mortgaged property — should be kept outside the CIRP as well as outside the confines of any resolution plan. However, the owner of the land, Gateway Impex, executed a lease deed in January. The NCLT order had not considered the validity of the lease agreement. The DVI plan got NCLT approval in July.

The RP filed for final approval with the NCLT in June. Around mid-june, DVI responded to the RP, asking it to discuss among other things, the status of conditions precedent. A few days later, DVI filed an application with the Supreme Court asking for an extension to discuss the terms with the COC and assess impact of Covid19. The application, however, was dismissed. DVI filed a rectification order subsequently.

A source close familiar with the matter said, “A bid for an IBC (Insolvency and Bankruptcy Code) asset must be commercially viable. That is

The matter has been next listed for September 14

why DVI sought and gained the agreement of the creditors to include certain commercial protections at the outset”.

“The reality is the plan cannot move forward if the commercial conditions have not been resolved by the COC. Ignoring contractual provisions would undermine foreign investor perceptions about the IBC, just as it was gaining recognition for being a credible bankruptcy framework,” the source added. Amtek Auto — one of the first 12 cases mandated for resolution by the RBI under IBC — has been dragging on for more than three years.