There have been many instances in the past where winning bidders have failed to pay up for the stressed firms they proposed to acquire for various reasons, including the inability to raise money to fund such acquisitions. the most prominent one being that of UK-based Liberty House in the Amtek Auto case .
The Government is proposing to invoke a stringent provision in the Code, that provides for a jail term, to deal with such wilful defaulters among winning bidders. Delhi-based Amtek Auto’s insolvency resolution process was initiated on Corporation Bank’s plea. Amtek’s total dues to lenders at the time when the company was admitted by the Chandigarh bench of NCLT was `12,603 crore. Liberty’s House bid was approved by the lenders on April 4, 2018, by a 94.2% vote.NCLT on July 25 approved Liberty’s plan that sought to pay financial creditors Rs 3,225 crore upfront and make a fresh infusion of Rs. 500 crores into the company for improving operations. However, the UK-based firm could not make the promised upfront payment in time, the lenders last week decided to move the NCLT, seeking directions on the way forward
Srinivas FE Corporate Affairs has stated to the media that the government might look at including dishonoring of an NCLT-approved plan as one of the disqualification criteria under Section 29A (which bars wilful corporate defaulters from submitting bids under IBC process). “Regulations could be tweaked to include earnest money deposit as a certain percentage of bid value or liquidation value, which can be forfeited” if an approved resolution plan is not implemented by the bidder.
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