Bidders face jail term if they back out from insolvency process
NEW DELHI: The government and the Insolvency & Bankruptcy Board of India are looking at using provisions of the Insolvency & Bankruptcy Code (IBC) against Liberty House and other companies, which have gone back on their plans to take over companies through the resolution process and derailing the entire process.
Lenders were looking to invoke section 74 of the IBC against Liberty House earlier, which provides for a penalty and a possible jail term.
The issue has now moved to the government, with sources saying the plan could also include Adani Wilmar, which pulled out of a deal to buy Ruchi SoyaNSE 9.56 % after the committee of creditors backed it. Liberty House has backed off from the resolution process of Adhunik Metals and Amtek Auto, citing various issues. But the government and bidders, who kept them out of the ABG ShipyardNSE 2.50 % resolution plan, are not buying its arguments.
Apart from invoking section 74 of the IBC, the government is also looking for imposition of a maximum Rs 1 crore penalty.
Several key resolutions plans have been held up due to Liberty House’s reluctance to honour its commitment, said sources. The sudden burst of aggressive interest from the UK-based entity controlled by Sanjeev Gupta had come as a surprise for lenders of beleaguered companies and the government. But the interest from the company seems to have fizzled out in recent weeks.
In an interview to a TV channel last week, Gupta suggested that he was keen to see the Adhunik Metals transaction to go through but added that Liberty House was interested in clean assets with no claims. At the same time, the TV channel quoted him to say that he had concerns over resolution exercise of Amtek Auto, including the valuation report. Although Gupta said he was still interested in the company, which was a high-profile NPA for several large banks, he wanted the concerns to be addressed.
The government is keen to resolve glitches in the IBC implementation process and is seeking to fast-track cases to ensure that the maximum permissible time limit is adhered to. In fact, the ministry of corporate affairs has initiated talks with banks to find ways to decide cases at the earliest.