DNA MONEY EXCLUSIVE: Lenders seek disqualification of Liberty House from NCLT

Bankers are seeking disqualification of London-headquartered Liberty House Group (LHG) from bidding for stressed assets after the Sanjeev Gupta-led outfit failed to pay the lenders subsequent to it being selected as the highest bidder for four ailing companies having a combined debt of Rs 44,314 crore.

As part of the broader strategy to disqualify Liberty House, about 98% of the lenders on Thursday rejected LHG's bid to take over the debt-laden ABG Shipyard at National Company Law Tribunal (NCLT).

LHG was to cough up Rs 12,515 crore for the acquisition of four NCLT companies -- ABG Shipyard, Amtek Auto, Adhunik Metaliks and Castex Technologies. All these companies now stare at a possible liquidation.

"Lenders have initiated the process of filing suit against Liberty House for damages. They are also approaching NCLT for disqualification of LHG for bids and permitting the restoration of CIRP (Corporate Insolvency Resolution Process) period," a senior banker told DNA Money.

LHG had offered to pay Rs 5,200 crore for the acquisition of ABG Shipyard, an Ahmedabad-based shipbuilding company. The offer for both Amtek Auto and Adhunik Metaliks stood at Rs 4,810 crore while for Castex Technologies, a subsidiary of Amtek Auto, LHG's bid amount was Rs 2,505 crore.

Lenders say they should be compensated by LHG for running the bidding process and for the subsequent delays.

The first such case was Amtek Auto, where the resolution plan submitted by LHG was approved by NCLT on July 25, 2018. After submitting the bid to acquire the distressed auto component maker, LHG approached the lenders for modification in the approved resolution plan. This proposal was rejected by lenders.

NCLT ordered the withdrawal of LHG's resolution plan for Amtek Auto subsidiary ARGL, calling its approach "casual" after it refused to pay a performance bank guarantee of Rs 100 crore.

However, LHG said in an email response to DNA Money that in one of the four cases (of Amtek and subsidiary companies), the resolution professional (RP) rushed and got NCLT approvals while they were in the process of negotiating various terms. "It was only after due diligence and full access, it was discovered that there were several issues and misrepresentations that impacted valuations significantly. Liberty approached the RP and CoC (committee of creditors) many times for an amicable resolution. Failing any conducive response, we have sought directions from the courts. The case will be heard on January 9, 2019. We are still keen to conclude the acquisition and our funding support remains intact, but we need the disputes on false representations and valuation addressed," it said.

Lenders say that LHG, the sole bidder for ABG Shipyard, has not been found eligible under Section 29 (A) of IBC. The bidder approached NCLT to direct CoC to consider them eligible. Lenders have twice rejected LHG's bid for ABG Shipyard owing to non-disclosure of Rs 18 crore it owed to Exim Bank. This was later paid by the company and thus ceased to be an impediment.

LHG has not responded to DNA Money's queries on ABG Shipyard's bidding.

In the case of Castex Technologies, LHG's resolution plan was approved by the lenders on August 30, 2018. However, the company was unable to submit a performance bank guarantee of Rs 100 crore. The State Bank of India then approached the Chandigarh bench of the NCLT on December 14 with a plea to withdraw the approved resolution plan submitted by the UK-based firm.

"The inability of LHG in submitting the performance bank guarantee (PBG) of Rs 100 crore casts doubts on its ability to implement the resolution plan, which contemplates total payment of Rs 2,505 crore," SBI said in its petition.

The two-member bench also directed LHG to submit its reply by January 9, 2019, and scheduled the matter for further hearing on January 11. On Friday, the matter was argued, but not admitted.

In the case of Adhunik Metaliks, LHG said NCLT heard both sides. LHG presented its full payment plan for Adhunik in a staggered manner. Its resolution plan says the Kolkata-based MSTC dues have been paid in full.

The state-owned MSTC has raised a claim, but LHG said in its response that the claim raised by MSTC is inter-creditor issue and that amount can be deposited in escrow pending MSTC settlement by the court.

LHG further stated that CoC wanted interim order to proceed on liquidation. NCLT did not give an interim order. NCLT has asked both sides to file replies and put the matter for hearing on January 3, 2019. Meanwhile, LHG said it has started providing financial assistance to over 1,000 employees of Adhunik Metaliks. The company added that it is committed to completing its payments for Adhunik Metaliks and reviving all the four companies for which it has put the bids.

EMPTY PROMISES?

• Liberty House has won four companies – ABG Shipyard, Amtek Auto, Adhunik Metaliks and Castex Technologies, but has not paid citing various reasons
   
• As part of the broader strategy to disqualify Liberty House, about 98% of the lenders of ABG Shipyard on Thursday rejected LHG's bid to take over debt-laden company