The Delhi High Court, in an order on Friday, asked U.K.-based Liberty House Group to pay Rs 50 lakh to State Bank of India within four weeks, as penalty for forcing the bank to engage in legal proceedings with respect to two insolvent subsidiaries of Amtek Auto Ltd.
Double Whammy
Liberty House’s arguments didn’t succeed at the high court. The court upheld the invocation of the guarantees, admonished Liberty House for wasting time and fined it a total Rs 50 lakh for doing so.
...what emerges on going through all the documents is that the plaintiff, after submitting the resolution plans and after the same were approved by the CoC, has had second thought and/or was not in a position to furnish Performance Bank Guarantee and started making counteroffer, of conversion of Bid Bond Guarantee into Performance Bank Guarantee and opening of an escrow account for the balance amount of the PBG and which was not acceptable to the RP/CoC who, after giving sufficient latitude to the plaintiff have invoked the BGs.Delhi High Court Order
Agreeing with the argument SBI made—that the high court does not have jurisdiction in cases involving the Insolvency and Bankruptcy Code, 2016—the Delhi High Court noted that there was no proof that the invocation of the bank guarantees was a case of fraud and therefore, there was no civil dispute in the matter, where the court could intervene. It left it up to the National Company Law Tribunal to determine the use of the guarantee funds.
The court also noted that Liberty House’s actions had resulted in wastage of time in an otherwise time-bound insolvency resolution process. This could likely result in both these companies being liquidated. It also pointed out that this litigation has caused a three-month delay in payment to SBI after the bank invoked the guarantees..
“The loss caused by such conduct of the plaintiff is thus mammoth, having adverse consequences on all the creditors and shareholders of the said two companies and also on the economy of the country and to remedy which, the code was enacted,” said the high court.
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