Three year old insolvency proceeding of Auto Amtek may now move into liquidation due to winning bidder invokes “force Majeure” clause of its Resolution plan. Amtek’s Committee of Creditors (CoC) in January approved Deccan Value's resolution plan with the force majeure option for the first time ever, and the NCLT approved it in July 2020.
Deccan value, a US based Investment fund, who was the winning bidder invoked Force majeure clause in the resolution plan, depicting the deteriorating prospects of automobile sector due pandemic and that it will not be able to execute Rs. 2700 crore resolution plan even though the upfront cash component in the whole process is just Rs 500 crore while the rest is to be recovered from sales of surplus land and other non-core assets. The prospects of growth and sales that it could foresee are now nowhere close to the economic conditions and hence, being able to invest such amount in Amtek would certainly be difficult. This whole topsy turvy situation happened due to the pandemic which is a force majeure situation.
This claim, if upheld by the adjudicating authority shall lead Amtek to liquidator, since there does not seem to be any other route left and also the timelines have already been extended and its quite difficult to get further extension. Chances of rebidding is also very less and no other resolution plan can come looking at this whole situation.
The legal views are that If a resolution plan is considered as a contract between the resolution applicant and the CoC, then force majeure can be invoked. However, in general parlance, force majeure cannot be termed as the end of a contract or an option for the resolution applicant to terminate the contract. It only reflects incapability to execute the deal during such period when the force majeure event continues.
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