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    Amtek Auto lenders move SC claiming contempt by bidder

    Synopsis

    The order was pronounced in response to an application from DVI claiming that the pandemic had drastically altered the financial calculations that were the basis for its previous offer.

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    “DVI’s resolution plan states that any material impact on Amtek’s performance due to a pandemic would allow DVI to exercise force majeure,” DVI’s statement read.
    New Delhi: Amtek Auto’s lenders have moved the Supreme Court claiming contempt of court by Deccan Value Investors (DVI), after the latter cited the “force majeure” clause as a reason to reconsider its bid for the auto parts maker that is undergoing insolvency proceedings, people aware of the matter said.

    The lenders, led by Union Bank of India, have cited contempt of court because the apex court had in an earlier ruling rejected Deccan Value Investors’ plea for time to re-evaluate its offer. “The application made by the applicant for withdrawal of the offer is hereby rejected and in case he indulges in such kind of practice, it will be treated as contempt of this court in view of various orders passed by this court at his instance,” a June 18 order of the Supreme Court reads.

    The order was pronounced in response to an application from DVI claiming that the pandemic had drastically altered the financial calculations that were the basis for its previous offer.

    Force majeure is where unforeseeable circumstances prevent someone from fulfilling a contract, and is typically invoked during events such as natural disasters.

    In a response to ET’s queries, DVI said the pandemic had rendered its commercial assumptions for the company “redundant”.

    “DVI’s resolution plan states that any material impact on Amtek’s performance due to a pandemic would allow DVI to exercise force majeure,” DVI’s statement read.

    “In addition, DVI built into its resolution plan and contract certain condition precedents without which the deal could not proceed. One such CP related to an ongoing dispute between the creditors and leaseholders of a key plot of land on which Amtek’s manufacturing facilities stand. All of these matters will now be adjudicated by the courts. Deccan Value Investors is confident of its position and looks forward to a final outcome that upholds the sanctity of contract under the IBC,” the company said.

    The Supreme Court’s proceedings could have an impact on multiple insolvency cases where bidders have invoked force majeure clauses to nullify previously made commercial commitments, on the grounds that Covid-19 had affected their financial calculations.

    Most notably, bids for Essar Projects, Bhushan Power and Steel and Avantha group’s power projects have run into hurdles due to the pandemic.

    DVI’s bid for Amtek Auto has already been approved by the National Company Law Tribunal.

    The auto parts maker was among the first 12 accounts selected by the Reserve Bank of India for insolvency proceedings when the IBC legislation kicked-off.

    Amtek Auto’s insolvency has been a long-drawn event and a second round of bidding was carried out for the company after certain suitors in the first round reneged on their offers. DVI was selected in the second round of bidding that concluded in January this year.

    The auto parts maker owes banks around Rs 13,000 crore. DVI had also made an offer for Metalyst Forgings, an associate company of Amtek Auto.

    Auto parts makers have been lobbying for greater relief from the government for the purposes of restructuring their loans, claiming adverse effects from the pandemic.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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