In August 2019, after a tortuous process of putting a set of stressed and non-performing assets through the bankruptcy process and failing, an insolvency appeals court reluctantly ordered the liquidation of Amtek Auto, With that one order, lenders said goodbye to close to ₹12,603 crore owed by the once thriving auto parts maker.
There was nothing wrong either with the process to sell Ametek or the London-based Liberty Group of Sanjiv Gupta bidding for the assets. The issue was that Messer Gupta and Company bid for Amtek Auto, Adhunik Metaliks Ltd AND ABG Shipyard Ltd and on each occasion reneged after having been declared the winner of the process. Later, the other companies too had to be liquidated.
It was as if Liberty was playing a macabre game of hide and seek; of seeing and then hiding and thereby making a mockery of the entire process. Furious lenders, including leading banks, were keen to sue Liberty House and have them barred from bidding for any distressed assets in the country under the Insolvency and Bankruptcy Code (IBC).
If that is one side of the story, the other side is reflected by the enormous success of the Arcelor Mittal-Nippon Steel acquisition of Essar Steel. Infact it was described as the biggest acquisition in 2020, a milestone that is celebrated on the Arcelor Mittal website: “ArcelorMittal and Nippon Steel’s joint venture, AM/ NS India, won the Deal of the Year Award from the S&P Platts 2020 Global Metals Awards for completing the $5.7 billion acquisition of Essar Steel India Limited last year, a fully integrated steel producer in India that entered insolvency in 2017.’’
As the Times of India later noted, ‘’the ESIL bankruptcy resolution process under the IBC stretched for more than two years. However, it also witnessed the fastest completion of a deal under IBC, exactly a month from SC approval on November 15, 2019. AM/NS India will combine the power of three – AM, Nippon Steel and ESIL’s existing brand equity and is thus tipped to emerge as a prized acquisition.’’
If the Arcelor Mittal—Nippon Steel succeeded it was largely the steely resolve of the then Supreme Court Judge, Justice Rohinton Nariman to implement the insolvency law in the right direction and prod the Government into course correction when required that saw the resolution happen. The Ruias (who owned Essar) had used every trick in the book including going to court to stop the deal, but ultimately failed. It is also to the credit of the Prime Minister and the Government that they kept away scrupulously from the process and let it play out naturally.
If these are two sides of the coin, there is a third side as well. The peculiar case of an aviation company reflects some of the other issues that confront the code. It involves the case of Pawan Hans ltd where the Government, after finalising the winning bid, had to put on hold the sale. It so happened that one of the entities that was part of the winning consortium was in the National Company Law Tribunal for being a defaulter.
That ruled it out from bidding for any assets and disqualified the consortium as well. The Pawan Hans sale has been dropped three times now. The present episode reflects poor due diligence and a lackadaisical attitude to the process by the bankruptcy professionals. And an embarrassment to the Government!
Overall, the Insolvency and Bankruptcy Code is a transformative law that has made Indian industry more responsible and transparent.
However, the process still takes far too long defeating the very purpose of the law. Moreover, too many speculators and gold-diggers continue to bid for assets. It’s a work in progress that will still take some time to mature.
(K.Srinivasan is Editor in Chief at Newsline Publishers and Editorial Director of Blitz India. He has over four decades of experience as a professional journalist)