The National Company Law Tribunal’s (NCLT) New Delhi bench has allowed a petition filed by the liquidator of Lotus Auto Engineering to sell the company as a going concern without its dissolution.
A similar plea was also filed by the successful bidder Deepak Industries that bought Lotus Auto through the e-auction process. The tribunal also allowed Deepak Industries’ plea.
Lotus Auto is a manufacturer of cast iron and cast iron components and has a manufacturing facility in Bhiwadi, Rajasthan. The company owes over Rs 550 crore to its lenders and Kolkata-based Deepak Industries has paid about Rs 38 crore to acquire the company in the auction.
The liquidator, in its application, sought the tribunal’s intervention to confirm the sale of the company as a going concern without its dissolution. Also, the application sought to direct the Registrar of the Companies (RoC) to reflect the company’s status to ‘active’ from ‘liquidation’.
The division bench of Justice Ramalingam Sudhakar and technical member Avinash Srivastava, while allowing the applications, directed the liquidator to provide all the support and assistance to the successful bidder of the company.
“This order has confirmed the issues faced by the successful bidders in the implementation of the decree,” said Ashish Pyasi, Associate Partner Dhir and Dhir Associates. “As the NCLT has granted the necessary reliefs for smooth transition and implementation, it is another positive move and provides comfort to the buyer and further reaffirmed the objective of the code to promote entrepreneurship.”
At the time of its insolvency resolution process, firms including listed auto component maker Sona BLW Precision Forgings, Alchemist ARC, Liberty House Group Pte., SSG Capital Management (Singapore) Pte. Ltd and Phoenix ARC among others had shown interest. However, the company was admitted for liquidation after lenders failed to receive any viable resolution plan.
Nipun Singhvi, founder of law firm NSA Legal, said this order is a welcome step as the sale of the company as a going concern has to be with benefits and concessions.
“The sale as going concern always gives more value to all stakeholders in contrast to piecemeal sale of assets,” said Singhvi. “Further, the NCLT has also waived interest for the delay which is a pragmatic approach and will help buyers to come forward.”
The company was admitted for insolvency resolution process on August 8, 2018, and later on June 12, 2020, the company was admitted for liquidation after lenders failed to receive any viable resolution proposal.
