Liberty House Group Ltd Vs State Bank of India [CS (COMM) 1246/2018 & No. 16056/2018 & 16060/2018] - Synopsis
Team SoOLEGAL 5 Dec 2020

The Delhi High Court, in the case Liberty House Group Ltd Vs State Bank of India [CS (COMM) 1246/2018 & No. 16056/2018 & 16060/2018], directed the Liberty House Group, headquartered in the United Kingdom, to pay Rs 50 lakh to State Bank of India within four weeks as a punishment for compelling the bank to take legal action against two insolvent subsidiaries of Amtek Auto Ltd. Liberty House has moved the High Court seeking to prohibit SBI from enclosing the offer bond assurances offered by the U.K.-based investor as it bids for Castex Technologies Ltd. and ARGL Ltd. In2017, both firms entered insolvency proceedings and in either case, the Creditors' Committee approved Liberty House as the winning bidder. The bidder, however, ultimately changed. According to the information available, Liberty House issued guarantees for tender bonds worth Rs 40 crore for Castex Technologies and Rs 10 crore for ARGL. They were released by Barclays Bank and Baroda Bank respectively. Once accepted as the winning bidder, the competent resolution professional of each organization asked Liberty House to also have performance bank guarantees of Rs 100 crore in the case of Castex Technologies and Rs 60 crore in the case of ARGL. The performance assurances had to be sent within 10 days of receipt by the bidder of the letter of intent from the CoCs, failing which its resolution proposal would be deemed non-responsive and the CoC would be able to rely on the bid bond guarantees offered earlier. Liberty House asked creditors to pay for the bid bond guarantees in respect of the sums due as performance guarantees and to open an escrow account for the remainder. However, the creditors opposed the plan and called for a full performance guarantee. Liberty House did not have efficient bank guarantees, so SBI, the lead lender for both Castex Technology and ARGL, invoked bid bond guarantees and obtained Rs 50 crore from Barclays Bank and Bank of Baroda. The Court also observed that the actions of Liberty House had resulted in a loss of time in an otherwise time-bound insolvency settlement process. This is expected to result in the liquidation of these two firms. It also pointed out that the litigation proceedings had triggered a three-month delay in payment to SBI after the bank had invoked the guarantees.


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