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Committee of Creditors of Amtek Auto Limited (through Corporation Bank) v. Dinkar T. Venkatsubramanian & Ors.

Interlocutory Application · 2021 INSC 112Decided 23 Feb 2021
Interlocutory Application No. 58156 of 2020 and Contempt Petition (C) No. 524 of 2020, both in Civil Appeal No. 6707 of 2019
Dr. Justice D.Y. Chandrachud · Justice M.R. Shah

Background

Amtek Auto Limited went through corporate insolvency resolution under the IBC, and after an earlier resolution applicant (Liberty House Group) failed to honour its plan, Deccan Value Investors LP (DVI) was eventually declared the highest evaluated resolution applicant and its plan was approved by the Committee of Creditors (CoC) in February 2020. When the matter reached the NCLT for final approval, DVI, citing the financial impact of the COVID-19 pandemic, sought a two-month extension to re-examine and renegotiate the plan's terms rather than furnish the balance Rs. 150 crore performance bank guarantee, which the Supreme Court rejected by order dated 18 June 2020, warning that any further such conduct would be treated as contempt. After the NCLT nonetheless approved the plan, DVI failed to provide the guarantee or join the implementation committee, invoked a "force majeure" clause to terminate the plan, and appealed to the NCLAT, prompting the CoC to file a contempt petition, while DVI separately sought rectification of the 18 June order, claiming it rested on factual misconceptions.

Decision Breakdown

The Supreme Court dismissed DVI's rectification application, holding that regardless of the precise phrasing used in the 18 June 2020 order, the substance was correct: DVI's application had in effect sought to renege on its approved resolution plan, and DVI had been a clear beneficiary of the series of time extensions the Court had granted during the process. On the contempt petition, however, the Court held that while DVI's conduct, repeatedly pressing a force majeure plea even after its application was rejected, and failing to furnish the guarantee or join the implementation committee, clearly lacked bona fides, contempt jurisdiction must be exercised with circumspection and requires willful, unambiguous disobedience of a court order rather than merely raising an untenable legal plea or defaulting on contractual obligations (which can instead attract other legal consequences). The Court accordingly dismissed the contempt petition too, but on DVI's own submission directed that DVI shall not raise any force-majeure plea in its pending NCLAT appeal, and directed the NCLAT to dispose of that appeal within one month.

Lesson Learnt

Contempt of court is reserved for clear, willful defiance of a specific court order: a party's bad-faith conduct or default under a separate contractual/regulatory obligation (even one shaped by prior court directions) does not automatically amount to contempt if it is pursued through legitimate legal remedies like an appeal, though courts can still neutralise bad-faith defences (like an unsustainable force majeure plea) going forward.

Official source (sci.gov.in)View Judgment (PDF)

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