Failure party, bad reputation — what NCLAT ex-chief said about firm whose parent he now advises

During his tenure as the NCLAT chief, Justice Mukhopadhaya presided over several cases in which the Liberty House group was a bidder for insolvent companies.

Justice S.J. Mukhopadhaya, former chairman of the National Company Law Appellate Tribunal | Photo: nclat.nic.in

New Delhi: On 8 March 2019, UK-based Liberty House Group got a dressing down from the National Company Law Appellate Tribunal (NCLAT) in New Delhi.

A bench headed by Justice S.J. Mukhopadhaya, then chairperson of the NCLAT, told the group’s lawyers, “You are a failure party all the time, dragging your feet. You are in bad reputation. We would not allow you to take advantage of the appellate tribunal.”

The reason — Liberty House had withdrawn from the corporate insolvency resolution process for Amtek group company ARGL Limited, after being selected as the highest bidder during the process. It had approached the NCLAT, aggrieved by the Rs 1 lakh cost and certain adverse observations the National Company Law Tribunal (NCLT) had passed against it.

While the Justice Mukhopadhaya-led NCLAT bench refused to interfere with the NCLT’s remarks, it did clarify that the observations against Liberty should not be construed as findings against the company, or make it ineligible from participating in any other resolution process. The Rs 1 lakh cost was also converted to litigation costs to be paid to ARGL Limited.

Justice Mukhopadhaya retired from the NCLAT a year later — on 13 March 2020 — and has now been appointed on the global advisory board of the Gupta Family Group (GFG) Alliance, a collection of global businesses and investments owned by Sanjeev Gupta and his family.

The alliance announced Justice Mukhopadhaya’s appointment through a release on 13 October, saying the advisory board “will guide the company in delivering its strategic priorities and achieving best practice in Environment, Social and Governance, particularly towards its Carbon Neutral 2030 target”.

Liberty House is a part of the alliance; it is an industrial and metal company founded and wholly owned by Sanjeev Gupta. Other members of the alliance include ALVANCE Aluminium Group and SIMEC Energy Group — they are all independent of each other.

Other members of the GFG Alliance advisory board include Lord Lancaster of Kimbolton, UK Member of Parliament for 14 years; Carwyn Jones, former First Minister of Wales and Leader of the Welsh Labour Party; and Alexander Downer, former Australian High Commissioner to the UK and Australian Minister for Foreign Affairs. Justice Mukhopadhaya is the only Indian on the panel.

Mukhopadhaya has refused to comment on his appointment or on the past cases involving the Liberty House Group.

NCLAT cases involving Liberty House

The NCLT and the NCLAT were launched in 2016 as big-ticket initiatives to tackle bad debt in a quick manner. Under the Insolvency and Bankruptcy Code (IBC), NCLT is the single adjudicating authority for all corporate default cases. The NCLAT is responsible for hearing appeals on the orders of the NCLT.

Justice Mukhopadhaya retired as a Supreme Court judge on 14 March 2015 and was appointed as the first chairman of the NCLAT on 1 June 2016, and during his tenure, presided over several cases in which the Liberty House Group was a bidder for insolvent companies.

One such case before Justice Mukhopadhaya involved Amtek Auto, which was among the first list of the 12 companies that were referred by the Reserve Bank of India (RBI) in 2017 to banks for the initiation of insolvency process for defaults.

Liberty House Group was selected as the highest bidder by the committee of creditors of Amtek Auto. However, Liberty House Group later refused to implement the resolution plan, claiming that it had found serious irregularities in the information shared with it during the bidding process.

Amtek then approached the NCLAT, requesting 90 more days to find a new buyer. However, on 16 August last year, a bench headed by Justice Mukhopadhaya directed the Chandigarh bench of the NCLT to pass an order of liquidation as 270 days mandated under the IBC for finalising a resolution plan had already lapsed.

A similar request had earlier been rejected by the NCLT as well in February 2019.

As for Liberty Group’s reasons for non-compliance with the plan, the NCLAT said that it cannot look into whether it is “genuine or it attracts punishment”. It noted that Section 236 of the IBC makes it clear that no special court can take cognisance of any offence punishable under the IBC. The provision says that this can only be done on a complaint made by the Insolvency and Bankruptcy Board of India (IBBI) or the central government or any person authorised by the central government for this purpose.

It left it open for the Resolution Professional or the Committee or Creditors to file an application in the NCLT to decide whether the matter should be referred to the IBBI or the central government for taking action against Liberty House.

This order, however, remains pending before the Supreme Court.

Another case including Liberty House was the one involving steel company Adhunik Metaliks and its subsidiary Zion Steel.

The Kolkata bench of the NCLT had approved the resolution plan submitted for Adhunik by Liberty House in July 2018. However, while approving the plan, the NCLT had rejected MSTC Ltd’s claim of Rs 108 crore. While MSTC was litigating against this in the NCLAT as well as the Supreme Court, Liberty House raised grievances alleging non-compliance of certain agreements by the committee of creditors.

In March 2019, the NCLAT gave an opportunity to Liberty House to implement the plan and make upfront payment within 30 days, but the company missed the deadline. Following this, the NCLT ordered liquidation of both Adhunik and Zion in July 2019.

However, NCLAT stayed the liquidation order last July and Liberty House paid the entire amount in February 2020 to close the deal. This case was also handled in the NCLAT by a two-member bench headed by Justice Mukhopadhaya.

Liberty House was also a bidder for Bhushan Power and Steel. It had, however, submitted its bid 12 days later than the deadline in February 2018. Tata Steel and JSW Steel were the only other bidders which had submitted a bid before the deadline.

While BPSL’s resolution professional had rejected Liberty House’s bid because of the delay, NCLT had observed that its bid could not be disqualified only on the grounds that it was submitted after the deadline. An NCLAT bench headed by Justice Mukhopadhaya had also asked the creditors of BPSL to consider Liberty’s bid.

However, finally it was Sajjan Jindal-led JSW Steel that last year offered Rs 19,700 crore ($2.7 billion) for the takeover of BPSL to outbid both Tata Steel Ltd and the Liberty House Group.

 

‘Disappointing optics’

A Delhi-based insolvency lawyer, who did not wish to be named, called Mukhopadhaya’s appointment as adviser to the GFG Alliance “improper”, given that he presided over cases involving Liberty House. The lawyer said there needs to be a cooling-off period before such appointments are taken up.

“I don’t think there is a conflict of interest, because whatever he did, he did while sitting on the chair, and we believe that he acted with integrity, while keeping in mind his oath of office. I wouldn’t want to cast any aspersions on this,” the lawyer clarified.

“But he did give a few orders in those matters and those cases are still not fully resolved; they’re still pending in the Supreme Court… He didn’t really pass an order in favour of Liberty House as such, but in terms of propriety, if I was in his position, I would not have accepted it,” the lawyer continued.

“It is disappointing from the point of view of optics, since it casts a shadow on the independence of the NCLAT.”

(With inputs from Poojasri Ganesan)