U.S. District Judge Thomas Griesa declared Argentina in contempt of court in a hearing on Monday over its failure to pay hold-out investors.

Griesa said he would decide on sanctions at a later date, but investors had requested daily fines of $50,000 and payment towards some of the holdouts' legal fees.

Hold-out investors refused to settle a restructuring debt deal with Argentina after it defaulted on loans in 2001. Ninety-two percent of the bondholders accepted a 70 percent cut on the face value of their bonds, but hold-out investors refused.

Hold-out investors U.S. billionaire Paul Singer's NML Capital and U.S.-based Aurelius Capital Management took Argentina to court, and on July 30, 2014, Judge Griesa ordered the country to pay them the full $1.6 billion due.

The judge also froze money Argentina had deposited in the Bank of New York Mellon, $539 million, to pay the bondholders who had accepted the restructuring deals in 2005 and 2010. That action caused international credit rating firms to declare Argentina in default again in July.

In a controversial move on Sept. 11, Argentine lawmakers passed a measure that would allow the country to sidestep the U.S. court order and make repayments through Buenos Aires or Paris.

"[Argentina] has been and is now taking steps in an attempt to evade critical parts of U.S. court order," Griesa said at the federal courthouse in Manhattan. "There's a very concrete proposal that would clearly violate the injunction," reported the Wall Street Journal.

Jubilee USA, the religious debt relief group, said a contempt verdict would not help resolve the issues.

"The case highlights the need for a comprehensive bankruptcy process that brings all investors to the table. This is the only way we can have settlements that benefit everyone, not just the special interests of a few," Eric LeCompte, executive director of Jubilee, USA told Latin Post.

The country has to make good on debt payments of $200 million by Sept. 30, according to AFP.

Argentina has argued that it can't pay the holdouts because of an obscure clause in its bond contract - called the Rights Upon Future Offers clause - which says any deal offered to the holdouts must also be offered to bondholders who accepted the 2005 and 2010 restructurings, according to the Wall Street Journal. A settlement with the hold-out investors would trigger the clause forcing the country to pay up to $120 billion. The clause expires at the end of this year.