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  1. Binani Cement resolution: Exim Bank claims ‘discrimination’ in process

Binani Cement resolution: Exim Bank claims ‘discrimination’ in process

Significantly, the tribunal heard the case on Monday after Binani Industries (BIL), the promoter of Binani Cement, on last Friday withdrew its appeal for termination of the insolvency process against its subsidiary, with the Supreme Court unwilling to interfere in the IBC proceedings.

By: | Kolkata | Published: April 17, 2018 5:19 AM
binani cement, binani cement resolution, exim bank Exim Bank, one of the unsecured financial creditors of the bankrupt cement maker, said under the Dalmia Bharat-controlled Rajputana Properties’ resolution plan, it would have to take a big haircut of Rs 170 crore.

In a move that is bound to keep uncertainty around the resolution of Binani Cement alive, and keep UltraTech Cement in the race, Export-Import Bank of India (Exim Bank) on Monday accused the resolution professional (RP) of “dereliction” of his duties as he allegedly did not ask the insolvent firm’s committee of creditors (CoC) to consider the revised bid of the Aditya Birla Group-led cement company under the corporate insolvency resolution process. Exim Bank, one of the unsecured financial creditors of the bankrupt cement maker, said under the Dalmia Bharat-controlled Rajputana Properties’ resolution plan, it would have to take a big haircut of Rs 170 crore. According to the lender, in the resolution plan, it is facing “discrimination” within the same class of unsecured lenders.

“UltraTech Cement had submitted its revised offer on March 8. We had written to the RP to place the revised offer before the CoC’s meeting on March 14. But the RP did not ask the CoC to consider the revised plan,” contended Exim Bank’s counsel Krishnaraj Thaker in his submission before the Kolkata bench of the National Company Law Tribunal (NCLT). “It is the dereliction of duties cast on the RP,” Thaker told a division bench of the tribunal. The counsel, representing Exim Bank, said although IDBI Bank fell under the same category of unsecured lenders it was getting 100% payment of its dues. According to him, Exim Bank in the March 14 CoC meet had voted in favour of Rajputana Properties “under protest”. At this meeting, the CoC approved the `6,600-crore resolution plan submitted by Dalmia Bharat-controlled Rajputana Properties.

The division bench, comprising justices Jinan KR and Madan Balachandra Gosavi, wanted to know from the resolution professional’s counsel as to why, despite Exim Bank’s request, Vijaykumar V Iyer, the RP, did not take up the matter for discussion in the CoC meet on March 14. “Exim Bank is a CoC member. It had sent a mail to the RP for consideration of UltraTech’s revised offer. Why did the RP not place the revised offer before the CoC meet? What had prevented him to do so?” the bench asked. Replying to this, Iyer’s counsel Abhrajit Mitra said: “Exim Bank’s letter regarding the revised bid of Ultratech was forwarded to the CoC members for their consideration. The RP left two options before the committee — either to negotiate with Dalmia Bharat for a higher bid or to go with the revised offer of UltraTech. The CoC voted in favour of Dalmia’s plan.”

Mitra also argued that as the Exim Bank was a part of the core committee for negotiation with the Rajputana Properties, the allegation of discrimination against the bank was baseless. Like Exim Bank, State Bank of India’s Hong Kong branch had also earlier claimed that it was not being treated on par with other lenders.  Notably, UltraTech believes its revised bid, which was submitted to the resolution professional on March 8, was not considered by the CoC at its March 14 meeting. A plea made by UltraTech Cement before the Kolkata bench of the NCLT — that the CoC ought to have considered its revised offer — will have to be resolved before a final decision can be reached on the way forward for the resolution.

The tribunal on Monday reserved order on all petitions except two in the Binani Cement insolvency case. In its next hearing on Tuesday, the bench will hear two petitions — the one on the approval or rejection of Dalmia Bharat’s resolution plan for the debt-laden cement maker and other on Exim Bank’s application alleging discrimination against it under this resolution plan.
Meanwhile, the operational creditors who await the NCLT’s order on their application for considering repayment of all their dues, indicated to FE that if the ruling is not in their favour, they may move the National Company Law Appellate Tribunal (NCLAT) seeking a repeat of the bidding process.

Significantly, the tribunal heard the case on Monday after Binani Industries (BIL), the promoter of Binani Cement, on last Friday withdrew its appeal for termination of the insolvency process against its subsidiary, with the Supreme Court unwilling to interfere in the IBC proceedings. BIL was hoping to pursue an out-of-court settlement. The apex court’s verdict assumes significance as it will deter bidders from seeking resolutions outside of the purview of the IBC. In early April, the NCLAT had instructed the NCLT to follow the IBC guidelines while resolving the Binani Cement case. Binani Industries had reached an in-principle understanding with UltraTech Cement last month that would allow the latter to buy Binani Industries’ 98.43% stake in Binani Cement for Rs 7,266 crore provided the resolution process under the IBC was terminated. NCLT’s Kolkata bench had placed the responsibility of considering an out-of-tribunal settlement on the lenders of Binani Cement, and had asked them to arrive at a decision by April 9. The bankers, however, had said they do not have the power to approve the out-of-tribunal settlement.

Creditors to Binani Cement include State Bank of India, IDBI Bank, Canara Bank, Bank of Baroda, Bank of India, Edelweiss Asset Reconstruction Company. As per details on Binani Cement’s website, financial creditors of the company had claimed Rs 6,470.26 crore, while the NCLT had admitted claims worth Rs 6469.36 crore. Dues to operational creditors, they claim, amount to be about Rs 510 crore.  The Kolkata bench had admitted the insolvency petition against Binani Cement on July 25, 2017 after Bank of Baroda referred the company to the bankruptcy court. In FY17, Binani Cement had posted a net loss of Rs 348 crore on revenues of Rs 1,527 crore, according to data from Capitaline.

By: Mithun Dasgupta  & Indronil Roychowdhury

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