Calcom Cement India, a subsidiary of Dalmia Cement (Bharat), and its financial creditor Mauritius-based GuarantCo on Wednesday said they have “amicably settled” all the claims and counterclaims, which had been the subject matter of insolvency petition, between them outside the Insolvency and Bankruptcy Code (IBC).

The out-of-tribunal settlement followed an order from the Guwahati bench of the National Company Law Tribunal (NCLT), which had given its approval to start insolvency proceedings against Calcom Cement, admitting the petition filed by GuarantCo.

GuarantCo, a financial creditor of Calcom Cement, earlier filed the insolvency petition last year at the NCLT against the company under Section 7 of the Insolvency and Bankruptcy Code (IBC). According to the petition, there was a total “default” of around Rs 100 crore by the cement manufacturing company as on September last year.

GuarantCo and Calcom jointly declared that they have amicably settled and resolved all the claims/counterclaims between them, including all claims/counterclaims which are the subject matter of the petition before the Guwahati bench of the NCLT, according to a joint press note issued on Wednesday.

“Accordingly, all the claims of the parties stand settled against each other and the parties shall not claim or raise any dispute against each other relating to the subject matter of the above cited petition. The parties are taking requisite steps for completion of formalities for withdrawal of the petition before NCLT, Guwahati,” it added. The settled amount between the two parties was below `100 crore, a person close to the development told FE.

Notably, around 2007, Calcom Cement India approached GuarantCo to stand as guarantor for the loan facilities it had availed from various Indian banks. The financial creditor had agreed to execute guarantees in favour of the Indian banks with respect to the loan facilities availed by the corporate debtor from Axis Bank and HDFC Bank. Pursuant to the default made by the cement company in 2011 with respect to the loan facilities it had availed from Axis Bank and HDFC Bank, the guarantees executed by financial creditor as guarantor were invoked by both the banks.

On the basis of demand notices issued by Axis Bank and HDFC Bank, GuarantCo had paid an amount of $10,842,267.16 and $11,221,084.9 to the two banks, respectively, according to the petition filed by the financial creditor.

“Thereafter, the financial creditor demanded the payment so made to Axis Bank and HDFC Bank pursuant to their invocation of guarantee from the corporate debtor in terms of the Amended and Restated Recourse Agreement. However, the corporate debtor failed to honour its commitment,” according to the petition.

In July, 2012, the Mauritius-based company had entered into a Memorandum of Understanding with Calcom Cement, wherein apart from other conditions, the former had agreed to the request of the corporate debtor to settle and restructure its dues under the Amended and Restated Recourse Agreement into long tenor loans subject to certain conditions. According to the petition, one of the important terms of the MOU was, “Calcom agrees to fully cooperate with GuarantCo and use its best endeavours to obtain all regulatory approvals, including approaching the RBI, MoF or other authorities for restructuring the total liability into the GuarantCo USD Loan.”

Notably, RBI had rejected the application for restructuring of the total liability in 2014. However, in 2017, RBI had provided its approval, directing that the “total outflow from beginning should not exceed principal amount of `112 crore + 8.5% interest per annum after invocation of guarantee amount + 2% guarantee fee per annum before invocation of the guarantee amount”, according to GuarantCo’s petition.

The Mauritius-based company alleged that after the RBI’s approval in July 2017, it had received certain payments from the corporate debtor, however, after the financial creditor had followed up on the payments on many occasions. “Following receipt of certain payments, the interest rate used to make the payments was contradictory to the Joint Application to RBI and Approval Order of RBI dated 21.07.2017,” it added.

In its reply, Calcom said the words “should not exceed” mentioned in the RBI letter dated July 21, 2017, applied to the principal amount as well as the payable rate of interest and guarantee fee, respectively.
However, in its order dated January 29, the NCLT said: “the entire argument of the corporate debtor in regard to the payable rate of interest was only an afterthought to reduce its liability and is liable to be rejected.”

In a statement issued after the NCLT order, Dalmia Cement said: “It (Calcom) has been regularly paying the principal repayment amount as per the agreed schedule against the total original outstanding of `112 crore.” Calcom had sought direction from the RBI on rate of interest for the said loan and the central bank had put a cap of 8.5% on the interest, making it clear it was for the two parties to settle within the ceiling, Dalmia Cement added.