Some lenders to Binani Cement have raised objections to the out-of-court settlement proposal of Binani Industries, sources close to Dalmia Bharat, a bidder for the beleaguered cement maker, said on Wednesday.
“Some banks have told other banks in the consortium that this is beyond established norms of ethical conduct in the banking industry, and also in violation of CVC and IBA guidelines,” they said. While this issue has been raised by Dalmia earlier too, that some lenders are seriously considering this matter is significant.
When contacted, a Binani Industries spokesperson said, “Today, majority of the lenders are supporting us on out-of-tribunal settlement, because we are offering banks almost `600 crore more than what the highest bidder (Dalmia Cement) is offering… Being an evolving process, some banks are unsure about what route to follow or take.”
According to sources, Canara Bank is opposing the out-of-tribunal deal, while IDBI Bank and Bank of Baroda are currently on the “silent mode”. A senior official with Canara Bank said, “We are not authorised to speak to the media. Whatever is our stance, we will make it clear at the CoC.”
When asked, whether Binani Industries is speaking with the banks who are still debating or unsure about supporting the deal, the spokesperson said, “No, we are not discussing with these banks. Because we are certain that they will come in line.”
Sources in Dalmia Bharat said that lenders might have met with Binani Industries representatives and had discussions to understand their proposal. “However in view of the Hon’ble NCLAT’s last order dated 5th April 2018, which directs NCLT to decide all matters in accordance with IBC code and in view of CVC / IBA guidelines, we understand that no understanding has been reached between BIL (Binani Industries) and CoC despite several attempts by BIL to explain their “side deal” to lenders and make a higher offer outside the IBC”.
They further argued that Indian Banks’ Association (IBA) took a decision in its meeting held on 29 January 2018 that “With respect to evaluating bids for assets of companies referred to NCLT, it will be a one stage process and no negotiation will be done other than with H1 bidder.”
Responding to whether Binani Industries had secured CoC approval on the out-of-tribunal settlement, the Binani spokesperson said, “Technically, CoC does not have to give approval. Under the out-of-tribunal settlement there is no role of CoC. When you are trying to settle under CIRP (Corporate Insolvency Resolution Process), then the approval of CoC would be needed. We are settling outside the CIRP process. So, outside the CIRP process, there are only lenders. Under the out-of-tribunal settlement, only the majority support of the lenders will do.”
In March, Binani Industries had reached an in-principle understanding with the Aditya Birla Group-led UltraTech Cement 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 Insolvency and Bankruptcy Code (IBC) is terminated. Since then, it has been trying to settle the matter outside the purview of the NCLT. The company is understood to have increased its bid to around Rs 7,600 crore.
However, bankers have maintained that the lenders do not have the power to approve the out-of-tribunal settlement, and Binani will have to go to the appropriate authority, which is the Supreme Court. The case is awaiting the Supreme Court’s verdict. On March 16, Dalmia Bharat had said the the resolution plan submitted by Dalmia Bharat controlled Rajputana Properties was approved by the CoC.
“The CoC of Binani Cement has recommended the resolution plan to the NCLT for its requisite approval,” Dalmia Bharat said in a statement, adding that the resolution plan has received almost 100% approval of the CoC members. Dalmia Bharat maintains that the resolution must happen as per the process laid out in the IBC.