With the Supreme Court unwilling to interfere in the proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), Binani Industries (BIL) on Friday withdrew its appeal for termination of the insolvency process under the IBC. BIL was hoping to pursue an out-of-court settlement for the sale of its subsidiary Binani Cement. With this, Dalmia Bharat is set to take control of the loss-making cement manufacturer, subject to clearance by the National Company Law Tribunal (NCLT). Dalmia Bharat’s resolution plan was approved by the committee of creditors (CoC) in March and it is believed to have submitted a bid of about Rs 6,600 crore.
The apex court’s verdict assumes significance for the IBC process as it will deter bidders from seeking resolutions outside of the purview of the IBC. A bench comprising justices AK Goel and Rohinton Nariman was unimpressed with BIL’s plea to terminate insolvency proceedings. Nariman questioned BIL’s urgency in the matter when the National Company Law Appellate Tribunal (NCLAT) was scheduled to hear the matter on April 19. “What is going to happen till then… Why should we interfere? UltraTech, the second highest bidder who was outbid, has put you up. Now the owner is taking a loan from UltraTech to repay the lenders so that it can come back,” the judge said.
Senior counsel CA Sundaram contended the code bars promoters and the company acting in consort with it from making any offer. “Here is the promoter who has defaulted, winding up petition against it is already pending in the Calcutta High Court and has siphoned off Rs 2,400 crore. Now he has brought a failed bidder. They are barred from giving any resolution plan. I have gone through the whole process and my resolution plan has been approved by the creditors,” he said. Senior counsel NK Kaul, appearing for Dalmia Bharat, argued that it was an “unholy alliance between a promoter and a failed bidder… They can’t introduce settlement in this manner.”
In early April, the NCLAT had instructed the NCLT to follow the IBC guidelines while resolving the Binani Cement case. On March 16, the CoC had approved the resolution plan submitted by Dalmia Bharat-controlled Rajputana Properties. A large financial creditor to Binani Cement said, on condition of anonymity, the out-of-tribunal offer had been considered because the Kolkata bench of the NCLT had asked the CoC to do so. “If the tribunal gives the CoC directions, we will meet,” he said.
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. The Kolkata bench of the NCLT 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. 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 this case.
UltraTech believes its revised bid, which was submitted to the resolution professional Vijaykumar V Iyer on March 8, was not considered by the CoC at its March 14 meeting. 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. The Kolkata bench of the NCLT had admitted the insolvency petition against Binani Cement On July 25, 2017. Bank of Baroda had referred the company to the bankruptcy court. Dues to operational creditors, they claim, amount to be about Rs 510 crore. 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.