Binani Cement lenders stick to Dalmia Bharat Cement's resolution plan

Despite terming the proposal from the promoters of the bankrupt Binani Cement as “superior”, the lenders of this company, in a meeting on Wednesday, sided with the resolution plan of the Dalmia Bharat Cement led consortium they had previously approved mainly on account of legal implications.

Sources among the lenders who attended the meeting told Business Standard that although the UltraTech Cement backed Rs. 80.10 billion Binani Cement proposal was discussed in details and the creditors found it to be a “good and superior offer than the one they have previously approved”, Binani Cement’s offer can only be considered by the lenders if this company is able to get approval from the Supreme Court for termination of IBC proceedings against it.

“Who (among the lenders) will take the risk of approving this offer? The stipulated resolution time of 270 days is soon getting over and lenders have already sent the Dalmia Bharat Cement proposal for NCLT’s approval. There is no way in the present scenario where we can consider the Binani Cement offer”, a source among the lenders told this newspaper.

In course of discussion, the lenders unanimously agreed that “IBC is a one-way process and one cannot exit once one enters this process”. A similar stance has been put forward by Dalmia Bharat Cement as well.

The lender added that considering the current IBC framework, it is a “grey area” for the lenders to heed to an out-of-court settlement as suggested by NCLT with one of them even questioning if NCLT has the power to recommend an out-of-court process.

However, the lenders have asked Binani Cement to first deposit Rs. 7.5 billion alongwith a bank guarantee with the lenders to prove their sincerity towards the out-of-court settlement process and obtain an approval from the Supreme Court for termination of IBC proceedings.

Sources told this business daily that at the moment, Binani Cement will not approach the Supreme Court and would like to present its case in the Kolkata bench of NCLT on Monday, April 9 which is the next scheduled date of hearing on the Binani Cement petitions.

“All options remain open for Binani Cement”, the source said.

Talking to this newspaper, Sanjeev Gemawat, executive director –legal at Dalmia Bharat Cement said, “Any out-of-court settlement while a company undergoes bankruptcy proceedings will set a bad precedence for the posterity as well as global investors. Enforcement of contract is critical to attract investment in the country and disrespect should not be shown to such contracts”.

A section of lenders are of the opinion that the current IBC framework is a time-bound procedure where lenders enter into legally binding contract with the winner of the bid.

“How can one give confidence to the market and the global investors one flouts a legal contract?”, Gemawat added opining that an out-of-court settlement will imply a breach of contract with Dalmia Bharat Cement by the lenders.

After accepting its proposal last month, the committee of creditors (CoC) at Binani Cement has approached NCLT for approval of the sanctioned plan and issued a letter of intent to the winner. In turn Dalmia Bharat Cement has deposited cash with the lenders to honour the agreement.

The Binani Cement proposal, which is backed by UltraTech Cement assured full payment to all the secured and unsecured financial creditors and operational creditors alongwith clearance of all statutory dues.