Binani Industries moves Supreme Court after Ultratech's out-of-court offer for Binani Cement

The acquisition war over Binani Cement is all set to be enacted in a new battleground: The Supreme Court. Parent firm Binani Industries move the apex court today with an appeal to redeem the pledge of its assets in debt-ridden subsidiary Binani Cement Ltd from its lenders. In fact, according to a company official, it will also submit 10 per cent of the offer to prove its commitment.

"We are moving the Supreme Court for sure. We have assurance of support from most of the lenders for this move," a Binani group spokesman told PTI. Redeeming the pledge will mean seeking an end to the bankruptcy proceedings against it from the National Company Law Tribunal (NCLT). Binani Industries has reportedly agreed to pay the interest up to the date when the insolvency proceedings kicked-off.

The beleaguered company's Committee of Creditors (CoC), despite supporting the over Rs 7,000 crore offer on the table, declined to accept it due to lack of clarity in legal interpretation in several rounds of meeting held over the past weekend. Lenders, part of the CoC, desired that there was no problem in the offer unless a higher adjudicating authority permits it.

"At a marathon meeting on Saturday, lenders decided to give their consent to settle their debt with Binani Industries provided it is approved by the Supreme Court," a senior official aware of the development told The Economic Times, adding that, "Banks have asked Binani Industries to indemnify the financial creditors for all legal liabilities that may arise if Dalmia Bharat moves court against the lenders for an agreement that may happen outside the Insolvency and Bankruptcy Code (IBC)."

To remind you, after the Dalmia Bharat-Bain Piramal consortium was declared the highest bidder for Binani Cement with an offer to pay Rs 6,350 crore, Aditya Birla group's UltraTech Cement bowled a googly by making a separate out-of-court offer to its parent firm.

In March, UltraTech had said in a statement that Binani Industries had approached it for arranging funds to pay-off the lenders. The company's board agreed to issue a 'comfort letter' to provide Rs 7,266 crore in return for 98.43 per cent stake in Binani Cement. "If they can take the company out of insolvency proceedings, we are happy to pay the same amount of money to buy the company and it has to be used to repay the debt. For that purpose they wanted a letter of comfort and we have given them a letter of comfort. I do not think that we have gone against IBC anyway," UltraTech Cement CFO Atul Daga was quoted saying earlier. Operational creditors have been supporting this UltraTech-backed Binani offer as it covers entire claim.

Flash forward to present, the Binani group is hoping to get a favourable outcome from the Supreme Court that will empower the CoC to consent to the out-of-court settlement. With Ultratech's bid getting approval from the Competition Commission of India two weeks ago - which it claimed was the reason why it was not rated as the highest bidder - things are certainly looking positive for this group.

Bharat Dalmia officials, meanwhile, have said that any out-of-court settlement, while a company undergoes bankruptcy proceedings, will set a bad precedent. According to the daily, the consortium is also expected to move the apex court on the grounds that the move by the lenders is illegal as they had won the bid. Furthermore, Dalmia Bharat has reportedly dashed off letters to all the banks in the CoC that any such settlement would be a breach of trust as they have signed a contract. In fact, the former has already submitted a performance bank guarantee of 10 per cent of upfront payment of its offer to the financial creditors of Binani Cement.

While everything is up in the air right now, one thing is for sure: The Supreme Court's verdict will either buffer up the IBC or leave it susceptible to corrosion.

With PTI inputs