After the debate over the acquisition of Binani Cement reached the country’s apex court, it is back to square one in the Kolkata bench of NCLT, as Binani Industries, which is hitherto seeking approval for an out-of-court settlement, withdrew its petition at the end of a 20-minute argument.
Sources confirmed that the decision on the matter now rests with the Kolkata bench of NCLT which will hear the matter back again on Monday, April 16.
Sources told Business Standard that Binani Industries, the promoter of the potentially bankrupt Binani Cement, which is seeking an out-of-court settlement with its creditors, has come up with a new strategy which led it to withdraw the petition.
Asked about why Binani Industries withdrew its petition, a spokesperson from Binani Cement said, “We’ll tell NCLT on Monday’s hearing whatever we have to say”.
However, the spokesperson reasoned that “Challenge to the resolution plan is pending adjudication before the Kolkata bench of NCLT”, which led the promoters to withdraw the appeal to Supreme Court.
Previously, following the creditors' decision that an out-of-court settlement would be acceptable only if Binani Industries had the permission of the Supreme Court, and challenging an interim order passed by NCLAT on April 5, it approached the apex court.
However, sources close to Binani Industries suggested that at a later date, it can still go to Supreme Court.
Sticking to Binani Industries' claims during the NCLT proceedings before, Harish Salve, who represented Binani Industries on April 13 in the Supreme Court, argued that the Insolvency and Bankruptcy Code (IBC) or any other law did not bar full payment of the debts and the Rs 76 billion settlement to the creditors offered by Binani Industries would benefit all the stakeholders associated with the company.
In turn, C.A. Sundaram, who represented the H1 bidder in the IBC process, Dalmia Bharat Cement and its consortium, alleged that the promoters of Binani Cement were using extra-judicial means to get out of the insolvency process with the financial help of UltraTech Cement, the runner-up in the bidding process.
Sundaram iterated that the scheme of IBC was to reconstruct a failed company and not merely to get the debt back. The argument is in stark contrast to what the Kolkata bench of NCLT has held – maximisation of value – which led it to suggest an out-of-settlement while responding to a plea from Binani Industries.
At the end of the argument, Binani Industries abruptly withdrew its petition resulting in the Supreme Court unable to pass either an order or pronounce any observations on this issue.
Mahendra Singhi, CEO at Dalmia Bharat Cement said, “The Supreme Court observed that once H1 bidder has been chosen through a process as laid down by the IBC code, the sanctity of the same needs to be preserved. The Supreme Court also observed that something which the law does not permit to be done directly, cannot be allowed to be done indirectly”.
He added, “Now the resolution process will follow the IBC procedure and we are ready to make the payments for taking over Binani Cement under the IBC framework”.
Nevertheless, the disbursal of payments to the lenders will depend on NCLT’s course of proceedings.
A group of operating creditors led by Swastik Coal Corporation also moved the court but their petition would be taken up by the same bench on April 19. According to them, they had been kept out of the committee of creditors and wants to be treated at par with financial lenders.
Previously, on March 27, the Kolkata bench of NCLT suggested the lenders to consider Binani Industries’ proposals even after a letter of intent (LOI) was handed over to Dalmia Bharat Cement, the H1 bidder; but the lenders didn’t discuss it citing there was no written directive from the tribunal. Thereafter, again on April 2, the same bench of NCLT, passed a written order asking the lenders to consider the proposal.
The lenders first met on April 4 and while sticking to the Dalmia Bharat Cement’s proposal, asked Binani Industries to increase their offer and submit earnest money and bank guarantee to prove their sincerity. On April 7, the lenders met again on the revised offer from Binani Industries but didn’t submit the outcome of the meeting to NCLT on April 9. The same day, the legal counsel of Binani Industries informed NCLT that they have submitted a special leave petition to the Supreme Court on April 7.
Sources clarified that while it is legally binding on the lenders to go ahead with the Dalmia Bharat Cement proposal as LOI has been issued, it is morally binding on the creditors to consider Binani Industries’ proposal as lenders have accepted earnest deposit from the promoters of the bankrupt firm.