Binani insolvency: Dalmia Bharat moves SC against NCLAT nod to UltraTech

As the Binani Cement case enters the Supreme Court, it marks the last phase of this takeover battle between UltraTech and Dalmia Bharat raging for 16 months now

The agreement between UltraTech and Binani Cement stated that the Aditya Birla Group company would pay Rs 72.66 billion for takeover of about 98 per cent stake, on the condition that insolvency proceedings were terminated.

NCLAT's order had dismissed Dalmia Bharat’s appeal that UltraTech was ineligible under Section 29(A). The order stated that after a Resolution Plan is approved, any transfer of shares from Binani to UltraTech for payment would not render the latter ineligible under Section 29(A). Further, NCLAT said, the revised offer from UltraTech was not illegal and and the CoC had not rejected the offer on legal grounds.

The second contention of Dalmia Bharat rests on the fact that it adhered to the process document as laid down by the CoC and followed the course of law in presenting its proposal.

A second source involved in this case said, “While it seems that the NCLAT, as well as NCLT, weres time and again aiming at maximisation of value, Dalmia Bharat’s contention is on the process of the IBC.”

Against UltraTech’s revised offer of Rs 79.5 bn, Dalmia Bharat’s offer stands at Rs 69.32 bn. This source claimed that the selection process of Dalmia Bharat had been in line with the internal process documents of the CoC, based on guidelines from the Central Vigilance Commission and the Indian Banks Association. More, wherever there were grey areas in the IBC, common law may be used in deciding selection and eligibility NCLAT and earlier

However, the NCLAT has maintained that this internal document could have been modified at will by the CoC to accommodate a higher offer. It blamed the CoC for not using its discretionary power to take a decision that best suited the interests of the creditors and the public money involved in the resolution process.

“Non-application of mind by the CoC and discriminatory behavior in approving the plan submitted by Rajputana Properties is apparent,” the NCLAT order says.

In July last year, the Kolkata bench of NCLT admitted the Binani Cement resolution case. Initially, the proposal from the Dalmia consortium was selected as the (highest ('H1') bidder and its plan was sent to NCLT for approval in March 2018. Initially, UltraTech's offer was Rs 65 bn, inferior to Dalmia Bharat. It revised this just after the window of time for applications had closed. The CoC, then, rejected this revised bid.

However, UltraTech, Binani Cement, SBI Hong Kong, EXIM Bank, operational creditors and other stakeholders mounted their opposition to this plan and on May 2, after a number of hearings, the NCLT ordered the CoC to approve UltraTech’s plan and consider the one from Dalmia Bharat only if it matched (in effect outbid) the former offer.

Dalmia Bharat moved the NCLAT for a stay on NCLT’s order but failed. With fresh petitions filed both atn NCLT and NCLAT, the SS in July had ordered transfer of all pending cases on this matter to NCLAT, directing it expedite the hearings and give a verdict.

Timeline

• July 25, 2017 - NCLT Kolkata admits Binani Cement insolvency resolution under IBC
• March 15, 2018 - CoC approves Dalmia Bharat led consortium as H1 bidder
• March 19, 2018 – RP submits Dalmia Bharat’s resolution plan for approval in NCLT
• May 2, 2018 – NCLT asks CoC to consider & approve UltraTech’s plan and consider Dalmia Bharat’s plan only if it matches 
• May 8, 2018 – Dalmia Bharat moves NCLAT & Supreme Court to obtain stay but fails
• May 31, 2018 - CoC issues Letter of Intent to UltraTech
• July 2, 2018 – Supreme Court orders transfer of all cases on Binani Cement to NCLAT from NCLT
• November 14, 2018 – NCLAT approves UltraTech’s resolution plan. Terms plan of Dalmia Bharat as “discriminatory”
• November 15, 2018 – Dalmia Bharat appeals to Supreme Court; case admitted for hearing on Monday