Dalmia Bharat alleges UltraTech legally ineligible to bid for Binani Cement

On the eve of the crucial meeting of Binani Cement’s Committee of Creditors (CoC) on Thursday, Dalmia Bharat Cement has written to the lenders and the company’s resolution professional alleging that UltraTech Cement is disqualified to bid for Binani Cement under Section 29 (A) of the IBC.

The aforesaid section deals with various ineligibility parameters for resolution applicants. As per Section 29 (A) (c) of the IBC, any person or promoter who is managing a company classified as non-performing asset for a period of one year till the commencement of insolvency proceedings stands disqualified. The provision mentions that any other person acting jointly or in concert with the ineligible resolution applicant also stands disqualified.

As per a source in Dalmia Bharat, the primary reason for their claim rests on the fact that UltraTech had tried to financially back the promoter of Binani Cement — Braj Binani — for an out-of-court settlement with the lenders. According to the source, Brij Binani is disqualified to place any bids under section 29 (A) (c) and since UltraTech had cooperated to finance Binani, it too stands disqualified.

In March this year, UltraTech had given a public notice on the stock exchanges that it has concluded an agreement with Binani Cement and had also financed a Rs 7.5 billion bank guarantee for Binani Cement when the lenders wanted “some confidence of guarantee from Binani” for an out-of-court settlement.

On the other hand, Binani Industries, which owns Binani Cement had also sought approval from shareholders to finalise its deal with UltraTech.

As per the agreement between UltraTech and Binani Cement, the Aditya Birla Group company had agreed to pay Rs 72.66 billion to Binani Cement for the takeover of over 98 per cent stakes in this company on the condition that insolvency proceedings are terminated. A comfort letter was also issued by the Kumar Mangalam Birla controlled company to Binani Cement to this effect.

However, Binani Cement had failed to conclude an out-of-court settlement with its lenders. 

Calls to an UltraTech spokesperson remained unanswered.

Besides, Dalmia Bharat has also approached the Supreme Court to obtain a stay on the order of NCLT, which not only admitted UltraTech’s proposal but also directed the CoC to consider Dalmia Bharat’s proposal only if it is able to outbid UltraTech.

After a second revision, UltraTech’s offer stands at around Rs 79 billion while Dalmia Bharat’s offer stands at Rs 67 billion.

Sources among the lenders said that the CoC meeting will take place as scheduled in Mumbai and “legal advice” needs to be sought by them after receiving the letter from Dalmia Bharat. 

“Anyways the UltraTech proposal will be up for discussion only as per NCLT’s order and will not be put to vote on Thursday”, a lender said.

Sources said UltraTech has been asked to turn up for this meeting at around 4 o’clock in the evening — the time when its proposal will be up for discussion.

The operational creditors of Binani Cement, who will debut in the CoC meeting is expected to push for 100 per cent recovery of their dues and ask the CoC to approve any plan which takes care of their claims.

Previously, after issuing a Letter of Intent to Dalmia Bharat led consortium after the bidding process, the CoC had approached NCLT for approval of this resolution plan. In turn, UltraTech had challenged to resolution process and approached the same Tribunal. NCLT’s final order has been in UltraTech’s favour.