Insolvency: Dalmia's letters to CVC, RBI irk Binani Cement lenders

Majority of lenders has supported the revised offer from Binani Industries but asked the company to obtain SC's permission

Dalmia Bharat Cement's letters to the Central Vigilance Commission (CVC) and the Reserve Bank of India (RBI) asking for a probe into the race for the acquisition of Binani Cement has irked a major section of the lenders.

Some of the creditors having considerable exposure to Binani Cement are viewing the move from Dalmia Bharat Cement unnecessary, citing that the matter is in the Supreme Court and the decision taken by the country's apex court will be the final and binding for all the stakeholders involved in the tussle in the acquisition process of Binani Cement.

"The lenders themselves did not opt for an out-of-court settlement with the promoters of Binani Cement. It was only after the Kolkata Bench of NCLT passed a written directive asking the lenders to consider an out-of-court settlement that they met. We acted in accordance with NCLT's suggestions only", one of the leading lenders to Binani Cement told Business Standard.

The lender added, "However, Dalmia Bharat Cement has written to the CVC, RBI and others, which was unnecessary considering the matter is in the Supreme Court and lenders may have second thoughts if the matter is dragged needlessly to other authorities other than the Supreme Court which has the final say".

On April 5, Rajputana Properties, a Dalmia Bharat Cement subsidiary, which won the bid for Binani Cement, wrote to CVC alleging breach of IBC guidelines stating "if the sanctity of the IBC process is violated, then public confidence in the code will get shaken" and requested it to "examine the matter suitably, and pass such guidelines/advisories as it deems appropriate in public interest".

However, following NCLT's suggestions, which was upheld by NCLAT, the lenders met on April 7 to discuss the revised Rs 76 billion offer from Binani Industries, which is financially backed by UltraTech Cement, the unsuccessful bidder under the IBC process.

In the meeting, a majority of the lenders had supported the revised offer from Binani Industries but asked it to obtain the approval of Supreme Court for an out-of-court settlement process first.

One of the lenders in the Committee of Creditors (CoC) opined, "The matter of acceptance of either the Dalmia Bharat Cement proposal, which we have passed or an out-of-court settlement with Binani Industries is not in our hands. It is a matter of law and we will do whatever the court directs us to do".

This financier is also unhappy with Dalmia Bharat Cement for writing to CVC and RBI for examination into the ongoing scrimmage for Binani Cement, which is undergoing insolvency proceedings.

One of the lenders, categorised as a public sector bank (PSB), with whom this newspaper spoke to opined, "We have taken a wait and watch approach. Since the matter has been referred to the CVC and RBI, it is not something which can be ignored but then, the issue is in the Supreme Court".

In the letter to RBI, which is particularly targeted at the PSBs, Dalmia Bharat Cement stated, "In light of several frauds in the banking sector, any settlement with Binani Industries will be scandalous, illegal, contrary to law, and make the bank a co-conspirator to yet another bank fraud and could become a reputation issue for lenders. Lenders instead of doing an out of court settlement should bring such perpetrators to book".

The CoC doesn't want itself to be dragged into the Supreme Court as a party to the case and so far hasn't opted for a representation via a legal counsel to the highest court of India.

"The offer from Binani Industries is no doubt superior to the one we have already approved, but it doesn't mean will be pleading to the Supreme Court for an out-of-court settlement", a third lender in the CoC added.

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 with 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.

The matter is up for Supreme Court's consideration on April 13.