NCLAT okays UltraTech bid for Binani Cement, says no to Dalmia Bharat

NCLAT's decision marks an end to the second phase of prolonged litigations which has marred the Binani Cement resolution case for 16 months now

The National Company Law Appellate Tribunal (NCLAT) on Wednesday approved the Aditya Birla Group firm UltraTech Cement’s revised offer to take over debt-ridden Binani Cement for Rs 79.50 billion. The NCLAT rejected the Rs 69.32 billion resolution plan by the Dalmia Bharat Cement-led consortium, terming it “discriminatory”.

A two-member Bench headed by Chairperson Justice S J Mukhopadhaya said, “We approve the revised resolution plan submitted by UltraTech Cement Limited, which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan”.

In the 44-page order, the NCLAT also noted that the plan submitted by Rajputana Properties, the consortium led by Dalmia Bharat Cement, not only discriminated between the financial and operational creditors but between the sections of financial creditors as well.

The appellate tribunal reasoned that the objective of the Insolvency and Bankruptcy Code (IBC) was to provide a resolution process, rather than going for liquidation, in a time-bound manner for maximisation of value of assets of such persons to promote entrepreneurship, credit availability and balance the interest of various stakeholders.

Comparing both the resolution plans, the NCLAT noted that while UltraTech’s plan pays up both the financial and operational creditors entirely along with interest, which is 9.06 per cent more than the verified claim of Rs 72.89 billion, the offer from Dalmia Bharat accounts for 95.10 per cent of the total verified claims.

The appellate tribunal said the IBC did not prescribe differential treatment between similarly situated operational creditors or the financial creditors on one or other grounds.

“The adjudicating authority has rightly held the resolution plan submitted by Rajputana Properties Private Limited to be discriminatory,” the order said. 

Ultratech

The NCLAT also blamed the committee of creditors (CoC) for not using its discretionary powers to take the best decision within a stipulated time-frame to best suit the interests of the creditors and the public money. It noted that internal process documents can be modified to accommodate a better proposal and pulled up the CoC for considering only Dalmia Bharat’s plan despite a higher bid from UltraTech.

“Non-application of mind by the CoC and discriminatory behaviour in approving the plan submitted by Rajputana Properties is apparent”, the order said. According to Dhaval Vussonji of Dhaval Vussonji & Associates, the law firm representing the operational creditors, while internal procedural documents should be respected, the NCLAT order highlights the fact that the same can be changed or modified at will to accommodate a superior monetary bid which takes care of all the stakeholders for the sake of value maximisation.

Sources close to Dalmia Bharat suggested that the battle for Binani Cement may not still be over as Dalmia Bharat is weighing options to appeal to Supreme Court to overturn the NCLAT order and obtain a go-ahead from the apex court for its resolution plan. 

The primary contentions which may be put forward are eligibility of UltraTech to bid for Binani Cement, sanctity of IBC considering several grey areas and others. In July last year, the Kolkata bench of NCLT admitted the Binani Cement resolution case. At first, the Dalmia Bharat consortium was selected as the H1 bidder and its plan was submitted to the NCLT for approval in March 2018.

Initially, UltraTech had quoted an offer of Rs 65 billion, inferior to Dalmia Bharat, but revised the same just after the window of submitting the applications closed. The CoC, in turn, had rejected this revised bid terming it a violation of the process document.

However, UltraTech, Binani Cement, SBI Hong Kong, EXIM Bank, operational creditors and other stakeholders mounted their opposition to this plan and on May 2, 2018, after a series of prolonged hearing, 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 offer from UltraTech.

Thereafter, Dalmia Bharat moved to NCLAT to obtain a stay on NCLT’s order but failed in the attempt. With fresh petitions filed both in NCLT and NCLAT, the Supreme Court, in July this year, ordered transfer of all pending cases to the NCLAT on this matter and ordered the NCLAT to expedite the hearing and pass its judgement. The NCLAT has sealed the option for an out-of-court settlement between the Binani Cement promoters (financially backed by UltraTech) and the creditors by disallowing such a process. 

“Merely because the promoter wants to pay all dues including the default amount cannot be a ground to set aside the Corporate Insolvency Resolution Process”, the order said.

Earlier, after the plan of Dalmia Bharat was submitted to the NCLT for approval, the Kolkata Bench of NCLT had conceded to Binani Cement’s appeal for an out-of-court settlement with the lenders. However, the CoC asked Binani Cement to obtain a clearance from Supreme Court first before the out-of-court proposal could be considered. During the course of hearing in the apex court, Binani Cement abruptly withdrew this application and the matter thereafter lay with NCLAT.