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A day after the resolution professional (RP) for Binani Cement alleged fraudulent activities by its promoters, the company hit back saying the allegations were an “afterthought”.
Lawyers representing Bhushandas Binani, the company’s director, claimed a forensic audit was conducted during 2015-16 by Haribhakti & Co, LLP, at the behest of the Joint Lenders Forum and “there were no allegations of any wrongdoing by any of the directors of the company,” in the report.
“The same auditor was appointed by the RP and he is now making the allegations based on the same report. The allegations are an afterthought,” the lawyer said. “Binani had filed an application against the RP before the National Company Law Tribunal (NCLT), giving full details of the payouts that were against the Insolvency and Bankruptcy Code (IBC) and amounted to misconduct by the RP and warranted disciplinary and/or criminal proceedings against him. The tribunal took cognisance due to the seriousness of the allegations and sought a reply from the RP. Now the RP has made such frivolous allegations against the directors of Binani.”
Binani’s counsel had alleged that the RP downgraded the asset value of Binani Cement from Rs 150 billion to 30 billion.
According to the application filed by the RP, Vijaykumar Iyer, Haribhakti & Co was appointed by Binani Cement’s lenders in 2015-16. The firm was reappointed in November. The consultant submitted its report on March 12. Based on the findings, Iyer alleged that the promoters of Binani Cement diverted funds through capital advances, inter-corporate deposits, loans and other means to related parties at preferential prices which, in turn, affected the company’s working capital position.
Iyer also said since the inception of the insolvency resolution process for Binani Cement, he was not provided access to all the information and documents required, and he had filed an application with the NCLT on December 21 about this.
Sources close to Binani Cement alleged that the RP was seeking information on subsidiaries and business verticals of Binani Industries, which did not pertain to the cement vertical, and so he was not provided the information initially.
Lenders have revealed that the winning bidders for Binani Cement, the Dalmia Bharat-led consortium, and the runners-up, UltraTech Cement, were aware of the irregularities in the company’s accounts while placing their bids and the RP did not hide it from the bidders. “When the bidding was called for, the RP had reported these irregularities to the interested parties. But it cannot be called a fraud,” a source among the lenders told Business Standard.
UltraTech Cement has already negotiated a share purchase agreement with the promoters of Binani Cement subject to the termination of the insolvency proceedings against the company.
Asked about the negotiation, UltraTech Cement’s Chief Financial Officer Daga said: “It was done in good faith and we did not knew about the allegation by the RP.”
Sources close to Dalmia Bharat Cement, whose joint resolution plan with Bain Capital's Resurgent India Fund, is before the Kolkata bench of the NCLT for final approval, said it got to know about the alleged fraud on March 17, after the Committee of Creditors voted in favour of their resolution plan and a letter of intent was issued.
As of now, according to lenders, around Rs 8.68 billion could be reported as irregularities and around Rs 11.49 billion could be “questionable transactions”, but it did not amount to fraud. “Internally, we have started reviewing the books of Binani Cement again,” one of the lenders to Binani Cement said.
