The resolution process of debt-ridden Binani Cement seems to be going nowhere. Binani Industries, the promoters of Binani Cement, which had moved the Supreme Court seeking approval for an out-of-court settlement with the lenders, withdrew its petition after a 20-minute argument on Friday. The matter will now go back to the Kolkata bench of the National Company Law Tribunal (NCLT).
A Supreme Court bench comprising Justice A K Goel and Justice R F Nariman questioned the rationale behind an intervention by the apex court, saying several other cases in connection with the Binani Cement matter were up for hearing in the NCLT, and that the NCLAT was also supposed to take a call on the Binani case. The decision now rests with the NCLT, which will hear the matter again on Monday, April 16. Sources told Business Standard that Binani Industries had come up with a new strategy, leading to the withdrawal of the petition.
On why the petition was withdrawn, a spokesperson for Binani Cement said, “We will tell the NCLT during Monday’s hearing whatever we have to say.”
The spokesperson said, “The challenge to the resolution plan is the pending adjudication before the Kolkata bench of the NCLT.”
Binani Industries had approached the Supreme Court following the creditors’ decision that an out-of-court settlement would be acceptable only if the promoters had the permission of the apex court. It had also challenged the April 5 interim order of the NCLAT in the apex court.
Harish Salve, while representing Binani Industries in court, continued to stick to the company's claims made during the NCLT proceedings. He argued the Insolvency and Bankruptcy Code (IBC) or any other law did not debar full payment of the debt and that the Rs 76 billion settlement to the creditors offered by Binani Industries would benefit all stakeholders.
In turn, C A Sundaram, who represented the winning bidder in the IBC process, Dalmia Bharat Cement and its consortium, alleged that the promoters of Binani Cement were using extra-judicial means to get out of the insolvency process with the financial help of UltraTech Cement, the runner-up in the bidding process. Sundaram said the IBC was meant to reconstruct a failed company and not merely to get the debt back. The argument is in stark contrast to what the Kolkata bench of the NCLT has held – maximisation of value – which led to the suggestion of an out-of-settlement while responding to a plea from Binani Industries.
At the end of the argument, Binani Industries abruptly withdrew its petition, because of which the Supreme Court could not either pass an order or pronounce any observations on this issue.
Mahendra Singhi, CEO of Dalmia Bharat Cement, said, “The message is loud and clear that once a bidder has been chosen through a rigorous process as laid down by the IBC, the sanctity of the same needs to be preserved. We are encouraged by the fact that the primacy of the IBC in insolvency cases has been established, and this will help in attracting high-quality domestic and international capital to facilitate resolution of the mounting NPAs of the banking sector in an expeditious manner.”
“Demand for an out-of-court settlement and attempts to withdraw the insolvency proceedings after they have reached an advanced stage, at the instance of the disqualified promoter or a losing bidder, have been seen through as a device and an attempt to do indirectly what could not be done directly by them. It is a message to the practitioners in the IBC space that one must conform to and observe the rules of the game in CIRP for resolution and not subvert the same by any non-IBC process,” said Shardul S Shroff, executive chairman, Shardul Amarchand Mangaldas & Co, which represented Dalmia Bharat Cement in the Supreme Court.
A group of operating creditors led by Swastik Coal Corporation also moved the apex court but their petition will be taken up by the same bench on April 19. According to them, they have been kept out of the committee of creditors and want to be treated on a par with financial lenders.
On March 27, the NCLT suggested that the lenders should 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, on April 2, the tribunal 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 its offer and submit the earnest money and bank guarantee. On April 7, the lenders met again on the revised offer from Binani but did not submit the outcome of the meeting to the NCLT on April 9. The same day, counsel for Binani Industries informed the NCLT they had submitted a special leave petition with the Supreme Court on April 7.
Sources said while it was legally binding on the lenders to go ahead with the Dalmia Bharat Cement proposal as the LOI had been issued, it was morally binding on the creditors to consider Binani Industries’ proposal as lenders had accepted earnest money from the promoters.