Binani Cement is likely to move the Supreme Court on Monday to end insolvency proceedings against it. The company’s lenders have asked it obtain the necessary permission before consenting to an out-of-court settlement.
The lenders met on Saturday. After the meeting some of them confirmed the meeting was held to consider the cement maker’s revised proposal to pay back the entire sum it owed, along with interest.
A banker said they were happy with the proposal. “It is an excellent proposal, but we need the Supreme Court’s approval to go ahead with this. Binani Cement told us it is going to move the Supreme Court on Monday,” he added. A source close to Binani also confirmed the plan to move Supreme Court.
Earlier this week, the lenders had turned down a proposal by Binani Cement to pay them Rs 72 billion. The promoters of the company then increased the offer to Rs 75 billion.
At the meeting, lenders considered whether such a proposal could be accepted in the current Insolvency and Bankruptcy Code framework. They questioned if they could entertain an out-of-court settlement suggested by the National Company Law Tribunal (NCLT) and whether the NCLT had the power to make such a suggestion. Some lenders were of the opinion that once the creditors of an company had accepted a bid, they were in a legally binding contract with the winner.
Dalmia Bharat has won the bid for Binani, and has also deposited an initial payment with the creditors to honour the agreement. The creditors have already written to the NCLT approving the insolvency plan.
Since then, Binani Cement, backed by UltraTech Cement, has come up with an alternative proposal to pay its secured, unsecured and operational creditors in full.
Dalmia Bharat has claimed that a reversal of the insolvency process at such an advanced stage will set a bad precedent. “Any out-of-court settlement for a company while it undergoes bankruptcy proceedings will set a bad precedent for other investors, including global ones,” said Sanjeev Gemawat, executive director, legal, Dalmia Bharat. “Enforcement of contracts is critical to attract investment in the country. How can one offer confidence to the market and the global investors if one flouts a legal contract?” he pointed out.