The Supreme Court today struck a big one for the fledgling Insolvency and Bankruptcy Code (IBC) by refusing to allow the out-of-bankruptcy court deal between UltraTech Cement and Binani Industries (BIL) for its beleaguered subsidiary Binani Cement. So all parties will now have to go back to the National Company Law Tribunal (NCLT) for subsequent acts of this long drawn out drama.
Earlier this week, BIL had moved the apex court with an appeal to redeem the pledge of its assets Binani Cement from its lenders. It had also deposited a sum of Rs 750 crore to show its commitment, along with a bank guarantee for the remaining amount of the total offer of Rs 7,266 crore.
To remind you, last month, UltraTech's board had agreed to issue a 'comfort letter' to provide the above-mentioned amount in return for 98.43 per cent stake in Binani Cement provided the company came out of insolvency proceedings. Significantly, this offer came after the latter's Committee of Creditors (CoC) had voted in favour of the resolution plan submitted by the Dalmia Bharat-Bain Piramal Resurgence Fund consortium.
The offer from the Aditya Birla Group company was certainly fatter than Dalmia Bharat's winning bid of around Rs 6,500 crore. So Binani Cement's CoC last Saturday decided to conditionally back the deal between BIL and UltraTech, subject to the Supreme Court's nod. The Kolkata bench of the National Company Law Tribunal also recently adjourned the hearing of the Binani case to April 16 in light of the hearing today.
According to BloombergQuint, while putting forth its argument in the top court BIL had said that UltraTech's out-of-court offer ensured that all Binani Cement creditors would be paid in full. UltraTech meanwhile argued that there were no grounds to disqualify them from making the offer. The Competition Commission of India gave its approval to the UltraTech bid two weeks ago, which it previously claimed was the reason why it was not rated as the highest bidder for Binani Cement.
"We are happy that the Supreme Court has upheld the IBC process and has not terminated the process, which was requested by the defaulting promoter and the losing bidder. At the same time, Supreme Court has said that nobody should front someone. Now it will be heard at NCLT ... as scheduled earlier to approve our resolution plan," Mahendra Singhi, group chief executive officer, Dalmia Group, told the news portal.
According to him, Dalmia Bharat's resolution plan proposed to pay out nearly 99 per cent of all operational creditors in Binani Cement, excluding some related parties and certain other operational creditors. "Legally the lenders have voted for us by 99.4 per cent majority, so there was no question that lenders would not be supporting us," he added.
The NCLT proceedings on Monday will hopefully take things towards closure. Let's not forget that the 270-day deadline specified for bankruptcy resolution under the Insolvency and Bankruptcy Code is fast approaching. Bank of Baroda had dragged Binani Cement to NCLT last July after it failed to repay a loan of over Rs 97 crore.