Why Binani Cement Lenders Were Asked To Consider Revised UltraTech Offer

The Kolkata bench of the NCLT extended Binani Cement’s resolution process till June 24.

Indian security forces attempt to reconstruct a bridge. (Photographer: Brian Sokol/Bloomberg)
Indian security forces attempt to reconstruct a bridge. (Photographer: Brian Sokol/Bloomberg)

Binani Cement Ltd.’s committee of creditors were today directed by the National Company Law Tribunal to consider a revised offer from UltraTech Cement Ltd.

The Kolkata bench of the NCLT asked UltraTech to place a fresh bid before Binani Cement’s resolution professional in three days and extended the resolution process till June 24. The 270-day period for Binani Cement’s insolvency process would have ended in April, had the NCLT not provided this extension.

The tribunal also allowed Dalmia Group to match UltraTech’s revised offer, if it so chooses.

UltraTech’s first bid for Binani Cement under the Insolvency and Bankruptcy Code was less than Dalmia group’s offer. The CoC at the time had decided to only negotiate with the highest bidder. UltraTech had attempted to revise its offer for Binani Cement, but were not allowed to do so by the CoC and the resolution professional.

Thereafter, in a parallel deal, UltraTech signed an agreement with Binani Industries Ltd. to buy its cement assets for Rs 7,266 crore and said it will seek termination of the insolvency process. This decision was subject to lenders agreeing to withdraw from the NCLT.

Over the last two months, UltraTech has been revising its bid for Binani Cement and is now said to be offering over Rs 8,000 crore, which would cover for all financial and operational creditor dues. During this period, the CoC had already listed the Dalmia Group as the preferred bidder.

What The NCLT Order Said

The NCLT held that the decision of the creditors’ panel to deny UltraTech an opportunity to be heard once its resolution plan was rejected is unfair, unjust and against the very objective of the IBC. It stated that the resolution professional and the CoC are duty bound to ensure value maximisation for shareholders of Binani Cement. The lenders’ argument that UltraTech had sent an offer on email and did not adhere to the timelines and process is not substantive, the NCLT ruled.

The reason that the process document does not permit the resolution professional and the CoC to consider the revised offer of the applicant [UltraTech] has no legal force at all. There are no provisions in the process document or in the clarification matrix that its makers cannot amend if the need arises. 
Kolkata NCLT Order

The clarification matrix has a clause that allows the CoC to delete or modify the clauses, the bench noted. The CoC can accept or reject any plan at any time before the approval of the plan submitted to the adjudicating authority, it said.

Scoring not as H1 applicant is also not a disqualification in participating in the bidding process. In case such an applicant is ready to revise its offer and that offer is more than the bid amount offered by H1 applicant and agrees to satisfy all the stakeholders’ claims, then why should its offer not be considered?
Kolkata NCLT Order

The tribunal also accepted the argument of EXIM Bank and Binani Cement’s operational creditors that they have been discriminated against and held that the plan proposed by Dalmia’s wholly owned subsidiary Rajputana Properties needs to be modified to account for their claims.

Approval of the plan of Rajputana Properties doesn’t satisfy the larger claim of operational creditors and some of the unsecured financial creditors. For the said reason also, we are not bound to approve a resolution plan when we are satisfied regarding availability of a better resolution...
Kolkata NCLT Order

Will Take Appropriate Steps: Dalmia Group

Expressing “surprise” at the tribunal’s decision, a Dalmia Bharat spokesperson said, “Any revised offer from an unsuccessful resolution applicant outside the resolution process cannot become a basis of setting aside the decision of the CoC.” The resolution professional and lenders’ panel followed due process of law in approving the plan of Rajputana Properties, the spokesperson said in an emailed statement.

Dalmia will take “all the appropriate steps” needed on the deal, the statement added.

Binani Industries had also approached the Supreme Court last month to get lenders to agree to an out-of-court settlement. However, it later withdrew the petition saying it was premature.

Following the tribunal’s decision, Sameer Kaji, senior adviser of Binani Industries and the Braj Binani Group told BloombergQuint, “There won't be any out-of-court settlement, it will be within the resolution process”.

UltraTech Questions Binani Cement’s Resolution Process