Despite terming the proposal from the promoters of Binani Cement “superior”, lenders sided with the Dalmia Bharat-led consortium’s resolution plan in a meeting on Wednesday.
Sources who attended the meeting told Business Standard that Binani Industries’s Rs 72.66-billion proposal, backed by UltraTech Cement, could only be considered if the promoters get the Supreme Court to terminate bankruptcy proceedings against the company.
“Who (among the lenders) will take the risk of approving this offer? The stipulated resolution time of 270 days is getting over soon and lenders have already sent the Dalmia Bharat proposal for approval by the National Company Law Tribunal. There is no way in the present scenario where we can consider Binani’s offer,” a source among the lenders said.
The lenders also asked Binani Cement to deposit Rs 7.5 billion and a bank guarantee to prove its sincerity towards the out-of-court settlement process. Sources said Binani Cement was not likely to approach the Supreme Court at the moment and might present its case before the Kolkata Bench of the NCLT on April 9, which is the next date of hearing on Binani Cement petitions. “All options remain open for Binani Cement,” the sources said.
The lenders said, “Insolvency is a one-way process. One cannot exit once one enters.” Sanjeev Gemawat, executive director, legal, Dalmia Bharat, said: “Any out-of-court settlement while a firm is undergoing bankruptcy proceedings will set a bad precedent. Enforcement of contract is critical to attract investment in the country and disrespect should not be shown to such contracts.”
Gemawat said an out-of-court settlement would imply a breach of contract with Dalmia Bharat by the lenders. The lenders said heeding an out-of-court settlement, as suggested by the NCLT, was a “grey area” considering the current framework of the Insolvency and Bankruptcy Code. One of them even questioned if the NCLT had the power to recommend an out-of-court process. A section of the lenders is of the opinion that the current IBC framework is a time-bound procedure where lenders enter into a legally binding contract with the winner of the bid. After accepting Dalmia Bharat’s proposal last month, the committee of creditors had approached the NCLT for approval and had issued a letter of intent to the winner. Dalmia Bharat had deposited cash with the lenders to honour the agreement. Later, Binani Industries entered a deal with UltraTech Cement and offered payment of all dues to creditors to the firm.