The Insolvency and Bankruptcy Code (IBC) Amendment Ordinance, promulgated on Wednesday, bans late bids in order to resolve the impasse in cases such as Binani Cement, where UltraTech Cement and Dalmia Bharat are currently fighting a pitched legal battle over the Birla company’s late bid.
Sources in Dalmia Bharat note that the ministry of corporate affairs has said late bids will not be entertained and no negotiation with late bidders will take place. Based on this, it might appeal to the National Company Law Tribunal (NCLT) or higher courts, citing the government’s stand in the IBC ordinance.
In the Binani Cement case, the promoters defaulted on bank loans and its lead lender, Bank of Baroda, referred the company to the NCLT's Kolkata bench for debt resolution last August. In the resolution process, six companies gave bids and Dalmia Bharat was selected as the highest one.
However, UltraTech objected to the marking by the Resolution Professional. Later, it also joined hands with the promoters of Binani Cement and gave a higher bid to the lenders, which was accepted. Binani and the lenders then moved the NCLT to terminate the IBC proceedings.
To avoid a similar situation, the ordinance says such a withdrawal will only be permissible before publication of the notice inviting Expression of Interest (EoI). There will not be any withdrawal once EoIs are invited and bids are called.
“The regulations to be framed by the Insolvency and Bankruptcy Board of India (IBBI) will have to specify the events and circumstances under which the withdrawal application can be entertained by the NCLT. Till the regulations are framed, the applications for withdrawal will not be maintainable,” said R S Loona, managing partner of Alliance Law.
Dalmia Bharat’s entire contention in the case is based on the allegation that UltraTech’s revised bid came too late and after the Committee of Creditors (CoC) had decided on Rajputana Properties – the Dalmia Bharat and India Resurgence Fund consortium - as the highest bidder.
Sources in favour of Dalmia Bharat’s bid argued the NCLT, while giving its order last month, had prioritised only maximisation of value. Due to which, UltraTech’s offer got approval from the lenders.
“Even if the ordinance doesn’t have retrospective effect, it clears the government’s stance on late bids and revision of bidding. NCLT, the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court can be apprised about what the government thinks of the IBC process,” a source suggested. Adding that Dalmia Bharat was most likely to bring this point on June 18, the next hearing date at NCLT.
Sources suggest UltraTech has kept the option open to financially back Binani Cement for an out-of-court settlement, since its deposit money of Rs 7.5 billion is still with the CoC.
The ordinance reinstates most of the arguments Dalmia Bharat had put forward in the NCLT when the tribunal was hearing the case before passing its judgement. The verdict had ordered the CoC to consider UltraTech’s revised offer of Rs 79.6 billion and to allow Dalmia Bharat to match that offer. Additionally, it ordered the CoC to approve a plan which was in the spirit of the IBC, which, it held, enjoined value maximisation.
In turn, the CoC, amidst a series of appeals to NCLAT and the Supreme Court (SC), has sent UltraTech’s plan for approval. Dalmia Bharat has opposed the plan and the process of selection of the new H1 (highest) bidder under NCLT’s directives. And, filed petitions before NCLAT and the SC.
An UltraTech official said the ordinance would not impact their bid to take over Binani and they were waiting for the top court’s judgement.
May 2: NCLT Kolkata passes order accommodating bid of UltraTech Cement, with a provision for Dalmia Bharat to be allowed to match this offer
May 4: Dalmia Bharat moves NCLAT for obtain stay on NCLT order. NCLAT declines immediate stay. Binani’s RP asks for clarification from NCLT on UltraTech’s bid
May 23: Union Cabinet approves ordinance to amend IBC rules
June 1: CoC votes in favour of UltraTech plan. RP submits plan to NCLT, Kolkata
June 4: NCLT-Kolkata asks Dalmia Bharat to present its objection to UltraTech’s plan on affidavit