Binani Withdraws Cement Unit’s Insolvency Settlement Plea in SC

Binani Industries Ltd. has withdrawn its petition seeking termination of the insolvency process for its debt-ridden cement unit that would have allowed an out-of-court settlement with UltraTech Cement Ltd.

The argument to terminate the insolvency seems to have left the Supreme Court bench unimpressed. While the judges did not rule on the matter, their questioning of the maintainability of the petition prompted Binani’s counsel in court, Harish Salve, to withdraw the petition.

Here are some of the arguments that were made in the apex court 13 April:

• Binani Industries argued that the offer from UltraTech ensures that all creditors are paid in full.
• Dalmia Bharat Ltd. argued that it was an unholy alliance between a promoter and a failed bidder.
• UltraTech argued that there was no grounds to disqualify them from making the offer.

The emphasis returns to working within the provisions of the Insolvency and Bankruptcy Code.

But the judges queried the efforts of a “failed bidder” to support Binani’s offer to repay lenders and also pointed to the impending hearings in the National Company Law Tribunal on April 16, and National Company Law Appellate Tribunal on April 19.

This position of the Supreme Court suggests that the case to terminate the insolvency is now dead, officials and lawyers on both sides of the matter explained to BloombergQuint. To be sure, the judges did not say so in as many words and the written order, not yet available, is unlikely to do so either as Salve withdrew the petition.

Binani Industries will now continue arguments in the NCLT and thereafter the NCLAT. But, since the IBC rules provide that any withdrawal of case can only be done before the insolvency petition is admitted by the tribunal, it remains to be seen what legal strategy the company will adopt to try and prevail over winning bidder Dalmia Bharat Ltd.

Sameer Kaji, senior adviser said that Binani Industries would wait till a final decision is made by the NCLT, before coming back to the Supreme Court.

We have withdrawn our application from Supreme Court, accepting it to be a bit premature. Monday we will be participating at the NCLT in Kolkata, where we will be discussing the out-of-court settlement. We went to the Supreme Court because the NCLT was not making a decision, but it has now been confirmed that since Monday is the hearing at NCLT, we should go to the NCLT and let them take a call first. If something happens, we will come back to Supreme Court.

Sameer Kaji, senior adviser

According to Mahendra Singhi, group chief executive officer of the Dalmia Group, the Supreme Court had upheld the process under the IBC.

“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 on [April] 16th as scheduled earlier to approve our resolution plan,” Singhi said.

Case Background

Dalmia Bharat had emerged as the highest bidder during insolvency proceedings for Binani Cement by offering Rs 6,350 crore, according to Bloomberg. UltraTech Cement then revised its bid to Rs 7,618 crore offer, which was rejected by lenders because they had already selected Dalmia Bharat, BloombergQuint had reported earlier.

UltraTech then struck a parallel deal with Binani Industries, which moved the Supreme Court for to get the insolvency proceedings terminated for an out-of-court settlement.

Binani Industries, supported by UltraTech, has offered to repay in full the outstanding amounts to lenders and operational creditors.

According to Dalmia Bharat Group’s resolution plan, nearly 99 percent of all operational creditors in Binani Cement would be paid out, while some related parties and certain other operational creditors would not, Singhi said.

“Lenders have always backed us. But the way the information was being spread about lenders, that was the cause for some anxiety. Legally the lenders have voted for us by 99.4 percent majority, so there was no question that lenders would not be supporting us,” Singhi said, while speaking with BloombergQuint about whether the lenders would stand by the insolvency process or go with the out-of-court settlement.

Meanwhile efforts by a group of operational creditors to support the Binani-UltraTech resolution also did not find immediate relief in the Supreme Court on 13 April.

(This story was first published on BloombergQuint and has been republished in an arrangement.)