Conglomerate Dalmia Bharat, with presence in cement, on Tuesday wrote to the bankruptcy resolution professional (RP) and committee of creditors (CoC) of debt-laden Binani Cement that the latter’s parent, Binani Industries, was acting in concert with UltraTech Cement for takeover of the insolvent firm.
The letter was written on the same day Dalmia Bharat appealed to the Supreme Court to stay the May 4 order by the National Company Law Appellate Tribunal (NCLAT) that allows Binani Cement’s committee of creditors (CoC) to approve either Dalmia Bharat’s original or UltraTech Cement’s revised bankruptcy resolution plan.
On May 2, National Company Law Tribunal (NCLT) had asked Binani Cement’s CoC to consider a revised offer from UltraTech despite the earlier resolution plan being disqualified by the CoC. Dalmia Bharat contested this order but failed to get a stay by the NCLAT on May 4.
Dalmia Bharat’s Supreme Court appeal said that UltraTech’s resolution plan, once disqualified, stands ineligible under the Insolvency and Bankruptcy Code (IBC). This appeal is likely to be heard on Thursday.
In the letter, Dalmia Bharat has asked related parties not to proceed with the revised resolution plan of UltraTech pending the result of the appeal in the Supreme Court. The letter said UltraTech is not eligible to make a bid under IBC. “By allowing the bid to even be considered, the NCLT has permitted an illegally directed process on the basis of a toppling bid of an unsuccessful and ineligible applicant. This sets a disastrous precedent for the processes being followed and evolved under the newly enacted and economically significant legislation,” the letter said.
It further said that UltraTech is acting in concert with Binani Industries, which has “an ulterior motive in UltraTech’s bid”. UltraTech’s previous disqualification is “incurable”, the letter argued.
Background to the case
Binani Cement has been undergoing insolvency proceedings initiated by NCLT since July 2017. In February, UltraTech and a consortium of Dalmia Bharat and Bain-Piramal’s India Resurgence Fund had separately bid for the company.
In March, the Dalmia consortium emerged as the preferred bidder with an offer of Rs 6,300 crore, despite UltraTech’ revised bid of Rs 7,266 crore.
UltraTech was not declared the winner in view of the penalty imposed by the Competition Commission of India (CCI) for alleged cartelisation with 10 other cement manufacturers.
Later, UltraTech entered into an arrangement with the promoters of Binani Cement to provide Rs 7,266 crore ($1.1 billion) to help terminate the insolvency proceedings against the cement unit. It had also obtained CCI’s approval for its bid to acquire Binani Cement.
UltraTech’s significantly higher offer has, in recent weeks, forced some of Binani Cement’s creditors to backtrack on their earlier vote in favour of Dalmia Bharat’s resolution plan.
Dalmia Bharat had also challenged the arrangement between Binani and UltraTech, arguing that the lenders had approved its bankruptcy resolution plan and an agreement outside the NCLT would be illegal. The two companies have been in a deadlock for the takeover of Binani Cement ever since.
In April, UltraTech argued for a re-evaluation of its re-revised bid of Rs 7,966 crore by Binani Cement’s CoC. This was approved in NCLT’s abovementioned May 2 order. Dalmia Bharat says allowing UltraTech to take over Binani Cement would violate IBC and the entire proceedings under NCLT.