Kolkata: Government agencies, including the income tax department, will take the biggest haircut if the Kolkata bench of the National Company Law Tribunal (NCLT) approves Dalmia Bharat Ltd’s debt resolution plan for Binani Cement Ltd.

Statutory dues are proposed to be settled for Rs33.10 crore, a small fraction of the Rs114.07 crore estimated cost of resolution, which is to be paid by the acquirer of the assets.

Under its Rs6,932.46 crore resolution plan reviewed by Mint, Dalmia Bharat has proposed to pay up to Rs33.10 crore to settle all outstanding statutory dues payable to government agencies, which has been assessed by the resolution professional, or the administrator, at Rs177.50 crore. It translates into a haircut of 81.35% for government agencies.

When a delinquent enterprise is liquidated, or its assets sold as scrap, tax authorities—both direct and indirect—take a huge hit, said a top official in the income tax department, who asked not to be named. Indirect taxes such as excise duty are almost always waived. But in this case, the company is being sold as a going concern and still only 19% of statutory dues are to be cleared.

Even under the erstwhile Board for Industrial and Financial Reconstruction—the earlier forum for insolvency resolution—tax authorities would often have to give up their demands, said the officer cited above, adding that even with the Insolvency and Bankruptcy Code coming into force, things have not improved.

Operational creditors are up in arms against Dalmia Bharat’s resolution plan, under which the company has proposed to settle their accumulated dues of Rs503.37 crore for Rs151 crore—a haircut of roughly 70%. Vendors have, however, claimed that the company owes them over Rs700 crore, and that such a poor settlement would lead to a chain of defaults by several of the company’s 3,000 trade partners.

Based on claims admitted by the resolution professional, Dalmia Bharat has said that it will pay in full 98% of operational creditors by number. Their individual claims are less than Rs1 crore. Dues of Binani Cement’s workers, too, are to be paid in full.

Dalmia Bharat has said that the liquidation value of the stressed assets of Binani Cement having been assessed at Rs2,300.70 crore, the successful bidder did not have to pay anything to government agencies. Dues to secured creditors has been determined at Rs4,041.97 crore.

Under IBC, they have no priority over payments made to take over a stressed asset. The law gives highest priority to secured creditors and it is being widely seen as one aimed to help them the most.

Dalmia Bharat has been selected as the highest bidder for Binani Cement and its resolution plan submitted to the Kolkata bench of the NCLT for its approval, amid opposition from Ultratech Cement Ltd and operational creditors. Vendors are rooting for Ultratech, which has offered to pay up to Rs8,000 crore for the company.

Though the committee of creditors has declined to consider Ultratech’s bid, citing the importance of “certainty of contract" and the sanctity of process, other stakeholders including Binani Industries Ltd, the 98.43% owner of the beleaguered cement maker, are fighting court cases for a better realisation for all stakeholders.

“If for argument sake the tribunal orders liquidation of Binani Cement as a going concern, operation creditors stand to gain," said a lawyer appearing for one of the key vendors, who, too, asked not to be named.

“In such a situation, the liquidator will seek fresh bids, and the realisation will certainly be more than Dalmia Bharat’s offer," he said, adding that the tribunal’s approval of Dalmia Bharat’s bid will lead to “sub-optimal resolution".