Kolkata: The Braj Binani group on Thursday asked the Kolkata bench of the National Company Law Tribunal (NCLT) to suspend the ongoing resolution process of group firm Binani Cement Ltd, even as one of the stakeholders said that the sanctity of the bankruptcy resolution process is now at stake.
After lenders chose Dalmia Bharat Ltd to take over Binani Cement, its parent Binani Industries Ltd entered into an agreement with UltraTech Cement Ltd to sell a 98.43% stake in the cement firm on termination of the resolution process. As per this deal, UltraTech would pay Rs7,266 crore, compared with Dalmia Bharat’s Rs6,350 crore offer made under the insolvency resolution process.
The insolvency and bankruptcy code (IBC) has no provision to suspend the resolution process after it has started, but the Supreme Court set a precedent last year by allowing a Mumbai-based realtor and its creditor to settle their dispute on mutual consent outside the framework of IBC even after the resolution process had started.
“If the process (of insolvency resolution) is seen as unclear or arbitrary...bona fide applicants will decline to spend time and money to submit bids," Dalmia Bharat said in its petition with NCLT.
The Braj Binani group argued UltraTech offered a better deal for all stakeholders, and that in the interest of a more optimal resolution, the dispute resolution process under IBC should be suspended.
The bench did not pass any interim order. At least 14 applications filed by different stakeholders were heard on Thursday. Hearing is to continue on Tuesday.
The Kolkata bench had earlier rejected a similar application by the founders of Gujarat NRE Coke Ltd and ordered the firm to be liquidated. According to multiple lawyers associated with the case, the lenders’ stand will determine the course of this dispute.
“IBC is, at the end of the day, a law created to maximize returns for creditors from stressed assets through a time-bound process that cannot drag out beyond 270 days," said one of these lawyers, who asked not to be named. “At the same time, the proposal to suspend the resolution process should be weighed against its potential broader implications for dispute resolution under IBC, and in the light of the fact that the window of 270 days cannot be extended."
The dispute started after Binani Cement’s creditors on 27 February declared Dalmia Bharat as the top bidder. With the approval of creditors, that resolution plan was filed with NCLT amid opposition from other interested parties such as UltraTech and the Braj Binani group.
After being outbid, UltraTech, one of the five unsuccessful bidders, alleged the process for determination of the top bidder was not transparent and that the resolution professional had not followed established best practices in managing the process. UltraTech claimed to have filed revised bids, topping Dalmia Bharat’s bid, on 8 March.
UltraTech’s counsel Sudipto Sarkar argued at the tribunal that the committee of creditors did not consider the AV Birla group company’s “substantially" higher bid for Binani Cement’s assets, and instead gave its approval to Dalmia Bharat’s bid on 14 March. The Braj Binani group claimed that if the resolution process is terminated, creditors will be paid their dues within a definite time frame.
UltraTech also claimed the resolution process through bidding was invalid because the resolution professional had at the behest of the creditors engaged an external consultant in November last year to conduct a forensic audit of Binani Cement’s accounts, and this was not disclosed at the time of receiving bids.
The forensic audit conducted by Haribhakti and Co. Llp eventually indicated possible diversion of funds through related party transactions, the maximum impact of which was assessed at around Rs2,400 crore. This, UltraTech claimed, was suppression of material facts. But Dalmia Bharat told the tribunal that nothing of consequence was concealed from bidders.