Bank of Baroda invoked the Insolvency and Bankruptcy Code on Binani Cement after the firm failed to come up with a restructuring plan to recover the loans
Kolkata: Bank of Baroda has filed a petition against Binani Cement Ltd with the National Company Law Tribunal’s (NCLT) Kolkata bench, seeking to recover Rs97 crore in an outstanding loan under the new Insolvency and Bankruptcy Code after the firm failed to come up with a restructuring plan to clear its dues.
Lawyers for Binani Cement, a privately held firm of the Braj Binani Group, claimed Bank of Baroda’s application had several technical flaws, and that its claim was minuscule compared with the total value of the group’s assets, which, according to its lawyers, is Rs14,000 crore.
Binani Cement, which is a unit of Binani Industries Ltd, had assets worth Rs5,074.83 crore at the end of March, according to the holding firm’s auditor, MZSK & Associates.
NCLT’s Kolkata bench on Wednesday reserved its order on whether or not it would admit the lender’s application under the new insolvency code. If the application is admitted, the company’s board will be superseded and an interim resolution professional appointed to take control of its assets and operations. Bank of Baroda wants management consulting firm Deloitte to be appointed as interim resolution professional.
Pratap Chatterjee, counsel for Binani Cement, said Bank of Baroda was not the lead lender to the cement maker and that it had not taken the approval of the joint forum of lenders before moving NCLT. Citing Reserve Bank of India rules, Chatterjee said Bank of Baroda was required to write to the joint forum and wait for at least 30 days before unilaterally moving NCLT.
Chatterjee asked why Bank of Baroda was seeking the appointment of an administrator to recover a small loan of Rs97 crore when the lead banker, Central Bank of India, was not seeking dispute resolution in this manner.
However, senior advocate Ratnanko Banerjee told the bench that Bank of Baroda’s move had the backing of the joint forum of lenders led by the Edelweiss Group, and that Binani Cement was in distress because the management had failed to come up with a restructuring plan.
Bank of Baroda has in its application said the firm had in a meeting with the joint forum of lenders in January committed to preparing a restructuring plan, according to the bank’s counsel, Rishav Banerjee. Lenders met the management again in April, but no concrete plan for revival has yet been given, Banerjee said in his submission to the bench.
In fiscal year 2016-17, Binani Cement registered a net loss of Rs349.31 crore on revenue of Rs1,534.62 crore, according to the auditor of its holding company. Binani Industries’ net consolidated loss was Rs468.37 crore, and its consolidated liabilities exceeded its assets by Rs1,525.32 crore.
“The management has represented to us that it is hopeful of revival of businesses in the subsidiaries in the near future," auditor MZSK & Associates wrote in its report.
Lenders, however, appear to have lost confidence in the management. Banerjee said Bank of Baroda had lent Rs386 crore in all, and that Rs97 crore is currently outstanding. The company started to default on its repayment obligations in 2015, he added.
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