The Kolkata bench of NCLT on Wednesday ordered the resolution professional of the bankrupt Binani Cement to accept the revised offer of Rs 79.60 billion from UltraTech Cement and place it before the lenders for their consideration, which potentially can set precedence for lenders to negotiate with an unsuccessful bidder for maximisation of value under IBC. On the other hand, the tribunal also provided scope to the Dalmia Bharat Cement led consortium to raise its bid over UltraTech Cement’s revised offer.
According to the order passed by Jinan K R, member-judicial and Madan B Gosavi, member-judicial at Kolkata bench of NCLT, the resolution professional (RP), Vijay Kumar Iyer has been directed to accept the revised bid and place it along with UltraTech Cement’s resolution plan before the Committee of Creditors (CoC) within Saturday, May 5.
Previously, UltraTech Cement had challenged the selection criteria and process by the RP and the CoC in NCLT and stated that wrong gradation system led it to become the H2 bidder.
Afterwards, it submitted a revised bid, beating Dalmia Bharat Cement’s offer after the closure of the bidding window and also tried to finance Binani Cement in an out-of-court settlement with the lenders, which the CoC refused. On April 16, it further revised its offer to Rs. 79.60 billion.
The CoC, in turn, has been ordered to consider the Aditya Birla Group company’s revised bid, while giving it the scope of further modification and take the necessary call, also bearing in mind the objective of the IBC. According to the ruling, the insolvency resolution process has to be completed by June 24 this year.
During the course of numerous hearings, Jinan had observed that the objective of IBC is the maximisation of value.
The difference between UltraTech Cement’s revised offer and that of the Dalmia Bharat led consortium is Rs 10.22 billion.
Earlier, the legal counsel of the RP, as well as the CoC, had argued that UltraTech’s revised bid couldn’t be admitted for consideration as it would flout the internal process document of the CoC. This process document is based on IBA and Central Vigilance Commission guidelines. The tribunal, however, had pointed out that the process document is not a legally binding document and questioned them frequently on what prevented the CoC to modify the process document to accommodate a superior bid from UltraTech Cement, which would pay off all lenders, including operational lenders as well as clear all statutory dues.
On the other hand, while reading from the order, Jinan said, “The CoC is also directed to reconsider and resolution plan of Rajputana Properties Pvt Ltd (RPPL), if the resolution applicant is willing to raise the offer above the offer of UltraTech”.
RPPL is the partnership firm formed by Dalmia Bharat Cement and Piramal-Bain Capital, which previously had been chosen by the CoC as the H1 bidder. Subsequently, the CoC had issued a letter of intent to RPPL, based on which it had made part of the requisite payment and moved NCLT for approval of the resolution plan. Dalmia Bharat Cement has a 50 per cent stake in this joint-venture firm.
A Dalmia Bharat spokesperson said, “We are surprised by the order passed by the NCLT today. The RP and CoC followed the due process of law in approving the plan of RPPL in which no flaw has been found. In our view, any revised offer from an unsuccessful resolution applicant outside the resolution process cannot become a basis of setting aside the decision of the CoC. We have a strong conviction that we have followed the law as per the due process and believe that we will eventually succeed. We will take all the appropriate steps required.”
Sources said the Dalmia Bharat led consortium is currently discussing the possibility of challenging the tribunal’s order in the Appellate authority in New Delhi but will take a call only after it receives the order “in totality.”
Sameer Kaji, corporate advisor to Binani Cement said, “It is a very positive move in the evolving scenario of corporate insolvency resolution process. As per my current understanding, while Dalmia Bharat consortium can raise its bid to match UltraTech Cement, it can also further revise its bid”.
Asked if it will lead to open bidding in the CoC or turn out to be an auction process, he said, “There will be more clarity on this after a copy of the order is made available”.
Previously, based on NCLT’s suggestion, the lenders had considered the UltraTech Cement backed the financial proposal from the promoters of Binani Cement to clear their dues. After the meeting, while the lenders termed the UltraTech Cement backed offer as “superior to the one the lenders have approved”, they had asked Binani Cement to obtain permission from the Supreme Court first for an out-of-court settlement. It implied termination of IBC proceedings against Binani Cement.
However, despite moving the country’s apex court, Binani Cement had withdrawn its application after completion of the hearing.
Repeated calls to Iyer and a lead lender to Binani Cement went unanswered.
The stipulated 270-day period under the IBC has expired on April 21. Jinan and Gosavi ordered that the period of litigation stands excluded. Legally, unless a resolution plan is approved before the 270-day timeframe expires, the company is liquidated.
What the order says
Resolution process to be completed by June 24, 2018
RP to accept UltraTech's revised offer and submit to CoC for consideration
CoC to consider revised offer of UltraTech and give an opportunity for further modification of the offer
Dalmia Bharat consortium may up its bid to match UltraTech's revised offer
According to the order passed by Jinan K R, member-judicial and Madan B Gosavi, member-judicial at Kolkata bench of NCLT, the resolution professional (RP), Vijay Kumar Iyer has been directed to accept the revised bid and place it along with UltraTech Cement’s resolution plan before the Committee of Creditors (CoC) within Saturday, May 5.
Previously, UltraTech Cement had challenged the selection criteria and process by the RP and the CoC in NCLT and stated that wrong gradation system led it to become the H2 bidder.
Afterwards, it submitted a revised bid, beating Dalmia Bharat Cement’s offer after the closure of the bidding window and also tried to finance Binani Cement in an out-of-court settlement with the lenders, which the CoC refused. On April 16, it further revised its offer to Rs. 79.60 billion.
The CoC, in turn, has been ordered to consider the Aditya Birla Group company’s revised bid, while giving it the scope of further modification and take the necessary call, also bearing in mind the objective of the IBC. According to the ruling, the insolvency resolution process has to be completed by June 24 this year.
During the course of numerous hearings, Jinan had observed that the objective of IBC is the maximisation of value.
The difference between UltraTech Cement’s revised offer and that of the Dalmia Bharat led consortium is Rs 10.22 billion.
Earlier, the legal counsel of the RP, as well as the CoC, had argued that UltraTech’s revised bid couldn’t be admitted for consideration as it would flout the internal process document of the CoC. This process document is based on IBA and Central Vigilance Commission guidelines. The tribunal, however, had pointed out that the process document is not a legally binding document and questioned them frequently on what prevented the CoC to modify the process document to accommodate a superior bid from UltraTech Cement, which would pay off all lenders, including operational lenders as well as clear all statutory dues.
On the other hand, while reading from the order, Jinan said, “The CoC is also directed to reconsider and resolution plan of Rajputana Properties Pvt Ltd (RPPL), if the resolution applicant is willing to raise the offer above the offer of UltraTech”.
RPPL is the partnership firm formed by Dalmia Bharat Cement and Piramal-Bain Capital, which previously had been chosen by the CoC as the H1 bidder. Subsequently, the CoC had issued a letter of intent to RPPL, based on which it had made part of the requisite payment and moved NCLT for approval of the resolution plan. Dalmia Bharat Cement has a 50 per cent stake in this joint-venture firm.
A Dalmia Bharat spokesperson said, “We are surprised by the order passed by the NCLT today. The RP and CoC followed the due process of law in approving the plan of RPPL in which no flaw has been found. In our view, any revised offer from an unsuccessful resolution applicant outside the resolution process cannot become a basis of setting aside the decision of the CoC. We have a strong conviction that we have followed the law as per the due process and believe that we will eventually succeed. We will take all the appropriate steps required.”
Sources said the Dalmia Bharat led consortium is currently discussing the possibility of challenging the tribunal’s order in the Appellate authority in New Delhi but will take a call only after it receives the order “in totality.”
Sameer Kaji, corporate advisor to Binani Cement said, “It is a very positive move in the evolving scenario of corporate insolvency resolution process. As per my current understanding, while Dalmia Bharat consortium can raise its bid to match UltraTech Cement, it can also further revise its bid”.
Asked if it will lead to open bidding in the CoC or turn out to be an auction process, he said, “There will be more clarity on this after a copy of the order is made available”.
Previously, based on NCLT’s suggestion, the lenders had considered the UltraTech Cement backed the financial proposal from the promoters of Binani Cement to clear their dues. After the meeting, while the lenders termed the UltraTech Cement backed offer as “superior to the one the lenders have approved”, they had asked Binani Cement to obtain permission from the Supreme Court first for an out-of-court settlement. It implied termination of IBC proceedings against Binani Cement.
However, despite moving the country’s apex court, Binani Cement had withdrawn its application after completion of the hearing.
Repeated calls to Iyer and a lead lender to Binani Cement went unanswered.
The stipulated 270-day period under the IBC has expired on April 21. Jinan and Gosavi ordered that the period of litigation stands excluded. Legally, unless a resolution plan is approved before the 270-day timeframe expires, the company is liquidated.
What the order says
Resolution process to be completed by June 24, 2018
RP to accept UltraTech's revised offer and submit to CoC for consideration
CoC to consider revised offer of UltraTech and give an opportunity for further modification of the offer
Dalmia Bharat consortium may up its bid to match UltraTech's revised offer
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