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UltraTech bags Binani Cement at NCLAT

UltraTech Cement's revised offer was at Rs 7,900 crore, against its earlier bid of Rs 7,200 crore

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UltraTech is set to bag Binani Cement, with the National Company Law Appellate Tribunal on Wednesday approving the revised bid of Aditya Birla group firm UltraTech Cement while rejecting the earlier preferred offer of Dalmia Bharat group as discriminatory.

A two-member bench of NCLAT, headed by chairman justice S J Mukhopadhaya ordered "constitution of monitoring committee and implementation of revised approved plan submitted by 'Ultratech Cement Limited' in accordance with law".

The 44-page judgement made wide ranging observations on the various aspects of Insolvency and Bankruptcy Code, reminding the key objectives and principles of the rules and its abuses, which would impact the outcome of the resolution of several other entities including Essar Steel where the contours of the disputes are similar.

Dalmia Bharat-promoted Rajputana Properties had moved the Supreme Court against a decision by the lenders of Binani Cement to consider the revised resolution plan submitted by UltraTech. The committee of creditors had also asked Rajputana Properties to revise its offer of Rs 6,930 crore.

UltraTech Cement's revised offer was at Rs 7,900 crore, against its earlier bid of Rs 7,200 crore. UltraTech Cement was earlier the second-highest bidder and had come up with an improved offer, backed by the promoters of Binani Cement.

The key observation behind ruling out Rajputana Properties was that their offer was discriminatory to the operational creditors and even some banks and financial creditors.

The resolution process has to be equitable to all classes of creditors, an observation which assumes significance when operational creditors of Essar Steel have just approached the National Company Law Tribunal (NCLT) claiming that selected applicant ArcelorMittal's offer was discriminatory as their dues would not be settled fully.

NCLAT also ruled against the offer of promoters to settle dues in order to retain control of the companies.

"Merely because the promoter wants to pay all dues including the default amount cannot be a ground to set aside the 'Corporate Insolvency Resolution Process," the judgement said.

After Braj Binani group's offer to settle dues of Binani Cement, the Ruias of Essar have recently made of similar offer to pay off all the dues of Essar Steel.

NCLAT found UltraTech's resolution plan better compared with that of Dalmia Bharat group.

"From the two Resolution Plans, it will be clear that the Rajputana Properties in its Resolution Plan has discriminated some of the Financial Creditors who are equally situated and not balanced the other stakeholders, such as Operational Creditors. Therefore, the Adjudicating Authority has rightly held the Resolution Plan submitted by 'Rajputana Properties to be discriminatory," NCLAT ruled on Wednesday.

The appellate authority found fault with the choices and decisions made by the Committee of Creditors which had earlier selected Rajputana Propeties.

The Committee of Creditors took note of revised offer given by the Rajputana Properties on March 7 but refused to notice the revised offer submitted by UltraTech the next day "much prior to the decision of the 'Committee of Creditors' (March 14, 2018)", the NCLAT judgement said.

Pointing out that IBC process document provides that the Committee of Creditors has the right to accept or reject one or all plans prior to approval of the same by the Adjudicating Authority, the judges observed that the committee failed to notice the process document.

"Non-application of mind by the 'Committee of Creditors' and discriminatory behaviour in approving the plan submitted by the Rajputana Properties is apparent," the judgement said.

Rajputana's resolution plan was discriminatory to financial as well as operational creditors as well.

While some financial creditors have not been paid in full, the operational creditors got much less against most of the large financial creditors who stand to recover 100% of their dues.

Even among financial creditors, including Export-Import Bank of India were discriminated against getting 72.59%, while State Bank of India-Hong Kong got just 10%," the order said.

UPPING THE BID

  • Rs 7,900 crore – Ultratech's revised offer for Binani Cement
     
  • Rs 6,930 crore – Bid by Dalmia Bharat-led consortium
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