In a decision that may set a precedent, the National Company Law Appellate Tribunal (NCLAT) on Wednesday approved the revised bid of Aditya Birla group firm UltraTech Cement for insolvent Binani Cement as it offered higher value for the debt-ridden company that would meet the needs of all lenders.
The closure of insolvency resolution process for Binani on these terms would mean that bankruptcy courts may also give due consideration to highest bids in other cases. This could also have a bearing on the resolution process of Essar Steel, where promoters Ruias have given a higher last-minute counter offer even though lenders have approved ArcelorMittal’s proposition.
Also, operational creditors of Essar Steel have moved the Ahmedabad bench of National
Company Law Tribunal (NCLT), alleging that their interests have not been taken care of either by the committee of creditors or ArcelorMittal offer.
“The NCLAT order can be termed as path-breaking for the resolution process of stressed assets,” said a bankruptcy lawyer.
“If the principle of maximisation of value for lenders is given precedence over the process codified in the Insolvency and Bankruptcy Code (IBC), it could prevent delays and be a win-win for all stakeholders,” the lawyer said.
A two-member NCLAT bench, headed by chairman Justice SJ Mukhopadhaya while approving the UltraTech bid for Binani on Wednesday rejected the plan submitted by the rival Dalmia Bharat group firm Rajputana Properties terming it “discriminatory” against some financial creditors whose claims were not being met.
While decks have been cleared for final approval of UltraTech’s offer with NCLAT order, it needs to be seen whether Dalmia Bharat would explore some legal remedy to uphold its bid. While a Dalmia Bharat spokesperson declined to comment on the development, industry sources said it would decide future course of action after studying the order.
“NCLAT has correctly observed that IBC doesn’t provide for discriminatory treatment between the same class of creditors and dues of operational creditors must get similar treatment to that of financial creditors. If such an observation is not provided and operational creditors are given only liquidation value then it will discourage anyone to provide any supply of any goods or services,” said Dhaval Vussonji, lawyer representing Binani Operational Creditors Forum.
On July 2, the Supreme Court had transferred all matters related to insolvency resolution process of Binani Cement to the appellate tribunal from the National Company Law Tribunal, Kolkata, and asked NCLAT to hear the case on daily basis.
Rajputana Properties had moved the apex court against a decision by Binani Cement’s lenders to consider UltraTech’s revised resolution plan. The committee of creditors had also asked Rajputana Properties to revise its Rs 6,930 crore offer.
UltraTech Cement had sweetened its offer by Rs 700 crore to Rs 7,900 crore. The Aditya Birla group firm was the second-highest bidder in earlier round but came up with an improved offer later, backed by Binani Cement’s promoters. This started a series of action by both bidders to stay in the race.
Rajputana Properties moved the apex court second time in May challenging UltraTech Cement’s eligibility to bid under the conditions laid out in section 29(A) of IBC. The consortium had alleged UltraTech was acting in concert with Binani promoters making its bid ineligible.