Dalmia Bharat alleges information leakage in Binani Cement bidding process

Dalmia Bharat Cement claimed that UltraTech Cement revised its bid as there was a leak; in turn, UltraTech Cement hits back

At a time when the Kolkata bench of NCLT is pulling up the lenders of Binani Cement, questioning them on why they didn’t consider the revised offer from UltraTech Cement, which is monetarily superior to that of Dalmia Bharat Cement, the latter alleged that there has been leakage of information to UltraTech Cement, which led it to increase its bid amount.

During the hearing on allegations brought up by Exim bank, which claimed that the Dalmia Bharat Cement consortium’s offer discriminates repayment to the lenders, S. K. Kapoor, the legal counsel representing the H1 bidder in the tribunal, alleged that information on bids was leaked which prompted UltraTech to increase its offer and in turn it led Exim Bank to oppose his client’s proposal, even though a Letter of Intent (LOI) has been issued.

“After UltraTech (Cement) came to know, they increased their offer. There is a leak”, he stated before a two-member panel of judges at the Kolkata bench of the tribunal.

Kapoor claimed that post selection of the H1 bidder in late February, Exim Bank had been negotiating with Dalmia Bharat Cement because of which the winning bidder increased to repay their claim from the former 52 per cent to 72.5 per cent.

However, as per Kapoor, Exim Bank, which he alleged has been “set-up by UltraTech Cement”, filed a petition with NCLT seeking maximisation of value for itself, despite voting in favour of the Dalmia Bharat Cement-Bain Capital's Resurgent India Fund’s resolution plan earlier.

Under this proposal, Exim Bank will get back Rs. 4.5 billion of its exposure to Binani Cement, which is undergoing bankruptcy proceedings, and another Rs. 1.7 billion will be left out resulting in a haircut.

Asked about the allegation, an Aditya Birla Group spokesperson said, “We were never privy to any information directly or indirectly about the bids.  Even our requests for clarification remained unanswered.  People who might have been privy to such leaked information seem to now believe that others had similar access to leaked information.  The statement, bereft of any truth, is made by Dalmia’s before the NCLT, Kolkata”.  

“This is so much in line with Dalmia’s well thought out strategy to prejudice the mind of the Tribunal by raising irrelevant and extraneous issues instead of  dealing with the facts as to why should they be allowed to get away with the valuable assets at a huge discount of nearly Rs.1100 crore at the expense of public sector banks, like EXIM, SBI and the Government as statutory creditors and trade creditors who are all being subject to huge haircuts under certain proposals”, the Aditya Birla Group spokesperson added.

As per the allegation, a meeting of the Committee of Creditors (CoC) had taken place on March 7 and the following day, the Aditya Birla Group company enhanced its offer for the takeover of Binani Cement to over Rs. 72 billion, vastly outbidding the H1 in the process.

Sources close to Exim Bank have refuted the allegation stating that “it is not maintainable in court” and there is no proof to the allegation.

The resolution professional, Vijay Kumar Iyer didn’t respond to a query over the allegation.

When contacted, some of the lenders, who are a part of the CoC, stated that they are not aware of such leakage but “it needs to be found out”.

“The entire matter is being scrutinised now in NCLT. We hope that truth will emerge”, one of the leading lenders to Binani Cement said.

Punit Dutt Tyagi, the executive partner at Lakshmikumaran & Sridharan, a law firm, said, “If it is true it will have serious implications in other resolution processes as well. It is always better to opt for open bid for maximisation of value which is the aim of IBC”.

The CoC, as per its own mutually agreed rules, had opted for closed bids and negotiated with the H1 bidder only.

In course of the proceedings, the tribunal however, has been repeatedly questioning why the CoC did not modify or change its own process document which it itself framed for the bidding process and if it was within the power of the CoC to change it to give scope of consideration to a higher monetary offer from UltraTech Cement.

In turn, the legal counsel representing the CoC responded that the lenders had framed rules for the bidding process referring to guidelines from the Central Vigilance Commission and in case it changed rules of bidding process after their submission, it would set a bad precedence for posterity. 

“This (Binani Cement resolution process) is just a drop. Can you imagine the uncertainty that will prevail (for pending cases)”? the CoC counsel told the tribunal.

In addition, the CoC counsel also stated that IBC is an evolving matter and wherever there is a gap, common law has been considered.

The case is up for hearing again on Wednesday, April 18.