Dalmia Bharat prepares its battle-plan for Friday as Binani Cement moves SC

Dalmia Bharat, which was chosen by the creditors under the Insolvency and Bankruptcy Code (IBC) to take over Binani Cement, is preparing to disrupt the debt-laden company’s promoter Binani Industries’ move to the Supreme Court for an out-of-court settlement with lenders.  

Dalmia Bharat has filed a caveat with the Supreme Court so that proceedings do not take place without its knowledge or an ex-partie order is not issued.

Mahendra Singhi, chief executive officer, Dalmia Bharat, said an out-of-court settlement with the lenders would jeopardise India’s global ranking in ease of doing business. He asked: “How can the lenders settle their dues with those against whom allegations of money siphoning are being raised?”

Binani Cement’s resolution professional, Vijay Kumar Iyer, had earlier submitted an application with the Kolkata Bench of the National Corporate Law Tribunal (NCLT), alleging suspected fraudulent activities by Binani Industries. 

“It would be indeed sad if, for Rs 3-4 billion extra, the banks accept Binani Industries’ proposal. It would promote people doing unlawful activities to the likes of Nirav Modi or Vijay Mallya,” Singhi said. Mallya is a wilful defaulter on account of corporate loan default and the Punjab National Bank has alleged unauthorised transactions by Nirav Modi.

Singhi, however, clarified that his allegations were based on the application submitted by Iyer and doesn’t follow any enquiry undertaken by Dalmia Bharat. Binani Industries had earlier termed the allegations by the resolution professional an “after-thought” and some of the lenders termed it as “questionable transactions not amounting to fraud”.

On Saturday, after the lenders expressed their willingness to go ahead with an out-of-court settlement if Binani Industries had the approval of the Supreme Court, the company filed a special leave petition under Section 62A of the IBC and submitted a plea for an out-of-court settlement. The Supreme Court will be hearing the submissions on Friday.

“The maxim of the insolvency code is maximisation of value for the lenders and, thus, we do not think Binani Industries’ move is against the spirit of the IBC,” one of the lenders in the committee of creditors told Business Standard.

Singhi, however, has said such maxim cannot be implied in isolation. According to Singhi, India’s global rankings in ease of doing business could improve on the back of proper implementation of the IBC, which seeks to solve the problem of spiralling non-performing assets with the banks and offer sick companies a second chance.

Sources suggest that the Dalmia Bharat counsel is likely to touch upon these issues on Friday.

A source close to Binani Industries said that the lenders have already taken Rs 7.5 billion from the company as earnest deposit, which shows the lenders’ consent to their proposal. “UltraTech Cement is also a respondent in this case as they are financing the deal,” the source in Binani Industries said.

According to a Binani Industries’ spokesperson, the IBC is not designed to penalise a promoter by preventing them to make a full payment of legitimate dues and “become a mute spectator to his/her  company being sold at a huge discount, causing financial loss to financial lenders,  trade operational creditors, public equity holders etc”.

“The preamble of the IBC works on the basic ethos of maximising value for all stakeholders. Keeping this in mind, a borrower always has the right to pay off all dues of all lenders and creditors and redeem the company from all mortgages. Based on this basic principle, the company has appealed to the committee of creditors for a settlement outside the CIRP (Corporate Insolvency Resolution Process),” the spokesperson said.

Backed by UltraTech Cement, Binani Industries has offered the lenders over Rs 76 billion for the out-of-court settlement, which is Rs 1.1 billion higher than what Dalmia Bharat is offering.