NCLAT approves UltraTech's revised Rs7,900-cr bid for Binani Cement

The National Company Law Appellate Tribunal (NCLAT) has approved UltraTech Cement Ltd’s revised bid of Rs7,900 crore to acquire debt-laden Binani Cement Ltd, holding that the rival bid by Dalmia Group Ltd was “discriminatory” to creditors of the stressed cement maker.

The NCLAT turned down a Rs6,930 crore offer by Rajputana Properties, owned by Dalmia Bharat, and also dismissed an appeal over the rejection while approving UltraTech Cement’s revised bid of Rs7,900 crore.
The bankruptcy appeals court ruled that the insolvency resolution process should aim to extract the maximum value from auctions of stressed assets.
A two-member bench of the National Company Law Appellate Tribunal (NCLAT) dismissed an appeal by Rajputana Properties Pvt. Ltd, owned by Dalmia Bharat Ltd, saying its offer for Binani Cement was “discriminatory” against some financial creditors.
“The objective of the Insolvency and Bankruptcy Code is resolution (and) the purpose of the resolution is for maximization of the value of assets of the corporate debtor,” the tribunal held in its ruling on Wednesday.
Binani Cement’s committee of creditors had decided to consider an improved bid from UltraTech after Rajputana Properties’ Rs6,930 crore bid was declared the highest bidder and the company moved the Kolkata bench of the bankruptcy court for approval.
Rajputana Properties had in July approached the Supreme Court challenging the committee of creditors’ decision to consider UltraTech’s revised proposal, which would entirely pay off all secured and unsecured financial creditors, as well as operational creditors.
The apex court referred the matter to NCLAT.
UltraTech’s revised proposal approved on Wednesday was an improvement from the Rs7,200 crore offer it made just after the deadline for bidding ended. Binani Cement has an accumulated debt of Rs6,500 crore.
The UltraTech offer pays back not only secured lenders but operational creditors in full, along with interest accrued since the date the NCLT application was filed. 
The NCLAT noted that Dalmia Group’s plan discriminated between financial creditors based on whether they have direct exposure to Binani Cements or have been given guarantees by it. Even similarly situated financial creditors with guarantees from Binani Cement have been discriminated against, the appellate tribunal said, pointing to the amounts offered to Export-Import Bank of India and State Bank of India Hong Kong.
The Kolkata bench of the National Company Tribunal had also come to the same conclusion in May this year.
The NCLAT rejected Dalmia Group’s argument that the intent of the insolvency law is to bind minority financial creditors with the majority’s decision. 
The appellate tribunal also applied the principle in the context of Binani Cement’s operational creditors. It has rejected Dalmia Group’s plan on the grounds of differential treatment between similarly situated operational creditors.
“...‘unrelated parties’ have been provided with 35 percent of their verified claim which is about Rs90 crore. However, ‘related parties’ have not been provided with any amount.”
The law assures operational creditors at least the liquidation value. Over and above that, you can more or less choose what you (creditors’ committee) want to give. You can’t discriminate between two paper delivery guys but let’s say, one operational creditor supplied you coal and the other supplied paper. You may say that the one who supplied me coal is a lucrative supplier and pay him more.