SC allows UltraTech to take over Binani

The Supreme Court (SC) on Monday upheld the National Company Law Appellate Tribunal’s (NCLAT’s) order approving UltraTech Cement’s revised bid for stressed asset Binani Cement, and dismissed a plea by the Dalmia Bharat-led consortium.

Rajputana Properties— the consortium led by Dalmia Bharat — had moved the SC on Friday against the NCLAT order, alleging that UltraTech was ineligible to bid for Binani Cement. It said the bid was late and Rajputana Properties had stuck to the process laid out by the Insolvency and Bankruptcy Code (IBC).

Last week, the NCLAT had rejected a bid from Dalmia Bharat, stating it was “discriminatory” and approved the monetarily superior offer from UltraTech.

The committee of creditors (CoC) of Binani Cement was expecting the takeover to be completed by this week and the dues, along with interest, to be paid to the lenders.

“It will be a smooth handover as Binani Cement isn’t opposing the offer from UltraTech,” said Sameer Kaji, senior advisor on corporate strategy, Binani Cement. The Binani case had set off a debate around process versus value maximisation, as UltraTech had revised its offer after the window of submitting the applications was closed.

UltraTech had initially quoted an offer of ~65 billion — lower than Dalmia Bharat’s offer — but revised it just after the deadline. The CoC, in turn, rejected the revised bid and the Dalmia Bharat consortium was selected as the H1 bidder.

Its plan was submitted to the National Company Law Tribunal (NCLT) for approval in March.

UltraTech, Binani Cement, SBI Hong Kong, Exim Bank, operational creditors, and other stakeholders, however, opposed the plan. On May 2, after a prolonged hearing, the NCLT ordered the CoC to approve UltraTech’s plan and asked to consider the one from Dalmia Bharat only if it matched the offer from UltraTech.

Dalmia Bharat then moved the NCLAT.

The NCLAT reasoned that the objective of the IBC was to provide a resolution process rather than liquidation, in a time-bound manner for maximisation of value of assets of such persons to promote entrepreneurship, credit availability, and balance the interests of various stakeholders. It, therefore, passed UltraTech’s offer of ~79.5 billion, while dismissing Rajputana Properties’ ~69.32-billion offer.

According to Kaji, the SC’s ruling on Monday was a “landmark judgement” and had “laid the foundation for future cases”.

“Among many noteworthy things, two aspects are prominent. First, from the NCLAT’s order, it is now clear that a bid can be accepted at any stage before the adjudicating authority takes a decision and secondly, operational creditors have an equal footing along with the financial creditors,” said Kaji.

The order is likely to put to rest the debate around process versus value maximisation and set a precedent for other cases. Value maximisation has won in all three forums — NCLT, NCLAT, and SC, over process, a legal expert pointed out. Sumant Batra, managing partner of Kesar Dass B & Associates, however said there were two outcomes to the order. The CoC had the final say and maximisation within the process would be respected.

But UltraTech's main argument in NCLT and NCLAT was that it had revised its offer before the H1 bidder was selected by the CoC and therefore it wasn't outside the process. The revised offer, however, was made after the bid submission deadline.

Legal experts believed that from the Reserve Bank of India’s first list of non-performing assets, the Binani order was likely to have a bearing on Bhushan Power & Steel, as JSW Steel could take advantage of it.

In the case of Bhushan Power & Steel, value maximisation was prioritised over process twice. First, with a late bid from Liberty House and second, when JSW Steel came up with a higher bid after Tata Steel had been selected as the highest bidder.

The other high-profile NCLT case in which the Binani order might have implications is the Essar case.

In its order, the NCLAT had noted, “Any resolution plan if shown to be discriminatory against one or other financial creditor or the operational creditor, such a plan can be held to be against the provisions of the IBC.”

So far, 31 operational creditors have moved the tribunal against the ArcelorMittal resolution plan and could take recourse to the Binani order. Arcelor has offered ~420 billion for Essar but ~2.41 billion has been earmarked for operational creditors.