Calcutta: The lenders of bankrupt Binani Cement Ltd have justified their decision to back a lower financial offer from Dalmia Bharat, arguing they played by the rulebook to spurn a revised and higher offer from UltraTech Cement.
Appearing on behalf of the committee of creditors of Binani Cement, senior advocate Pratap Chatterjee cited the guidelines of the Central Vigilance Commission, Indian Banks' Association and the Reserve Bank of India to argue that the creditors' group could have only negotiated with the highest bidder.
He also argued that if the revised bid made by UltraTech was considered, the precedent might prove to be detrimental to the timely closure of insolvency proceedings initiated against several companies across the country involving Rs 8 lakh crore of non-performing assets in the banking sector.
According to the timeline publicly known, Rajputana Properties Pvt Ltd, a consortium headed by Dalmia Bharat in partnership with Piramal Enterprise and Bain Capital, was chosen as the highest bidder during a meeting of the committee of creditors on February 27 and communicated to the resolution professional.
Thereafter, a committee was formed to negotiate with Rajputana, which upped its offer to around Rs 6,700 crore from the earlier offer of Rs 6,300 crore. However, on March 8, UltraTech, by an email, increased its offer to Rs 7,267 crore.
"What prevented UltraTech to come up with the higher bid in the first instance...can we (CoC) be faulted for going ahead with the process which was pre-decided and as per CVC, IBA and RBI guidelines?" Chatterjee asked, while explaining the creditors' action to vote on Rajputana's bid on March 14 and offering the letter of intent to it, subsequently.
The resolution professional appointed by the NCLT for Binani Cement had argued he had done all that could be done to inform the committee of creditors about the existence of the UltraTech offer and even proposed an auction between the top bidders on March 14.
Appearing on behalf of the resolution professional, senior advocate Abhrajit Mitra argued the final decision was left to the creditors to consider the UltraTech offer or go ahead with the highest bidder instead. It decided to vote in favour of the second option with 99.43 per cent majority, Mitra informed.
CVC and IBA norms
Rajputana wrote to the Central Vigilance Commissioner, RBI governor and chiefs of all the creditors to Binani earlier this month, highlighting the CVC guidelines on negotiating with the highest bidder.
The IBA letter to the chief executives of all member banks on January 31 on issues pertaining to bid evaluation for the NCLT process noted that it will be "one stage process and no negotiation will be done other than the H1 (highest) bidder".
The directive came out of a meeting of select bankers with the Insolvency & Bankruptcy Board of India and the ministry of corporate affairs.
Writing to the Central Vigilance Commissioner, Rajputana had said negotiating with the second highest bidder would be in violation of the CVC guidelines on the closed bids of January 20, 2010.
In the courtroom, it was argued, that if the second bid was considered, all the other resolution applicants should also have been given the chance to revise their offer and the corporate insolvency resolution process could not be completed within the stipulated time of 270 days.
UltraTech in its revised offer to pay full to the claims Exim Bank and Hong Kong branch of SBI as compared to Dalmia's 72 per cent and 10 per cent respectively. Moreover, it agreed to pay all operational creditors in full as compared to Dalmia who was paying 98 per cent of operational creditors having claim of less than Rs 1 crore.
