Deconstructing The Binani Cements/Rajputana NCLAT Judgment: Discrimination Between Creditors, And Maximization Of Value

While the substance over process approach taken by the NCLAT in relation to UltraTech’s bid may be beneficial from a straight jacketed procedural approach in a CIRP, the conclusion in relation to no discrimination between sets of financial creditors and operational creditors may be problematic

- Tirthankar Datta & Neelasha Nemani

The saga begins

Being one of the key non-performing assets in the banking system, on July 25, 2017, the National Company Law Tribunal, Kolkata Bench (“NCLT”), had admitted an application filed by a financial creditor to Binani Cements Limited (“Binani”) for the initiation of a corporate insolvency resolution process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

Subsequently, resolution plans were received by the resolution professional (“RP”) from several resolution applicants, including Dalmia Bharat-led Rajputana Properties Private Limited (“Rajputana”) and Aditya Birla group company, UltraTech Cement Limited (“UltraTech”).

Based on the evaluation matrix, the resolution plan submitted by Rajputana was approved by the COC and the RP approached the NCLT for approval in accordance with the IBC. In the meantime, UltraTech had submitted a revised bid to the RP after expiry of the prescribed deadline, which was not considered by the COC. UltraTech also entered into negotiations with Binani Industries Limited (“Binani Industries”) to acquire Binani Industries’ stake in Binani for the same value as its revised bid amount, subject to the parties to the CIRP entering into a settlement.

Impugned NCLT order

While rejecting Rajputana’s plan, the NCLT vide its order dated May 2, 2018 held that the plan was discriminatory and was contrary to the scheme of the IBC and that the revised plan submitted by UltraTech should be considered by the COC. Subsequently, the COC on May 28, 2018 approved the revised plan submitted by UltraTech unanimously.