India: Supreme Court Upholds Equitable Value Maximisation Under The Insolvency And Bankruptcy Code


Earlier this month, the Supreme Court of India (the "Supreme Court") dismissed an appeal by a competing resolution applicant, asserting that the acceptance of UltraTech Cement Limited's recent resolution plan to acquire the distressed Indian cement manufacturer, Binani Cement Limited ("Binani Cement") violated the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (the "Code").

This alert looks at the circumstances surrounding the insolvency resolution of Binani Cement under the Code, the interests of competing resolution applicants and the reasoning of the National Company Law Tribunal (the "NCLT"), the National Company Law Appellate Tribunal (the "NCLAT") and the Supreme Court in deciding the matter.


On July 25, 2017, the NCLT admitted an insolvency plea against Binani Cement and initiated the corporate insolvency resolution process. Thereafter, Dalmia Bharat Group (through its company Rajputana Properties Private Limited) ("Dalmia") and UltraTech Cement Limited ("UltraTech") had sent their resolution plans for consideration by the Committee of Creditors (the "CoC").

On May 2, 2018, the Kolkata bench of the NCLT asked the CoC to consider the resolution plans submitted by Dalmia and Ultratech, even though it was not in accordance with the process and timelines set out by the CoC. After the judgment, the CoC considered and unanimously voted in favour of UltraTech's resolution plan.

The CoC decided that after the deadline for submission of the resolution plans (which was February 12, 2018) had passed, they would only negotiate with the highest resolution applicant and not engage with other resolution applicants.

Dalmia was held to be the highest bidder and after negotiations with the CoC, Dalmia submitted its revised offer on March 7, 2018.

UltraTech then submitted a revised resolution plan on March 8, 2018. However, the CoC approved Dalmia's resolution plan on March 14, 2018 without taking UltraTech's revised resolution plan into consideration.

Thereafter, the NCLT directed the CoC to consider both the revised resolution plans submitted by Dalmia and UltraTech. Dalmia challenged this order of the NCLT in the NCLAT and thereafter, in the Supreme Court.

In the meantime, Binani Industries Limited, the parent company of Binani Cement, entered into an agreement with UltraTech to arrive at an out of court settlement to repay all the creditors and seek termination of the insolvency process. This led to questioning the eligibility of UltraTech given their contractual ties with the promoters of Binani. All of this stirred up various actions in the tribunals, and the NCLAT, in its judgment dated November 14, 2018 decided to take up all the related matters and address them.1


The judgment discusses the objective of the Code and sets out certain guiding principles for the CoC on how to approach the resolution process. Given that resolution plans are complex financial structures that require analysis by commercial minds in order to maximise the value of the assets, they cannot be treated at par with a sale or auction where the only measure for value is the monetary value.

Resolution plans are expected to be structured, in the following order of priority. Firstly, for resolution; secondly, for value maximisation of the debtor's assets for all its creditors; and thirdly, to promote entrepreneurship, the availability of credit and balance the interests. The NCLAT has held this order of objective to be sacrosanct.

3.1 The Dalmia Plan

One of the main objectives of the Code is value maximisation. The premise of this value maximisation is that it is in the interests of all creditors and that it is also equitable. Under the Code, a two-thirds majority of the CoC is required to vote in favour of a resolution plan for it to attain approval and it cannot be that the resolution plan provides for some creditors to attain this approval at the cost of another stakeholder.

In the present case, the Dalmia resolution plan received approval from financial creditors holding 99.43% of the financial debt in the CoC, but financial creditors holding 10.53% of the financial debt, even while providing their consent recorded protests and alleged that they had not been dealt with equitably. While most financial creditors (including similarly placed financial creditors) were being paid 100% of their verified claims, only 72.59% of the verified claim of Export-Import Bank of India and 10% of the verified claim of the State Bank of India, Hong Kong branch, was provided for in the resolution plan.

Both of these were guarantees, and the NCLAT rejected explanations such as the underlying loan itself being a non-performing asset or insufficient due diligence as grounds for discriminating between financial creditors who are similarly placed.

3.2 Value maximisation by due consideration to all resolution applicants

At the outset, it should be noted that the Code does not look to set out out the specific process of submission of the resolution plans. This gives more freedom to the resolution professional, the CoC, and the resolution applicants to tailor-make and maximise value, given the specific circumstances surrounding each case.

The objective, however, is inviolable, and the end goal as well as the process is required to be set out to serve the objective of the Code: value maximization within the timelines specified in the Code.

The judgment, while dealing with the manner in which the objective of the Code is expected to be met, sets out that as long as the resolution plan was provided within time and prior to the approval of the CoC, it is required to be considered, even if it at the cost of minor non-compliances with guidelines set out in a process document by the CoC.


The Code is a welcome consolidation and replacement of the previously scattered and cumbersome regime that governed insolvency resolution and liquidation. However, given that the Code is in its nascent stages, a number of nuances not directly contemplated in the new regime are being brought to the forefront and questioned.

Arguably, the Code itself has initiated a mind-shift in the prevailing attitude to insolvency and the practical importance of unlocking value from distressed assets in a time bound manner.

What is emerging, however (and demonstrated in the Binani Cement case), is a balance between the procedure and the acknowledgment of the Code as a commercial statute, achieving commercial outcomes.

Although the basic principles of insolvency resolution, such as the time bound period for resolution and the order or priority are mandatory, the Binani Cement case demonstrates a more flexible approach to the process itself, to ensure that the objectives of the Code are served.

In light of the fact that the Supreme Court of India has rejected the admission of the appeal on November 19, 2018, the NCLAT judgment ensuring value maximisation and the equitable treatment of financial creditors has prevailed.


1. NCLAT judgment dated November 14, 2018 available at and

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions