12 February 2019

Insolvency Of Binani Cement - A Case Study



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NCLAT while deciding this case, summarized the object of the I&B Code and the Object of a Resolution Plan.
India Insolvency/Bankruptcy/Re-Structuring
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Insolvency and Bankruptcy Code, 2016



Binani Industries Limited VS.Bank Of Baroda And Anr.

[company appeal (at) (insolvency) no. 82 of 2018]dated: 14.11.2018


In this case, following appeals were filed with the NCLAT:

Company Appeal No. 82, arising out of order dated 28th February, 2018, passed by NCLT, Kolkata

The NCLT referred the application back to the Resolution Professional (RP) to re-consider in accordance with the Rules and Regulations of the IBC.

This led Binani Cement Limited to prefer an appeal.

Company Appeal No. 123, arising out of order dated 27th March, 2018, passed by NCLT, Kolkata.

Liberty was granted to the COC to consider the settlement plan proposed by the Binani Industries Limited.

Hence, Rajputana Properties Private Limited preferred an appeal against the abovementioned order.

Company Appeal No. 188, arising out of order dated 2nd May 2018, passed by NCLT, Kolkata

The Resolution plan submitted by Rajputana Properties Pvt. Ltd. was not accepted by the NCLT for reasons mentioned in the order.

Therefore, Rajputana Properties Private Limited preferred an appeal before the Honorable NCLAT.

Company Appeal no. 216, arising out of order dated 2nd May 2018, passed by the NCLT, Kolkata

The Adjudicating Authority refused to accept the proposal of Binani Industries Limited for repayment of dues of the Financial Creditors and close the CIRP in on the ground that there was no jurisdiction.

This led to Binani Industries limited preferring the present appeal.

Company Appeal no. 234, arising out of order dated 4th June 2018, passed by the NCLT, Kolkata

Adverse observations were made by the NCLT against the Resolution Professional (RP) Mr. Vijay Kumar Iyer.

The RP has thus, filed the present appeal with the NCLAT.

All the appeals were clubbed and decided together.


The meeting was held on 14th March, 2018 with 99.43% of the Committee of Creditors (COC) approving the Resolution plan that was submitted by Rajputana Properties Private Limited.

However, 10.53% of the COC who were forced to vote in favour of the 'Resolution Plan' recorded a protest note. They alleged that they had not been dealt with equitably when compared with other Financial Creditors who were the Corporate Guarantors of the Corporate Debtor.

Hence, an application was filed by the RP under Section 30 and 31 of the IBC r/w Regulation 39 of the Insolvency and Bankruptcy Board of India Regulations, 2016 for approval of the Resolution Plan in Binani Cement Limited.

The Resolution Plan of Rajputana Properties Pvt. Ltd. envisaged that the Financial Creditors such as, 'Edelweiss Asset Restructuring Company Limited', 'IDBI Bank Limited', 'Bank of Baroda', 'Canara Bank', 'Bank of India', State Bank of India' would be given 100% of the verified claim whereas lesser percentage was proposed for the claims of other Financial creditors such as Export-Import bank of India (72.59%) and State Bank of India-Hong Kong (10%).

Further with respect to the Operational Creditors (other than workmen), it was observed that 'unrelated parties' were provided with 35% of their verified claim which is about Rs. 90 Crores. However, 'related parties' were not made entitled to any amount.

The Tribunal agreed to the contentions that there was prima facie discrimination in the Resolution Plan submitted by Rajputana Properties.

Therefore, the NCLT held that the Resolution Plan submitted by Rajputana Properties Pvt. Ltd was discriminatory and contrary to the scheme of I&B Code and while rejecting the same, directed the COC to consider other Resolution plans including the revised plan submitted by Ultratech Cement Ltd.


The issues for consideration before the Appellate Tribunal were:

  • Whether the Committee of Creditors discriminated between the eligible Resolution Applicants while considering the Resolution Plan of Rajputana Properties Private Limited.
  • Whether the Resolution Plan submitted by Rajputana Properties Private Limited was discriminatory and in contravention to the provisions of the I&B Code.


NCLAT while deciding this case, summarized the object of the I&B Code and the Object of a Resolution Plan.


The main objective of the Code is of reorganisation and insolvency resolution of corporate persons in a time bound manner for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit and balancing the interest of all stakeholders.

The recent Ordinance explicitly aims to promote resolution over liquidation.

The objective of the Code can be summarized as below:

  • Resolution
  • Maximisation of Value of Assets
  • Promoting Entrepreneurship, availability of credit and
  • Balancing the interests.


The I&B Code defines Resolution Plan as a plan for insolvency resolution of the Corporate Debtor as a going concern.

A Resolution Plan must resolve insolvency i.e. should maximise the value of assets of the 'Corporate Debtor', and should promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders.

Resolution is not a sale or an auction, or a recovery or liquidation; it is the resolution of the Corporate Debtor as a going concern.

Therefore, while reviewing the I&B Code and under the facts & circumstances of the present case, the NCLAT observed that a better proposal for negotiation was submitted by Ultratech Cement Limited which was not even considered even though it was submitted on 8th March 2018, which was much prior to the approval of the plan (14th March, 2018).

The COC, in its defence, resorted to the following pleas:

  • First: The revised offer given by Ultratech Cement Limited was merely an e-mail with an offer.
  • Second: The offer was not made in accordance with the 'process document' and if it would have been considered, then it would have been a deviation from the process laid down in the 'process document' by the COC itself.
  • Third: The offer was beyond the time as stipulated under the I&B Code.

However, the NCLAT rejected the above pleas by stating that the COC failed to safeguard the interest of the stakeholders of the Corporate Debtor while approving the Resolution plan submitted by Rajputana Properties Private Limited.

Further, the COC erred in ignoring the revised Resolution Plan offered by Ultratech Cement Limited which had taken care of maximization of the assets of the Corporate Debtor and also balanced the claim of all the stakeholders of the Corporate Debtor.

The NCLAT also went on to hold that:

"Submission of revised offer is in continuation of the Resolution Plan already submitted and accepted by the Resolution Professional."

Ultratech Cement Limited had submitted its revised plan on 12th February, 2018 i.e. within the stipulated time. Thereafter, it was further revised and was submitted on 8th March, 2018 and therefore, the COC had enough time to notice and scrutinize the offer.

In this case, the COC accepted the revised offer submitted by Rajputana Properties Private Limited on 7th March, 2018 and refused to accept the revised offer submitted by Ultratech Cement Limited on 8th March, 2018 which is clearly arbitrary on the COC's part.

Therefore, the NCLAT while reviewing the process documents and the I&B Code held that:

"all the 'Resolution Plans' which meet the requirements of Section 30(2) of the IBC are required to be placed before the COC and the RP can review the 'Resolution Plan' and the 'Committee of Creditors' is entitled to negotiate and modify with consent of the 'Resolution Applicant'. To apply this clause there is no time limit prescribed except that the 'Resolution Process' should be completed within 180 days or maximum 270 days."

NCLAT further observed that, "Non-application of mind by the COC and discriminatory behaviour in approving the plan submitted by the 'Rajputana Properties Private Limited' is apparent."

The Authority also observed fraudulent transactions made by 'Binani Industries Limited' between 1st July 2015 to 30th November 2017 amounting to Rs. 1,187 Cr. However, these transactions have no connection to the Ultra Tech Cement hence no issue has been raised."


The Company Appeal (AT) (Insolvency) Nos. 123 & 188 of 2018 preferred by Rajputana Properties Private Limited and Company Appeal (AT) (Insolvency) Nos. 82 & 216 of 2018 preferred by'Binani Industries Limited were dismissed.

The Company Appeal (AT) (Insolvency) No. 234 of 2018 preferred by RP was allowed and the observations made against Mr. Vijay Kumar Iyer were set aside.

Records of Company Petition (IB) No. 359/KB/2017 were remitted to the Adjudicating Authority for constitution of the monitoring committee and implementation of revised approved plan submitted by Ultratech Cement Limited in accordance with law.


The COC after duly following the orders of the Adjudicating Authority and this Appellate Tribunal approved the plan submitted by Ultratech Cement Limited with majority vote.

Meanwhile, the Dalmia Bharat Group (of Rajputana Properties) moved to the Supreme Court challenging the NCLAT's approval for the transfer of Binani Cement Ltd. to UltraTech Cement Ltd.

The Supreme Court on 19th November, 2018, dismissed Dalmia Bharat's plea to seek stay on Ultra Tech's bid for Binani Cement.


The present case can be held as a landmark decision by NCLAT as the decision focused to extract maximum value from resolution of stressed assets and ensure that interests of operational creditors (who are not part of COC) are also well served.

The NCLAT ruling that has held Dalmia's plan as 'discriminatory' has simultaneously also opened up a Pandora's Box on the grounds on which the Appellate Authority can reject a resolution plan.

We believe that the objective of the IBC was to provide a resolution process rather than to prefer liquidation, in a time bound manner for maximization of value of assets of such persons to promote entrepreneurship, credit availability and to balance the interest of various stakeholders.

It is equally pertinent to note that our IBC is based on the UK model and the main intention is that the company should be pushed as a going concern during CIRP but shutting it down and opting for liquidation is the last resort under the compulsion of IBC.

Further, there is a dire need of better mechanism and guidelines for regulating fair COC meetings and actions as it may not only save time of CIRP and the adjudicating authority's (NCLT) efforts but also will result into a better and efficient CIRP.

Above all, the real intent and purport of IBC should not be frustrated due to any lacuna left at any end as after all balance has got to be maintained between all the stakeholders.

This content is purely an academic analysis under "Legal intelligence series".

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Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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