Binani Cement’s lenders approach NCLAT over corporate guarantees

15 January 2018

At least two lenders of Binani Cement Ltd, currently undergoing insolvency proceedings, have moved the appellate bankruptcy tribunal after the insolvency resolution professional (IRP) rejected their claims on corporate guarantees worth Rs2,000 crore issued by the company to some subsidiaries in the Binani group.

According to two persons aware of the matter who spoke on condition of anonymity, IDBI Bank and State Bank of India (SBI) have now approached the National Company Law Appellate Tribunal (NCLAT).

The background to the development is as follows: Banks, including IDBI Bank and SBI, had lent money to some companies in the Rajasthan-based Binani group, after Binani Cement issued corporate guarantees worth Rs2,000 crore for these loans. Now, Binani Cement itself has landed in bankruptcy court after defaulting on various loans, even though the subsidiaries continue to be healthy.

However, with the guarantor undergoing insolvency proceedings, creditors to the subsidiaries want Binani Cement to pay them the amount equal to the corporate guarantees. The IRP rejected their claim, on the grounds that these were corporate guarantees, not loans, and that the guarantees were not invoked until bankruptcy proceedings began.

NCLAT is expected to hear the matter in the third week of January, the people cited earlier said.

“The said corporate guarantees were given by Binani Cement for some of the group subsidiaries in India and overseas,” said one of the two persons. “This is a unique situation because the subsidiaries in question continue to remain standard accounts, while the guarantor itself has become an NPA and is facing insolvency proceedings,” the person added.

In July, the NCLT’s (National Company Law Tribunal) Kolkata bench had admitted the insolvency petition against Binani Cement. Bank of Baroda (BoB) had referred the company to the NCLT after it failed to repay around Rs100 crore, following which Vijaykumar V. Iyer of Deloitte India was appointed as the IRP. In total, the company owes close to Rs 3,042.93 crore to a consortium of lenders. Currently, Edelweiss ARC, which has bought over a chunk of the debt from bankers, is the leader of the consortium.

Requests for comment sent to Iyer, IDBI Bank and SBI remained unanswered until press time. An email sent to Edelweiss group was also not answered.

“Apart from two IDBI and SBI other lenders, Exim Bank of India also holds guarantees from the company,” the second person said. However, it was not immediately clear whether Exim Bank had also moved the NCLAT in this regard. Requests for comment sent to Exim Bank remained unanswered till press time.

According to both persons cited above, the decision by the Kolkata bench of NCLT in Binani Cement’s case was guided by a previous order from the NCLT’s New Delhi bench in a separate but similar manner.

In that case, the bench had dismissed Axis Bank’s plea to stake a claim of Rs397 crore in the ongoing corporate insolvency proceedings against EduSmart Services. EduSmart was a corporate guarantor for its parent company Educomp Solutions, which had borrowed from Axis Bank.

Axis Bank had filed a plea in NCLT’s Delhi bench after Educomp’s resolution professional rejected the bank’s claim filed under the Insolvency and Bankruptcy Code (IBC). “Axis Bank also has approached the NCLAT in this regard,” said the first person.

An email sent to Axis Bank by Mint remained unanswered. Meanwhile, according to a report in DNA, the deadline for bidding for Binani Cement has been extended from 5 January to 15 January. The report said Binani Cement has received initial interest from 22 potential bidders.

Binani Cement is part of the Braj Binani Group and is a subsidiary of Binani Industries Limited (BIL), which is the holding company of the group, and which has presence in five key businesses areas including cement, fibreglass, infrastructure and energy.

Source: LIVEMINT