Excess Remuneration Taken By Resolution Personnel Is the Main Allegation against Deloitte in Binani Cement Insolvency Case

Excess Remuneration Taken By Resolution Personnel Is the Main Allegation against Deloitte in Binani Cement Insolvency Case

RP to provide criteria for selection of bidder, minutes of meetings by March 26, 2018

A single-member judge in the Kolkata bench of the National Company Law Tribunal (NCLT) has ordered the resolution professional for Binani Cement to submit by March 26 the criteria and the procedure for selection of the bidder, minutes of meetings, and a timeline of proposals and decisions taken after counsel for Binani Cement and UltraTech Cement mounted their opposition to the way the resolution plan had been concluded.

Opposition against Decision of Resolution Personnel

The plan approved by resolution professional Vijay Kumar Iyer resulted in the Dalmia Bharat Cement-led consortium winning the bid for Binani Cement. The judge also sought details of the proceedings and outcome of the March 14 meeting when the Committee of Creditors (CoC) approved the joint resolution plan of Dalmia Bharat Cement and Bain Capital’s Resurgent India Fund.

Resolution Personnel Has to Submit final progress report on the resolution plan

According to the directive by Jinan K R, member judge at the Kolkata NCLT, Iyer will also have to submit the final progress report on the resolution plan. Iyer has already submitted the resolution plan approved by the CoC to the NCLT for approval. Citing pending cases, the judge did not hear Binani Cement’s plea for termination of insolvency proceedings. After obtaining a ‘comfort letter’ from UltraTech Cement by agreeing to a 98.43 per cent stake sale by the promoters for Rs 72.66 billion, Binani Cement had on March 19 informed the NCLT that it was seeking termination of insolvency proceedings against it.

Lenders Allege Fraud

Meanwhile, the counsel representing the lenders stated the alleged fraud by the company’s promoters as claimed by Iyer will not impact the selling procedure and appealed to the judge to consider the proposal if he finds it “proper”.

A series of questionable transactions

A source close to the lenders said that when the bidders had placed their bids, they knew about a series of questionable transactions and their bids had taken this factor into consideration. The primary charge leveled against the Iyer by Binani Cement is over the money spent in the resolution process.

Excessive Remuneration for Resolution Personnel

The counsel representing the company alleged that excessive funds were spent by the resolution professional in the process. Binani Cement has said apart from a monthly remuneration of Rs 3.5 million, insurance worth Rs 7.25 million was also claimed as expenses by the resolution professional.

The company also alleged that Rs 24 million had been facilitated towards Deloitte India, the firm Iyer is associated with.

Defence by Deloitte

Iyer’s counsel defended the claims, stating the resolution professional had to visit many factories of Binani Cement where labour protests were occurring and hence he needed insurance. The judge pointed out there was no cap on remuneration or costs associated with the resolution process. But all expenses by the resolution professional will need the approval by the creditors.

Representative of Binani Cement was barred

According to sources close to Binani Cement, the remuneration and other allowances of the resolution professional should be on a par with employees of government-owned companies. The Binani Cement counsel further alleged that despite an order of the Delhi bench of the NCLT directing the resolution professional to allow participation by a representative of Binani Cement, the person was not allowed entry in meetings.

Contention of UltraTech Cement

The UltraTech Cement counsel argued that no reason was provided to the firm why its bid was rejected and the resolution professional did not provide an explanation. Moreover, it wanted to know from the resolution professional that despite it revising its bid to Rs 72.66 billion, higher than that made by Dalmia Bharat Cement, why its offer was not considered.

Maximisation of value is the ultimate goal of the NCLT 

 “Maximisation of value is the ultimate goal of the NCLT and a time-bound process is just the procedure,” a source close to UltraTech Cement said. The resolution process for Binani Cement will end on April 21, after which no extension can be provided, according to provisions of the Insolvency and Bankruptcy Code.

Out of a total of 14 applications in this case that were up for hearing on Thursday, only four were heard in part and other applications, including one by State Bank of India Hong Kong, one of the secured lenders that voted against the Dalmia Bharat-led consortium’s proposal, have been put up for hearing on March 27.

Courtesy : Business Standard

IBBI AMENDS REGULATIONS FOR INSOLVENCY RESOLUTION PROCESS

IBBI AMENDS REGULATIONS FOR INSOLVENCY RESOLUTION PROCESS

FAIR VALUE AND LIQUIDATION VALUE

Insolvency resolution professionals will now be required to assess the fair value and liquidation value of the entity undergoing insolvency proceedings, with the latest set of amendments to the regulations.

The Insolvency and Bankruptcy Board of India (IBBI) has amended the norms pertaining to insolvency resolution process for corporate persons.

RESOLUTION PLAN

Under the revised framework, the resolution plan -- approved by the committee of creditors -- should be submitted to the adjudicating authority "at least 15 days before the expiry of the maximum period permitted for the completion of the corporate insolvency resolution process".

An official release today said the norms have been amended wherein the resolution professional should appoint two registered Valuers to determine the fair value and the liquidation value of the corporate debtor.

COMMITTEE OF CREDITORS

"After the receipt of resolution plans, the resolution professional shall provide the fair value and the liquidation value to each member of the committee of creditors in electronic form, on receiving a confidentiality undertaking," it said.

"It would help in better price discovery for assets of corporate debtor in the process of insolvency resolution,".

INFORMATION MEMORANDUM

According to the release, the resolution professional should submit the information memorandum in electronic form to each member of the committee of creditors within two weeks of appointment.

Once an invitation, including the evaluation matrix, is issued to a prospective resolution applicant, the latter would have a minimum of 30 days to submit the resolution plan.

The resolution applicant would continue to specify the sources of funds that would be used to pay insolvency resolution process costs, liquidation value due to operational creditors and liquidation value due to dissenting financial creditors, the release said.

However, the committee of creditors would specify the amounts payable from resources under the resolution plan for these purposes, it added.

"A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximisation of value of its assets.

"These may include reduction in the amount payable to the creditors, extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor, change in portfolio of goods or services produced or rendered by the corporate debtor and change in technology used by the corporate debtor," the release said.

"As liquidation value resulted in the estimated realizable value based on the piecemeal sale of assets if the corporate debtor were to be liquidated on the insolvency commencement date, it often resulted in a base value of the Assets of the corporate debtor,"

The fair value is to be arrived on going concern premise and is under a willing buyer willing seller concept.