NCLAT asks ED, MCA to reach consensus on BPSL assets

The National Company Law Appellate Tribunal (NCLAT) on Friday asked the Enforcement Directorate and the Corporate Affairs Ministry to reach a consensus on the issue of attachment of assets of Bhushan Power and Steel which is presently going through the insolvency resolution process. The Enforcement Directorate (ED) and the Corporate Affairs Ministry (MCA) have locked horns over the attachment of assets of the debt-ridden company by the agency over charges of siphoning of funds by erstwhile Bhushan Power and Steel (BPSL) promoters.

While the ED is of the opinion that it can attach the property of BPSL under the Prevention of Money Laundering Act (PMLA), the MCA has been maintaining that the agency cannot do so as proceedings under the Insolvency & Bankruptcy Code were on. During the proceedings, a three-member bench headed by Chairperson S J Mukhopadhaya asked both the entities, which are presently under the ambit of same Cabinet minister Nirmala Sitharaman, to settle it, adding that there was no question of amendment of laws.

"It is desirable if the two wings/ Departments of the Central Government sit together and settle the issue," the NCLAT said in its order. Moreover, the appellate tribunal said that Enforcement Directorate (ED) can claim its dues, which are from the proceeds of crime, under the Insolvency and Bankruptcy Code (IBC) as an operational creditor.

"Prima facie, we are of the view that if the assets are seized by the ED and finally held that the assets were purchased out of the ‘proceeds of crime’, in such case, the amount as may be generated out of the assets will come within the meaning of ‘Operational Debt’ payable to the Enforcement Directorate for which it may file claim in terms of the IBC," the bench said. It further said: "To give an opportunity to the different wings/ Departments of the Central Government, we adjourn the matter."

The bench also told BPSL may also go for liquidation, if both the agencies keep insisting, and this would be a loss to the government's money. The NCLAT directed to list the matter for orders on November 18, 2019, on the top of the list.

On October 10, the ED had attached assets worth over Rs 4,025 crore of debt-ridden BPSL in connection with its money laundering probe linked to an alleged bank loan fraud by its former promoters. JSW Steel, which has emerged as the successful bidder for BPSL with its bid of Rs 19,700 crore, filed an appeal against ED's move before the NCLAT, which had on October 14 directed them to be immediately released in favor of the resolution professional of the debt-ridden firm.

Earlier, on October 14, the NCLAT had directed the ED to release BPSL properties attached by the agency on the JSW Steel plea, alleging the siphoning of funds by its erstwhile promoters. On this, ED filed an affidavit before the NCLAT and questioning its jurisdiction.

In the said affidavit, the ED told the appellate tribunal that it has no jurisdiction over the properties attached by the agency under the PMLA and asked it to vacate its earlier order and dismiss the appeal filed by JSW Steel. The validity of the attachment could be examined by an adjudicating authority only under the PMLA, and hence the NCLAT should vacate its order passed on October 14, directing it to release the assets of BPSL, the ED told NCLAT.

"It is submitted that the provisional attachment order dated October 10, 2019, passed under Section 5 of PMLA Act is not amenable to the jurisdiction of this Hon'ble Tribunal (NCLAT) and its validity can only be examined by the adjudicating authority under Section 8 of the PMLA," the ED had said in an affidavit filed before the appellate court. "There is no power under the IBC to interfere with a provisional attachment order passed," it had said.

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