NCLAT reserves order on JSW Steel's Bhushan Power buyout

The National Company Law Appellate Tribunal (NCLAT) on Tuesday reserved its order over a batch of petitions over Bhushan Power and Steel's sale to JSW Steel under the insolvency process. An NCLAT bench headed by Justice S J Mukhopadhaya concluded its hearing as arguments in all seven petitions, including JSW Steel and former promoters of Bhushan Power and Steel Ltd (BPSL), are over.

During the proceedings, the Enforcement Directorate said it had registered Enforcement Case Information Report (ECIR) under Prevention of Money Laundering Act (PMLA) on April 23, 2019, while the resolution plan was approved on September 5, 2019. The Enforcement Directorate, which is investigating alleged fraud committed by the debt-laden firm's previous management, had attached the assets of BPSL on October 10, 2019, which it believes to be from proceeds of crime.

In its affidavit filed before the NCLAT, the Enforcement Directorate has opposed JSW Steel's immunity in the BPSL insolvency case. The directorate has said a recent amendment in Insolvency and Bankruptcy Code (IBC) would not apply on the JSW Steel-BPSL deal as it was approved last year, before the amendment came into force.

Moreover, it has also said that promoters of JSW and BPSL are related parties as they had a joint venture for a coal block. Earlier, the NCLAT had on January 13 asked the agencies to file their reply affidavits stating whether after insertion of Section 32A into the IBC last month, JSW Steel has immunity from the alleged fraud committed by the previous BPSL management.

The government had last month amended the IBC and inserted Section 32A, which mandates that once management or control of a debt-ridden company changes after the completion of the corporate insolvency resolution process, it would not be liable for any offences committed prior to the commencement of the insolvency resolution process. The changes were made after the ED and the Ministry of Corporate Affairs were at loggerheads over the attachment of the assets of BPSL by the former over the money allegedly siphoned off by the erstwhile promoters of BPSL, which is currently going through the insolvency resolution process.

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 a successful bidder for BPSL with its bid of Rs 19,700 crore, filed an appeal against the ED's move before the NCLAT, which had on October 14 directed that the assets be immediately released in favour of the resolution professional of the debt-ridden firm.

While the ED is of the opinion that it can attach the property of BPSL under the Prevention of Money Laundering Act, the MCA has been maintaining that the ED cannot do so as proceedings under the Insolvency and Bankruptcy Code are on.

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