The recent Supreme Court order on the Bhushan Power and Steel (BPSL) has made it legally tenable for the Enforcement Directorate (ED) to re-attach the company’s assets and continue its probe, legal experts told FE.
However, it is for the agency to decide whether to exercise the option at this stage, given that a review petition has been filed against the apex court order, they added.
The ED could not be contacted for comments.
The SC in early May ordered BPSL’s liquidation, as the apex court found serious violations in the JSW Steel’s resolution plan for the company, approved by the National Company Law Tribunal (NCLT).
Experts said that the Insolvency and Bankruptcy Code (IBC) provisions provide for the continuance of the legal proceedings that were started before the liquidation order.
“Under the Section 33(5) of the IBC, there is a prohibition on fresh suits or other legal proceedings once the liquidation order has been passed. However, the already-instituted proceedings can continue. The ED might take a chance, but given the order of status quo over NCLT proceedings, any action at this stage may be seen as overreaching the judicial order,” said Sujoy Datta, partner at Aekom Legal.
In late May, the apex court ordered a status quo on the NCLT proceedings after JSW Steel filed a review petition. “The SC, by its first order, had put the company in liquidation. The second SC order has not put status quo on the said liquidation proceeding which essentially creates a room for the ED to re-attach the assets besides ,” said a senior corporate lawyer.
The ED’s action against BPSL was started in 2019 when the investigating agency provisionally attached the company’s assets – land, building, machinery, etc – under Section 5 of the Prevention of Money Laundering Act (PMLA) alleging that the former promoters of the company had cheated banks to the tune of Rs 47,204 crore, and siphoned off the bank funds for private investments.
Following the ED action, the JSW Steel challenged the powers of ED in company appellate tribunal (NCLAT) which held that ED (or any investigating agency) do not have the powers to attach assets of BPSL once the resolution plan was approved, and that the criminal investigations against BPSL also would stand abated.
Though in December 2024, the ED restituted assets worth Rs 4,025 crore to JSW Steel, which emerged as a successful resolution applicant for BPSL under the IBC mechanism.
Recently, SC said that neither NCLAT nor the NCLT is vested with the powers of judicial review over the decision taken by the government or statutory authority (like ED) in relation to a matter which is in the realm of public law. “The prevention of money laundering act, 2002 being a public law, the NCLAT did not have any power or jurisdiction to review the decision of the statutory authority under the PMLA,” the SC order said.