The ED had in October 2019 attached BPSL assets worth over Rs 4,000 crore in connection with a money-laundering probe.
For speedy resolution of Bhushan Power and Steel (BPSL), the ministry of corporate affairs (MCA) is likely to counter the Enforcement Directorate’s contention that preferred bidder JSW Steel cannot seek to ring-fence BPSL and its assets after take-over since Section 32A of the Insolvency and Bankruptcy Code (IBC) does not apply retrospectively.
In its affidavit to the National Company Law Appellate Tribunal (NCLAT) submitted on January 17, the ED said since the amendment came into force after JSW Steel’s resolution plan was approved, JSW Steel cannot seek benefits accrued under the Section. JSW Steel’s resolution plan for BPSL was approved by the National Company Law Tribunal on September 5, 2019; while Section 32A was notified on December 28, 2019.
Discounting ED’s contention as “baseless”, a senior government official said that the ED was perhaps interpreting Section 32A in isolation; while the MCA would take into consideration various other provisions of the IBC to interpret Section 32A. The ED had in October 2019 attached BPSL assets worth over Rs 4,000 crore in connection with a money-laundering probe. Legal sources also said that the ED’s stand that Section 32A does not apply retrospectively is “totally misplaced”. “In any given case where the facts of Section 32A are applicable, the law will operate,” a senior advocate said.
The investigating agency, in its affidavit, also informed the NCLAT that during the course of investigation under the Prevention of Money Launder Act, it found that BPSL and JSW Steel were associated as shareholders, holding 24.09% and 49% equity, respectively, in a joint venture, Rohne Coal Company. The JV, according to its 2018-19 annual return filed with the ministry of corporate affairs, was formed in 2008 and “is still operational”. The MCA official said that the related party issue would be discussed within the ministry before it files its intervention before the NCLAT.
“Even assuming without admitting that Section 32A were to apply to the present case, it is submitted that the successful resolution applicant is a related party as per Section 5(24) of the IBC includes associate company of the corporate debtor,” the ED said.
However, legal sources said, “The ED’s contention that JSW and BPSL are related parties has no merit. Rhone is a related party to both by virtue of the fact that both are shareholders in it. This does not make JSW and BPSL related parties in law.”
The NCLT, while approving JSW Steel’s bid, did not grant JSW Steel protection from attachment of assets on account of acts of omission or commission of the previous directors under the Prevention of Money Laundering Act (PMLA). JSW Steel had on September 13, 2019, filed an application with the NCLAT seeking protection of the insolvent firm’s assets, post-take over.
The MCA had earlier said that once corporate insolvency resolution process (CIRP) is completed against an insolvent firm, there cannot be any attachment or confiscation of the assets of the corporate debtor by any enforcement agencies after approval of the resolution plan. The NCLAT has scheduled the matter for “orders” on January 30.