BPSL resolution: ED moves SC seeking stay on NCLAT order approving JSW Steel bid

By: |
September 22, 2020 3:15 AM

Apart from this, JSW had offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore.

Apart from this, JSW had offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore.

The Enforcement Directorate (ED) has moved the Supreme Court seeking a stay on the National Company Law Appellate Tribunal’s (NCLAT) order that approved the JSW Steel’s bid for debt-ridden Bhushan Power and Steel under the new amendment (under Section 32(A) to the IBC) that provides immunity to the new owners from ongoing criminal proceedings against the erstwhile promoters of the company.

The ED is opposing the BPSL’s committee of creditors’ appeal seeking direction to JSW Steel to implement the resolution plan it had proposed for the bankrupt company.

JSW had offered to pay Rs 19,350 crore to the financial creditors as part of its resolution plan, a near 60% haircut for the lenders. Apart from this, JSW had offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore.

NCLAT had on February 17 upheld NCLT’s decision and ruled that JSW Steel cannot be held responsible for the alleged misdeeds of the past promoters at any stage.

Seeking a stay on the appellate tribunal’s decision, the ED, in its appeal, told the SC that BPSL and JSW Steel are associated as shareholders, holding 24.09% and 49% equity, respectively, in a joint venture called Rohne Coal Company. Therefore, JSW is a related party of the corporate debtor, and the protection under Section 32A will not be available to it, it said.

Saying that the formation of JV was not mandatorily required, the investigating agency said the NCLAT conclusion was based on the incorrect assumption that JSW was mandated by the Central government to join hands with the corporate debtor by virtue of which they could not be related persons. It said the resolution applicant was responsible for the acts of the old management.

Citing recent developments, ED stated it had raided BPSL resolution professional (RP) Mahender Kumar Khandelwal at Gurgaon and Delhi for allegedly helping its former promoters “clandestinely” in clearing the finished goods from its Odisha plant to other plants in Kolkata and Chandigarh. This practice resorted to by BPSL’s erstwhile management had continued even after initiation of the CIRP on August 5, 2017, it said.

According to ED, the search operations conducted on August 19 and 20 on the residential premises of Khandelwal, BPSL office and the residence of one of BPSL ex-directors found incriminating documents, indicating a receipt of cash in lieu of preferential selection of coal suppliers and preferential selection of insurance firm for concerns under the NCLT were also found.

“The RP also attempted to destroy a crucial piece of evidence but it was prevented. Huge cash payments to various individuals outside the books of accounts indicate siphoning of cash from various concerns undergoing CIRP under NCLT. Further investigations are being conducted by way of recording of statements of various persons involved,” the ED stated.

Further investigation had revealed that in May this year, sale of coke worth Rs 43 crore had taken place from BPSL to Monnet Ispat and Energy, a JSW group company, the petition stated, adding that the sale had taken place without any tender.

The ex-promoters of BPSL are under investigation for diverting Rs 4,025-crore bank funds taken as loans. The ED in October last year had provisionally attached BPSL’s assets worth over Rs 4,025 crore for diversion of funds by the erstwhile management prior to the commencement of CIRP. Though the attachment was lifted by NCLAT, the ED had then appealed against the order in the SC.

JSW has accused the CoC of deliberately misleading it by not disclosing the fact of siphoning of funds and fraud. The SC has not stayed the resolution plan, but has told the CoC that if JSW makes the payment but loses the case, the lenders should return the money within 60 days.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1ICICI Bank shuts down operations in Sri Lanka
2Risk averse banks continue to lend with caution; bank credit up marginally, deposit growth stable
3Russia’s Sberbank to host AI contest with prize pool of Rs 66 lakh; expects large-scale Indian participation