NCLAT defers hearing on JSW Steel’s Bhushan Power buyout till January 31

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New Delhi | Published: January 24, 2020 8:45:49 AM

The appellate tribunal has given around one week more to investigative agencies to file an affidavit clarifying whether prosecution against Bhushan Power and Steel Ltd (BPSL) can be dropped once JSW Steel, the successful bidder, takes over the company.

JSW Steel's resolution plan was approved by the National Company Law Tribunal on September 5, 2019; while Section 32A was notified on December 28, 2019.According to sources, only ED has filed its reply and has opposed JSW Steel’s immunity in the BPSL insolvency case.

The National Company Law Appellate Tribunal (NCLAT) on Thursday adjourned till January 31 its hearing on Bhushan Power and Steel Ltd’s sale to JSW Steel under the insolvency process. The appellate tribunal has given around one week more to investigative agencies to file an affidavit clarifying whether prosecution against Bhushan Power and Steel Ltd (BPSL) can be dropped once JSW Steel, the successful bidder, takes over the company.

The Enforcement Directorate (ED) is investigating alleged fraud committed by the debt-laden firm’s previous management. On January 13, the NCLAT had asked investigative agencies such as the ED, the Serious Fraud Investigation Office and the Central Bureau of Investigation (CBI) to file an affidavit. According to sources, only ED has filed its reply and has opposed JSW Steel’s immunity in the BPSL insolvency case.

The ED has said a recent amendment in IBC would not apply to the JSW Steel-BPSL deal as it was approved last year, before the amendment came into force. Moreover, it has also hinted that promoters of JSW and BPSL are related parties as they had a joint venture for a coal block. A three-member NCLAT Bench, headed by Chairperson Justice S J Mukhopadhaya, 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 (CIRP), 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 (MCA) 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 of BPSL. 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 (PMLA), the MCA has been maintaining that the ED cannot do so as proceedings under the Insolvency and Bankruptcy Code are on. On October 25, the NCLAT had asked both organisations, which are currently headed by Finance and Corporate Affairs Minister Nirmala Sitharaman, to settle the matter adding that there was no question of amendment of laws. On this, the ED filed an affidavit before the NCLAT 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 the NCLAT.

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