The National Company Law Appellate Tribunal (NCLAT) on Tuesday asked Tata Steel to furnish reasons as to why it would not be ineligible under 29 (A) of the Insolvency and Bankruptcy Code (IBC) to take over Bhushan Steel and how it proposed to distribute the amount earmarked for the operational creditors under its resolution plan for the debt-ridden company.
The home-grown steel major has also been asked to submit reasons as to why it intended to terminate the power purchase agreement (PPA) between Bhushan Steel and its subsidiary Bhushan Energy, another insolvent firm where Tata Steel is the lone bidder. The agreement was slated to end in 2024.
While approving Tata Steel’s resolution plan to take over Bhushan Steel on May 15, National Company Law Tribunal (NCLT) dismissed questions raised on Tata Steel’s eligibility and Larsen and Toubro’s (L&T) upgrade plea. It also rejected a plea by Bhushan Energy to continue its power purchase agreement with Bhushan Steel.
Tata Steel, which has already deposited Rs 35,200 crore to the financial creditors of the debt-ridden firm, has also offered to pay Rs 1,200 crore to the operational creditors of Bhushan Steel.
However, had earlier said that it would pay Rs 1,200 crore to operational creditors over a period of 12 months, but did not mention the proportion in which the amount would be distributed to operational creditors.
Bhushan Steel owes Rs 56,080 crore to its financial creditors and `1,332 crore to operational creditors. The two-member NCLAT bench headed by Justice SJ Mukhopadhyay has placed the matters for further hearing on July 26.
Bhushan Steel promoter Neeraj Singal had moved the NCLAT, questioning Tata Steel’s eligibility to bid for the company under Section 29A of the Insolvency and Bankruptcy Code (IBC).
Operational creditor Larsen and Toubro moved the appellate tribunal seeking to be declared a secured creditor so that it gets higher priority in repayment of dues.
Bhushan Energy promoters sought the appellate tribunal’s intervention as the termination of the PPA might reduce its valuation.
The engineering and construction major said that against dues of `961 crore, the resolution professional has admitted Rs 537 crore. However, Tata Steel’s resolution plan does not specifically mention any amount that would be accrued to L&T.