7 September 2019: JSW Steel, which won Bhushan Power and Steel (BPSL) at the insolvency court, is likely to challenge the National Company Law Tribunal (NCLT)’s decision to redistribute profits earned during the insolvency resolution period among creditors, while seeking further immunity from ongoing investigations against the bankrupt steelmaker, people aware about the development said.
Sanjay Singhal, erstwhile promoter of BPSL, and other directors are facing probe from multiple agencies including, the Enforcement Directorate (ED), for fraud and siphoning of money.
While the New Delhi Bench of the NCLT on September 5 directed the resolution professional (RP) to redistribute the profits earned by BPSL between July 2017 and August 2019 among all the financial and operational creditors on a pro-rata basis according to the NCLAT order in the Essar case, it said the criminal proceedings initiated against the erstwhile board members and others will not effect JSW Steel or the implementation of the resolution plan.
“We leave it open to the members of the CoC to file appropriate applications if criminal proceedings result in recovery of money which has been siphoned of or on account of tainted transactions or fabrication as contemplated under the various provisions of the Code (IBC) or any other law,” the principal Bench headed by Justice MM Kumar said in the judgment.
However, JSW Steel doesn’t seem entirely convinced with the NCLT’s judgment, considering a Delhi High Court ruling which said that money laundering law prevails over the Insolvency and Bankruptcy Code (IBC).
Justice RK Gauba on April 2, 2019, held: “The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former. The PMLA, by virtue of Section 71, has the overriding effect over other existing laws in the matter of dealing with “money-laundering” and “proceeds of crime” relating thereto.”
Sources said Sajjan Jindal-promoted steel major could approach the NCLAT seeking more protection after takeover of BPSL. The ED is yet to attach any properties in the Bhushan Steel case.
On Thursday, the NCLT accepted the `19,700-crore bid by JSW Steel for BPSL, with bankers taking a near 60% haircut. Financial creditors will get `19,350 crore while operational creditors will get `350 crore against their admitted claims of `733 crore, a recovery of nearly 48%.
The NCLT’s principal Bench had on July 26, 2017, admitted the insolvency plea of Punjab National Bank against the company. A clutch of 34 financial creditors claimed `47,303 crore from the company as on January 3, 2019. Of that amount, the RP admitted claims worth `47,158 crore. Operational creditors, numbering 1,778, claimed `2,320 crore from BPSL.