14 September 2019: JSW Steel on Friday challenged an order of the National Company Law Tribunal (NCLT) that approved its Rs 19,700 crore bid for Bhushan Power and Steel (BPSL), but did not provide immunity from attaching the insolvent firm’s assets, post-take over, by investigating agencies for recovering Rs 5,580 crore fund digression by erstwhile promoters.
Mentioning JSW Steel’s plea under section 61 of the Insolvency and Bankruptcy Code (IBC) that allows any person aggrieved with the NCLT order to appeal before the NCLAT, senior counsel Kapil Sibal said, “So far as I (JSW Steel) am concerned, my asset is not proceeds of crime. The assets I acquire can’t be taken away.” The two-member NCLAT bench, headed by its chairperson justice S J Mukhopadhaya, has scheduled the matter for hearing on September 16.
In its application, JSW Steel urged, “No penal liability or attachment of assets of the corporate debtor (BPSL) should occur on account of proceedings by CBI or ED for actions taken by the corporate debtor under its previous management prior to take over by JSW Steel.” Based on forensic audit investigation findings, Punjab National Bank and Allahabad Bank had in July this year reported Rs 3,805 crore and Rs 1,775 crore frauds respectively to the Reserve Bank and made a total of Rs 2,800 crore provisions as per the prescribed prudential norms. Both the lenders found that BPSL has misappropriated bank funds, manipulated books of accounts to raise funds from consortium of lenders. CBI filed FIR, on suo muto basis, against BPSL and its directors.
The Sajjan Jindal-led firm, which is slated to become the largest steel company in the country post-acquisition, has also challenged in the NCLAT the conditions imposed by NCLT regarding distribution of profits earned by the company during the corporate insolvency resolution process (CIRP) that started with the admission of Punjab National Bank’s insolvency plea against BPSL on July 26, 2017.
NCLT, in its order, had directed the resolution professional “to redistribute the profits earned by running the corporate debtor (BPSL) during CIRP in accordance with the judgement of hon’ble NCLAT rendered in the case of Standard Chartered Bank Vs Satish Kumar Gupta, RP of Essar Steel Ltd & Ors.”
In the Essar Steel matter, the NCLAT had ordered that the profit earned by Essar Steel during the insolvency resolution period should be distributed amongst all financial and operational creditors on pro-rata basis of their claims subject to the fact that it should not exceed the admitted claim.
However, sources said BPSL did not generate any profit at all during the insolvency resolution period. All it earned was a positive EBITDA (earnings before interest, depreciation and amortisation) of about Rs 1,900 crore. They said after adjusting the EBITDA with depreciation, there will remain no profit and thus, NCLT’s direction on distribution of profits is “infructuous”.
However, JSW Steel did not seek indemnity from statutory dues from authorities under the Income Tax Act, ministry of corporate affairs, department of registration and stamps, Reserve Bank of India and others in its plea before the NCLAT. Rejecting its plea, the adjudicating authority had left the matter for competent authorities to decide.