16 January 2020: The National Company Law Appellate Tribunal (NCLAT) has asked the investigative agencies like Enforcement Directorate, SFIO and the CBI to file an affidavit clarifying whether JSW Steel, a successful bidder for Bhushan Power and Steel Ltd (BPSL), is liable for offences committed by the previous management of the debt-laden firm under the amended IBC.
A three-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya asked the agencies to file their reply affidavits by January 20 stating whether after insertion of section 32 A in the Insolvency and Bankruptcy Code (IBC) last month, JSW Steel has immunity from the alleged fraud committed by the previous BPSL managemet.
“The Directorate of Enforcement and the central government through the Secretary, MCA on behalf of the Serious Fraud Investigation Office (SFIO) and the Central Bureau of Investigation (CBI) are allowed to file additional reply affidavit by 20th January, 2020 stating therein as to whether JSW Steel, whose plan has been approved, are covered by newly inserted Section 32A of the IBC, 2016,” said the NCLAT in an order passed on January 13.
It further said: “In case, the answer is in negative, they will enclose the evidence in support of their stand after serving a copy of the same on the learned counsel for JSW Steel and other appellants.”
The appellate tribunal had directed to list the petition on January 23, for next hearing.
The government had last month amended the Insolvency and Bankruptcy Code (IBC) and inserted section 32A inside it, which mandates that once management or control of a debt-ridden company changes after the completion of 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) went 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 presently going through 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 ED’s move before the NCLAT, which had on October 14 directed them to be immediately released in favour of the resolution professional of the debt-ridden firm.
Earlier, on October 14, the NCLAT had directed the ED to release BPSL properties attached by the agency on the JSW Steel plea, alleging siphoning off of funds by its erstwhile promoters.
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 & Bankruptcy Code was on.
Earlier, on October 25, the NCLAT had asked both organisations, which are presently headed by Union 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.