Creditors of Bhushan Steel stand to lose even after resolution

Swathi Moorthy New Delhi | Updated on August 20, 2018 Published on August 20, 2018

The resolution plan for the debt-ridden Bhushan Steel Ltd is in place with Tata Steel willing to acquire the former for ₹35,000 crore, but the question of who will pay ₹20,000 crore to the creditor remains, according to sources in the Ministry for Corporate Affairs.

This, according to them, is the trigger for action taken by the Serious Fraud Investigation Office (SFIO). Bhushan Steel owned a debt of ₹57,000 crore to its creditors, mostly public sector banks (PSB). Tata Steel has offered ₹35,000 crore in cash to acquire the company, which was approved by the National Company Law Tribunal. However, the remaining ₹20,000 crore has to be borne by the PSBs that are already reeling under series of corporate frauds in the recent times.

The SFIO arrested Neeraj Singal, Managing Director of Bhushan Steel, on August 8, for indulging in serious corporate fraud. The arrest was made as a part of the investigation into the affairs of Bhushan Steel and its several Group Companies by the SFIO. He was produced before the court of Competent Jurisdiction on Thursday and was sent to Judicial Custody.

However, Singal’s mother has moved the Delhi High Court seeking his release from judicial custody. Hearing Singal’s bail plea on Monday, the High Court asked SFIO to file a short affidavit and also bring the relevant records for the hearing on August 21.

Singal was accused of siphoning off funds of over ₹2,000 crore from the loans availed by Bhushan Steel Ltd (BSL), using more than 80 companies. The companies were used for rotation of funds through bogus loans and advances and investments. According to the source, the amount is a conservative figure and could easily be ₹7000 crore to ₹ 10,000 crore.The fear is that if Singal is granted bail, there is a possibility that documents pertaining to shell companies could be destroyed or hidden. Employees who were partner in the sin might be threatened by the management so as to not to reveal the information.

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Published on August 20, 2018
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