JSW Steel takeover of BPSL to be delayed as case moves to SC

After battling for more than two-and-a-half years, JSW Steel’s bid to take over the bankrupt Bhushan Power and Steel (BPSL) is far from over.

BPSL promoter Sanjay Singal has filed a petition in the Supreme Court against te National Company Law Appeallate Tribunal order clearing ₹19,700-crore bid of JSW Steel to acquire the bankrupt company under Insolvency and Bankruptcy Code.

The case is likely to come for hearing on Monday. JSW Steel was gearing up to pay the committed ₹19,700 crore before March 15.

Apart from questioning the authority of the NCLAT to provide immunity to JSW Steel from ongoing cases against BPSL, the petition has flagged the vesting of ₹3,000 crore profit made by BPSL to JSW Steel during the insolvency period.

“Can JSW Steel be allowed to retain the EBITDA of ₹3,000 crore made during the Corporate Insolvency Resolution Process as a windfall gain and at the cost of creditors.. especially when the insolvency process has extended over two-and-half years. It is submitted that during the insolvency period the company was run by committee of creditors at their own cost and risk without servicing any interest in huge outstanding debt. The Committee of Creditors in their affidavit filed in October, 2019 have made claim on Ebitda. However, the petition said the NCLAT has set aside the order passed by Adjudicating Authority (NCLT) transferring the money to CoC.. thereby exposing JSW Steel to huge benefit...”.

Early this month, a two-member Bench, headed by NCLAT Chairman Justice SJ Mukhopadhaya said that the acquirer, JSW Steel, will be rendered immune from the acts done by the former promoters of BPSL. However, it added that the prosecution of the former promoters under the money laundering Act would continue.

If BPSL and its new buyer can be given immunity from the ongoing investigation, Singal has claimed whether he as a promoter of the company can also claim such immunity “especially when the investigating agency itself contended that the monies were utilised for the benefit of corporate debtor (BPSL) only and even as per the case of Enforcement Director the appellant (Singal) never benefited”.

The petition highlighted the fact that NCLAT lacks power to remove the attachment of property (including BPSL) made by Directorate of Enforcement under Prevention of Money Laundering Act even when the SC has admitted a special leave petition filed by CoC against ED in this regard.

The petition has also sought clarity on whether JSW Steel can be termed as a related party with BPSL as it had a joint venture for operating Roma Coal Company.

However, JSW Steel had earlier clarified that the joint venture was formed as the coal mine was allotted by the government to four companies including JSW Steel and BPSL. Moreover, the joint venture was a non-starter.

Bhushan Power and Steel, which owns 3.5 million tonnes of steel making capacity, had defaulted on ₹47,200 crore and was among the first 12 large referred for insolvency in July 2017.

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