JSW Steel-Bhushan Power buy may hit Enforcement Directorate hurdle

There is no power conferred upon the NCLAT under the Insolvency and Bankruptcy Code (IBC) to interfere with a provisional attachment order, ED said.

The JSW Steel-Bhushan Power & Steel acquisition may run into a roadblock with the Enforcement Directorate (ED) claiming that the National Company Law Appellate Tribunal (NCLAT) does not have the jurisdiction to release property attached under the Prevention of Money Laundering Act (PMLA).

In an affidavit filed before the Supreme Court, ED mentioned that the PMLA is a special/specific law governing money laundering in the country and no exceptions can be made to it unless specifically provided for by Parliament.

There is no power conferred upon the NCLAT under the Insolvency and Bankruptcy Code (IBC) to interfere with a provisional attachment order, it said.

Sources close to development, said, the affidavit by ED was filed last week. According to ED officials, the affidavit has been filed in an ongoing matter involving lenders and Committee of Creditors (CoC). They broadly objected to the applicability of the newly-inserted Section 32A of the Insolvency and Bankruptcy Code (IBC) to the JSW-Bhushan deal. 

This new rule mandates that once management or control of a debt-ridden company changes after completion of the corporate insolvency resolution process (CIRP), it would not be liable for any offences committed prior to the commencement of the insolvency resolution process. Since, the acquisition was approved last year before the amendment came into force, this can’t be evoked retroactively, said a senior ED officer. 

Meanwhile, the probe agency has also sent a request for a fresh special leave petition (SLP) to the law ministry seeking approval to challenge the NCLAT order over unfreezing assets of Bhushan Power & Steel.

Once approved, ED is likely to file a fresh petition before the apex court.  SLP is essentially for taking special permission to be heard in appeal against any high court/tribunal verdict. The matter pertains to the provisional attachment order, which was issued on October 10 last year, for assets of Bhushan Power & Steel (BPSL) valued at Rs 4,025.23 crore by ED. The attachment order came about seven months after JSW Steel was declared a successful resolution applicant for the debt-ridden BPSL. It was also almost a month after National Company Law Tribunal (NCLT) approval for the Rs 19,700 crore deal.

A JSW Steel official said, “The matter is subjudice before the honourable Supreme Court as all the parties in the last hearing were asked to file their submissions within two weeks in response to an application filed by JSW Steel."  The next hearing is likely to be on July 6. “Pending adjudication of appeals and CoC application before the SC, the plan is incapable of being implemented, more so when the assets of BPSL continue to be attached by ED,“ the JSW Steel official added.