JSW Steel files appeal against NCLT order on Bhushan Power resolution plan

Firm seeks immunity from criminal proceedings in ongoing fraud probe against Bhushan Power & Steel, after NCLT disposed of various reliefs sought by JSW from statutory authorities

JSW Steel has moved the National Company Law Appellate Tribunal (NCLAT) seeking immunity from criminal proceedings in the ongoing fraud investigation against Bhushan Power & Steel (BPSL).

JSW informed the stock exchanges on Friday, that it noticed certain modifications on detailed examination of the terms and conditions of the NCLT order approving the resolution plan. 

"Further certain important reliefs sought by the company have also not been granted. The company has therefore appealed against the said order dated September 5, 2019 before the relevant judicial forum," the notice read.

Last week, the National Company Law Tribunal (NCLT) approved JSW's Rs 19,700 crore offer for BPSL, one of the 12 cases mandated by the Reserve Bank of India (RBI) for debt resolution under the Insolvency and Bankruptcy Code (IBC).

However, the tribunal disposed of various reliefs sought by JSW from the statutory authorities under the Income Tax Act, 1961, Ministry of Corporate Affairs (MCA), Department of Registration and Stamps, Reserve Bank of India, and others. 

The reliefs and concessions sought by JSW were part of the CoC (committee of creditors) approved resolution plan. 

The NCLT had disposed of the waiver and said, "We do not feel persuaded to accept the prayer made in the resolution plan. Yet the resolution plan applicant may file appropriate applications before the competent authorities which would be considered in accordance with law because it would not be competent for the adjudicating authority - NCLT to enter into such area for granting relaxation, concession or waiver which is wholly within the domain of competent authorities."

Vidisha Krishnan, Partner, M V Kini & Co, said if the concessions sought were part of the resolution plan and the approved plan does not cover the waiver, then the resolution applicant is within its right to file an appeal. JSW's appeal is likely to be taken up by NCLAT on Monday.

BPSL is facing an investigation from different government agencies. Based on an FIR by the CBI and a forensic audit report, several banks had reported fraud. The combined amount reported as fraud by just Punjab National Bank (PNB) and Allahabad Bank was more than Rs 5,500 crore.

The tribunal has, however, granted partial immunity and said that criminal proceedings initiated against erstwhile directors shall not affect JSW-the H1 resolution applicant or the implementation of the resolution plan by the monitoring agency.

The other point that JSW Steel is also appealing against is the directive that profits earned by running the corporate debtor during the corporate insolvency resolution process are to be redistributed in accordance with the Essar Steel judgment of July 4, 2019.

The Essar order had said that where the successful resolution applicant is not paying the total dues to creditors but pays lesser than the claim, the profit should be distributed among all creditors including financial and operational.

JSW however feels that the profits could be used as working capital.

With the appeal, a resolution in BPSL which has been dragging for more than two years is not looking likely in the immediate term.