Sort out Bhushan Power and Steel asset issue: NCLAT to MCA and ED

Appellate tribunal says ED can claim dues from proceeds of crime under IBC as operational creditor

The National Company Law Appellate Tribunal (NCLAT) on Friday asked the Ministry of Corporate Affairs (MCA) and the Directorate of Enforcement (ED) to sort out whether the assets of Bhushan Power and Steel (BPSL), allegedly purchased from proceeds of crime, can be attached during the insolvency period.

The MCA had, in an affidavit to the NCLAT, said the ED had no rights to attach the properties of a corporate debtor and that doing it would hamper the corporate insolvency resolution process of companies.

Based on these submissions, the NCLAT had asked the ED to forthwith release to the custody of the resolution professional the attached assets of BPSL.

Later, the ED had taken a divergent view and said that the NCLAT couldn't ask it to release the attached assets as the proceedings were going on under the Prevention of Money Laundering Act (PMLA).

The ED, a three-member Bench headed by NCLAT Chairperson Justice S J Mukhopadhaya, said it could claim its dues, which is from the proceeds of crime, under the Insolvency and Bankruptcy Code (IBC) as an operational creditor. The matter will be next heard on November 18.

“The amount generated would be under the operational debt and the ED can claim this. Sell it and give it to the creditors. Whatever you are entitled, you would get it. There is no question of amendment of law,” the NCLAT said.

During the last hearing on October 14, the appellate tribunal had directed the ED to release the attached properties of BPSL and asked it to not attach any further assets without its permission. The NCLAT also slammed ED, saying that the IBC would fail if the agency functions like this. It had then directed it to file a reply within two days, and it was in the same reply that ED had opposed NCLAT’s jurisdiction.

The ED had seized a portion of BPSL assets in the money laundering case against its former promoters. On September 5, the NCLT had approved JSW Steel’s Rs 19,700-crore resolution plan for BPSL. JSW Steel then approached the NCLAT seeking protection from the ongoing investigation in money laundering cases against former promoters of BPSL as the NCLT judgment was silent on the same.