NCLAT stays implementation of JSW Steel's resolution plan for Bhushan Power

Appellate tribunal also asks ED to release all attached assets immediately to RP of Bhushan Power, bars further attachment

The National Company Law Appellate Tribunal (NCLAT) on Monday stayed the implementation of JSW Steel’s Rs 19,700-crore resolution plan for Bhushan Power and Steel. 

A three-member Bench, headed by Chairperson Justice S J Mukhopadhaya, also ordered the release of all assets of Bhushan Power and Steel, which were attached by the Directorate of Enforcement (ED), to the resolution professional of the firm. The ED, the appellate tribunal said, would also be barred from attaching any assets of the company.

The NCLAT order asking the ED to release all attached assets and barring it from attaching any more assets of Bhushan Power came on the back of a submission made by the Ministry of Corporate Affairs (MCA). In its affidavit with the NCLAT, the MCA stated that it had called a meeting of the Department of Financial Services and the banks who are the lenders to Bhushan Power.

In a meeting held on October 3, the stakeholders unanimously decided that the “rights of secured financial creditors are to be protected in the resolution of the corporate debtor” and that once the said resolution plan was approved by the National Company Law Tribunal (NCLT), it was binding on all stakeholders, including government agencies.

“It is submitted that if any corporate debtor is undergoing investigation by the Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFIO) and or the Directorate of Enforcement (ED), such investigations are separate and independent of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code and both can run simultaneously and independent of each other,” the MCA said in its affidavit. The case would be next heard by the NCLAT on October 25.

 The stakeholders of the meeting also decided that the once the resolution plan for a corporate debtor was approved, no government agencies, including the ED, could attach or confiscate any assets of the company.

“The purpose and scheme of the CIRP is to hand over the company of the corporate debtor to a bona fide new resolution applicant. Any threat of attachment of the assets of the corporate debtor or subjecting the corporate debtor to proceedings by investigating agencies for wrong doing of the previous management will defeat the very purpose and scheme of CIR process, which inter-alia includes resolution of insolvency and revival of the company, and the efforts of the bank to realise dues from their NPAs would get derailed,” the MCA had told the NCLAT in its submissions. 

The enforcement agencies such as ED would, however, be free to attach the personal assets of the erstwhile promoters, should fraud be detected at the company, the MCA said. The ED had on October 10 attached Bhushan Power’s assets worth over Rs 4,025 crore. ED had then said it had attached land, building, plant and machinery of the firm in Odisha under the provision of the Prevention of Money Laundering Act (PMLA). In September, JSW Steel had approached the NCLAT seeking immunity from criminal proceedings in the fraud investigation against Bhushan Power.

In its plea before the appellate tribunal, JSW Steel had said it was apprehensive about the reports of fraud occurring at Bhushan Power. The firm had, however, said it was not backing out of the bidding process. It had then also sought forensic audit reports of banks, which had detected frauds at Bhushan Power.