NCLT reserves order on plea against sale of Bhushan Steel to Tatas

CoC of Bhushan Steel approved Rs 352 billion deal along with 12.27% equity in the company offered by Tata Steel

The National Company Law Tribunal (NCLT) on Wednesday reserved its order on a plea challenging sale of debt-ridden firm Bhushan Steel to Tata Steel by the Committee of Creditors (CoC).

The Principal bench of NCLT headed by President Justice M M Kumar reserved its order after concluding the hearing in the matter.

The CoC of Bhushan Steel has approved Rs 352 billion (Rs 35,200 crore) deal along with 12.27 per cent equity in the company offered by Tata Steel.

However, some Bhushan Steel employees had challenged the decision before the NCLT contending that Tata Steel was not eligible to bid under Section 29 (A) of the IBC Code.

During the proceedings, senior advocate Rajiv Nayar representing Tata Steel said that CoC of Bhushan Steel had found its offer compliant to the regulations of the Insolvancy & Bankruptcy Code (IBC).

He also justified Tata Steel's stand on not going with power purchase agreement (PPA) of Bhsuhan Steel with Bhushan Energy Ltd (BEL) in the resolution plan submitted before the CoC saying that it was at "exorbitant rate".

"We cannot be burdened with such contract... It has to be terminated," said Nayar adding that the agreement binds it to purchase the entire power generation of BEL, whether it is utilised or not.

On April 9, BEL, which is also going through insolvency proceedings, had approached NCLT contending that termination of PPA with Bhushan Steel and avoidance of any payment by the successful bidder would be against the contract.

However, Nayar said that such petty contracts shall not be allowed and alleged that they are operational creditors and and their contract could not stand.

As on February 1, 2018, Bhushan Steel had a total debt of Rs 571.6 billion (Rs 57,160 crore).