JSW Steel awaits fate of Bhushan Power acquisition as SC adjourns hearing

Since JSW was named the highest bidder last year, it has been a long wait for Jindal due to a spate of investigations by ED and multiple adjournments in final hearing at the Supreme Court

Exactly a year ago, Sajjan Jindal-owned JSW Steel’s resolution plan for Bhushan Power and Steel (BPSL) was approved by the National Company Law Tribunal (NCLT), and the Indian lenders heaved a sigh of relief as they were waiting since July 2017 to resolve the Rs 48,000-crore of debt taken by the firm. As the Supreme Court (SC) adjourned the final hearing on JSW's acquisition again on Wednesday, the lenders' wait just got longer.
 
The company was among the first to be sent for debt resolution by the Reserve Bank of India under the Insolvency and Bankruptcy Code, 2016.
 
“There is no clarity on when the acquisition will be approved by the SC. The Indian banks could have lent an additional Rs 1.6 trillion if Rs 20,000 crore received from JSW was added to their capital adequacy ratio,” said a banker close to the development. “The litigation and the delay in getting possession of the company goes against the ease of doing business in India, and bidders like JSW will soon think about its plan B,” the banker said.
 
JSW Steel officials declined to comment.
 
In the SC, JSW Steel is seeking immunity from the alleged offences committed by former promoter Sanjay Singal. The Enforcement Directorate (ED) had also objected to the JSW Steel acquisition in the SC saying JSW was an associate company of BPSL. JSW Steel, BPSL, and Jai Balaji Sponge held a stake in the coal mining venture — Rohne Coal — which according to the ED, makes JSW an associate company.
 
According to the insolvency and bankruptcy law, companies/relatives associated with former promoters are not allowed to bid for the company. JSW Steel says it was not an associate company of BPSL and is contesting the claim in the SC.

 
In the SC, the ED objected to the National Company Law Appellate Tribunal (NCLAT) order in February, which held that JSW Steel should be protected from any prosecution by government agencies that they are pursuing against former promoters.
 
The ED objected that the NCLAT does not have power under the Prevention of Money Laundering Act to give it any directions. The matter is pending in SC.
 
In October 2019, the ED had attached BPSL’s assets worth Rs 4,025 crore for diversion of funds by the erstwhile management.
 
In August this year, the ED also raided the resolution professional (RP) of BPSL alleging that the RP helped former promoters to siphon off funds worth Rs 700 crore from the company during the debt resolution.
 
Corporate lawyers said if there was any fraud done by the RP, the ED should proceed against the RP and trace the assets, but not delay the acquisition.
 
The question of who takes the earnings home during the resolution period was raised by Singal in the SC. He asked whether JSW can access BPSL’s earnings before interest, tax, depreciation and amortisation (Ebitda) worth Rs 3,000 crore earned during the debt resolution period. Singal told the SC that NCLAT had erroneously allowed JSW to retain the Ebitda.
 
“The final hearing in the case was supposed to be on September 8 in the SC, but it was adjourned after Singal sought four weeks to file additional replies. The apex court gave only two weeks. Later, the ED also filed its replies but as it had defects, the case was adjourned," the banker said.