The National Company Law Appellate Tribunal (NCLAT) on Friday upheld the sale of Bhushan Steel to Tata Steel, rejecting allegations of its ineligibility by the promoters of the debt-ridden firm.
The appellate tribunal also rejected the claims of engineering and construction major L&T, an operational creditor of Bhushan Steel Ltd, opposing Tata Steel's resolution plan seeking a higher priority in debt resettlement.
An NCLAT bench headed by Chairman Justice S J Mukhopadhaya rejected the claims of its promoters Neeraj Singal that Tata Steel was ineligible to bid for Bhushan Steel under section 29 A of the Insolvency & Bankruptcy Code (IBC).
The appellate tribunal said that Tata Steel UK, a foreign subsidiary of Tata Steel, which was fined by an English Court in February 2018 under UK Act, had a provision of imprisonment for a term not exceeding twelve months, or a fine, or both'.
While, the provision in section 29A (d) of IBC, which deals with eligibility, stipulates has been convicted for any offence punishable with imprisonment for two years or more, cannot be equated with Section 33(1)(a) of the UK Act, said NCLAT.
We hold that Tata Steel UK', which is the connected person' of Tata Steel Ltd', does not attract the disability. under Section 29A of the I&B Code' and for the said reason, we also hold that Tata Steel Limited' is eligible to file the Resolution Plan'', said NCLAT.
Section 29 A of the IBC mandates that a person convicted for any offence punishable with imprisonment for two years or more is ineligible for submitting a resolution plan.
Over the claims of L&T, which had supplied goods and machineries goods over Rs 9 billion, NCLAT said that Tata Steel's resolution plan was fair towards operational creditors of Bhushan Steel which has a total demand of Rs 14.22 billion.
The appellate tribunal observed that the company has allotted Rs 12 billion for them and L&T plea for a higher priority could not be accepted.
We hold that the Resolution Plan' submitted by Tata Steel is fair and equitable to all the Creditors including the Operational Creditors therefore, no interference is called for, the appellate tribunal said.
Moreover, it also declined the plea of Brij Bhushan Singal of the promoters family, contending Tata Steel's Resolution Plan' was illegal as it purports to transfer shares' of the preference shareholders' of Bhushan Steel without their consent for a fixed consideration of Rs 100 as against Rs 22.69 billion.
Over the claims of Department of Forest and Environment, Government of Jharkhand that part of the land shown in the resolution plan does not belong to Bhushan Steel and is in illegal possession of the company, NCLAT said that Tata Steel is aware of the proceedings.
If the title of land is defective, it cannot be cured upon taking over the assets of the Corporate Debtor' (Bhushan Steel) by the Resolution Applicants', said NCLAT.
It further said: "The Adjudicating Authority (NCLT) for the said reason held that remedy available to the Applicant/State of Jharkhand and its Officers, having already initiated and pending against the Corporate Debtor', allowing or rejecting the Resolution Plan' will not affect the legal remedy.
Bhushan Steel owed its lenders about Rs 560 billion and was among the 12 big loan defaulters identified by the Reserve Bank of India last year to undergo insolvency under the new bankruptcy law.
On May 15 the National Company Law Tribunal (NCLT) had approved Tata Steel's bid for Bhushan Steel and this was challenged by Neeraj Singal and L&T before NCLAT.
Tata Steel has offered Rs 352 billion in cash to acquire Bhushan Steel.
It would pay another Rs 12 billion over next 12 months to creditors and convert the remaining debt owed to banks to equity.
We are not inclined to interfere with the order dated 15th May, 2018, passed by the Adjudicating Authority (NCLT) in the case of Bhushan Steel Limited' under challenge in Company Appeals... They are accordingly dismissed,' the appellate tribunal said.