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by IANS |
New Delhi, March 5 (IANS) The Supreme Court will on Friday hear the former Bhushan Power and Steel's MD and promoter Sanjay Singhal's plea against the approval to JSW Steel's takeover of the bankrupt steel company.
Singhal has filed a special leave petition before the Supreme Court saying the National Company Law Appellate Tribunal (NCLAT) has erroneously allowed JSW Steel to retain Bhushan Power & Steel's earnings before interest, tax, depreciation and amortisation (EBITDA) to the tune of Rs 3,000 crore generated during the corporate insolvency resolution process (CIRP).
Last month the appellate tribunal had permitted JSW Steel to acquire the bankrupt company and granted it immunity from prosecution by the Enforcement Directorate (ED).
In September 2019, the National Company Law Tribunal had approved its resolution plan to take over the insolvent company, but the Enforcement Directorate, investigating alleged fraud committed by the debt-laden firm's previous management, had attached the assets of BPSL which, it believed, were acquired from proceeds of crime, following which JSW Steel moved the NCLAT to seek immunity from the proceedings.
Some experts feel that the takeover of Bhushan Power and Steel by JSW Steel would go against the spirit of the Insolvency and Bakruptcy Code (IBC), as the code was formulated to maximise the value of the assets, but JSW Steel' s bid of Rs 19,700 crore is way lower than the total exposure of the baks, which stands at over Rs 40,000 crore.
Further, its resolution plan of JSW Steel has also faced obstructions as it is a related party to the bankrupt Bhushan Power Steel.
The Enforcement Directorate had told NCLAT that JSW Steel cannot get immunity from the criminal charges being faced by Bhushan Power and Steel if it acquires the latter, because both are related parties.
The appelate tribunal approved the takeover under the new amendment to the IBC which provides immunity to the new owners from ongoing criminal proceedings against the erstwhile promoters of the company.
"We hold that the assets of the corporate debtor of which JSW Steel is a resolution applicant are immune from attachment by the Directorate of Enforcement under Section 32(A) of the IBC (Insolvency and Bankruptcy Code)," NCLAT said in February while clearing the stalled resolution plan.
There are also differing views among legal experts on the matter.
On the issue of banks taking a large haircut, Manoj Kumar of Corporate Professionals said: "They (banks) know that this will be a viable proposition after this haircut, this amount is fully secured. Banks have to see rationally how much they can recover, if they can get this much only then they should take and go..."
"This is not against the spirit of IBC, this will happen," he said.
