The ED has told the appellate bankruptcy court that JSW Steel will not get immunity from the criminal charges being faced by Bhushan Power & Steel if it acquires the latter, because both are related parties.
The agency also said that a Section under the Insolvency and Bankruptcy Code, which gives protection to the acquirer from prior offences committed by a bankrupt company, will not apply in this case since the provision was added to the law after lenders cleared JSW’s proposal to acquire Bhushan Power. This provision under Section 32A, it told the court, cannot be applied retrospectively.
JSW, which is seeking immunity from charges before going ahead with the deal, declined comment.
Bhushan Power’s former promoters are facing charges of financial irregularities and money laundering. In an affidavit filed in the National Company Law Appellate Tribunal, the ED said JSW and Bhushan Power are related parties through a joint venture.
JV founded in 2008
The ED is looking into whether one party had helped the other in the alleged offences. JSW Steel, which has offered to pay over Rs 19,000 crore to acquire Bhushan Power, had sought to be excluded from regulatory and criminal probes against the target company under the watch of its erstwhile management. It has also sought exemption from the attachment of the target company’s assets.
Last October, the ED had attached a factory of Bhushan Power in Odisha’s Sambalpur. Subsequently, the attachment was released by the NCLT. The agency has challenged the order in the appellate body.
In its affidavit filed on January 17, the ED said the relation between the two companies needs to be probed further. It said JSW Steel and Bhushan Power are shareholders, with stakes of 24.09% and 49%, respectively, in a venture called Rohne Coal Company. The agency said it wants to look at all the arrangements entered into between the two shareholders. Citing filings before the Ministry of Corporate Affairs, the affidavit said the joint venture company, founded in 2008, is “still in operation”.
On the application of Section 32A of IBC, included through an amendment in December 2019 to provide immunity to the corporate debtor and its assets from an offence committed prior to the commencement of the insolvency process, the ED said there is no provision that gives retrospective effect to the section.
Ministry of Corporate Affairs sources is of the view that they cannot give a clean chit to anyone. In the ministry’s affidavit, it is likely to explain the intent of the provision.
“Section 32A is clearly worded, if investigation agencies have reasons to believe based on material facts, the protection will not be available. The MCA will merely explain intent of the provisions. We cannot give a clean chit to anyone,” said a senior official. In its affidavit, the ED said the Section was introduced with effect from December 28, 2019, while JSW’s resolution plan for Bhushan Power was approved on September 5, 2019.
“The liability of corporate debtor shall not cease for the impugned offenses under PMLA as the resolution plan… is not resulting in change in management or control of the corporate debtor to a person who was not a related party of the corporate debtor, for the reason that JSW Steel is a ‘related party’ of the corporate debtor, being an associate company which has formed a joint venture with the accused-corporate debtor,” said the affidavit.
Source: Economic Times