An appellate tribunal on Tuesday reserved its judgement on the contentious matter of whether JSW Steel, the successful bidder for debt-ridden Bhushan Power and Steel, would have immunity from offences committed by the erstwhile management under a recent change in the insolvency law.
The National Company Law Appellate Tribunal concluded the hearings in the case. The corporate affairs ministry and the Enforcement Directorate have locked horns over the retrospective application of the recently amended IBC that provides immunity to new promoters from wrongdoings of the erstwhile management.
The ministry of corporate affairs (MCA) has argued before an appellate tribunal that the new law will apply to JSW Steel, the successful resolution applicant for Bhushan Power and Steel while ED maintains that the amended law could not be applied retroactively.
The Centre has previously submitted that the December ordinance, which grants immunity to the new management from offences committed prior to insolvency proceedings, also applied to cases pending before the NCLAT.
The MCA has also backed the argument of JSW Steel that it is not a related party to the erstwhile management and therefore immune from prosecution for offences committed by the latter, taking a stance counter to ED’s that maintains that the new promoter was a related party.
The ED had, last year, attached BPSL properties in Odisha worth over `4,000 crore, stalling the JSW Steel’s `19,700 crore resolution plan. “We will bring it to the notice of the government that they should not speak with multiple mouths,” noted a two-member bench led by Justice SJ Mukhopadhaya.
The ED has argued that the new provision does not apply to JSW Steel as it is a related party to the erstwhile promoters through its stake in Rohne Coal Company in which JSW Steel has a direct shareholding of 49% and BPSL has a stake of 24.09%.
The ED, Serious Fraud Investigation Office and the Central Bureau of Investigation are investigating erstwhile promoter and managing director Sanjay Singal for alleged diversion of funds at Bhushan Power and Steel. JSW Steel has, however, argued that the joint venture was a result of a joint coal allocation by the government of India. “The Union of India had given a common coal block (to JSW Steel and BPSL),” senior counsel for JSW Steel, Kapil Sibal had argued on an earlier date.
The joint coal block allocation has since been revoked after the Supreme Court cancelled coal block allocations leaving the company virtually defunct, according to sources aware of details. The bench said that it would decide on whether the ED had the jurisdiction to appeal that JSW Steel was a related party after it had been cleared by the resolution professional, committee of creditors and the adjudicating authority as an unrelated party under Section 29A of the IBC. Section 29A of the IBC prohibits parties related to those who have defaulted on debt obligations from bidding for distressed assets.
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Source: Economic Times