The Enforcement Directorate has challenged the jurisdiction of the National Company Law Appellate Tribunal (NCLAT) in directing the agency to release the assets of Bhushan Power & Steel Ltd (BPSL) it had attached. It also objected to the tribunal applying retroactively a law that gives immunity to the buyers of bankrupt assets from investigations against previous promoters.
The central agency’s move comes after BPSL’s committee of creditors (CoC) asked JSW Steel to implement the resolution plan it had proposed for the bankrupt company. The CoC had moved the Supreme Court earlier this month seeking direction on implementing the resolution plan. On June 24, the ED filed an affidavit in the top court opposing the request.
A senior JSW Steel executive said the Supreme Court had asked all the parties in the last hearing to file their submissions within two weeks, in response to an application filed by JSW Steel against BPSL’s former promoter who had opposed the resolution plan. Pending adjudication of this and other applications, the proposal cannot be implemented, “more so when the assets of BPSL are continued to be attached by ED”, the executive said.
In February, the NCLAT granted JSW Steel immunity from prosecution against any investigation pursued by government agencies against the previous promoters of BPSL. The newly inserted Section 32 (A) of the Insolvency and Bankruptcy Code (IBC) discharges new owners from any prior liability of offences committed by a corporate debtor.
The ED has raised objection to applying the section retrospectively in this case, which was registered by the ED before the IBC amendment.
The section was introduced on December 28, 2019 and the ED said the tribunal had “erred in law” in applying it retrospectively.
The ED has also argued that the NCLAT didn’t have any jurisdiction to direct the investigation agency to release properties attached under the Prevention of Money Laundering Act (PMLA).
“Because the PMLA is a specific/special law governing money laundering in the country and no exceptions can be made to it unless specifically provided for by Parliament,” said the ED in its response, a copy of which ET has seen. “There is no power conferred upon the NCLAT under the IBC to interfere with a provisional attachment order passed under Section 5 of the PMLA.”
According to the ED, the scope of the PMLA was “much wider and comprehensive” compared to the IBC and “since the assets of the corporate debtor are basically ‘proceeds of crime’, the special law governing money laundering will hold the field”.
It added: “If the provisions of the IBC are given primacy over a specialised penal statute like the PMLA, it will be subject to gross abuse to escape the rigours of the criminal law, thereby frustrating the entire object of the PMLA.”
JSW had bid Rs 19,700 crore for the 3.5-million-tonne steel plant. The proposal was approved by the lenders and subsequently by the National Company Law Tribunal in September 2019.
Source: Economic Times