Sanjay Singal, former managing director of Bhushan Power & Steel, has moved the Supreme Court challenging the troubled steelmaker’s sale to JSW Steel under the insolvency law.
Singal has filed a special leave petition before the top court contenting that 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).
The Enforcement Directorate (ED), too, is likely to challenge the Rs 19,700-crore deal before the top court because NCLAT while giving its nod to the deal provided immunity to the new owners from ongoing criminal proceedings against the erstwhile promoters of the company, people familiar with the development said.
ED had in its submission before NCLAT called JSW Steel a ‘related party’ and refused to grant immunity from the scope of criminal investigation.
“There are a lot of legal issues involved in the NCLAT order,” said senior counsel Vijay Aggarwal who is representing Singal. “The said order will not stand the scrutiny of the SC and its fate will be similar to that in the Tata-Mistry case,” he told ET.
Singal’s petition argued that by allowing the buyer to retain Ebitda generated during the insolvency process the appellate tribunal has given it a windfall gain at the cost of the creditors. “Even the committee of creditors in its affidavit rightfully claimed the rights over the Ebitda generated during the CIRP. Unfortunately the NCLAT has failed to return any finding qua the same,” it said.
ED had in its submission before NCLAT argued that the amended provisions in bankruptcy laws that shield buyers of distressed assets from criminal and regulatory proceedings subject to the fulfilment of conditions cannot be applied retrospectively.
More than Rs 4,000-crore worth of properties belonging to BPSL have been attached by ED under Prevention of Money Laundering Act (PMLA). The properties were attached before the amendment to Section 32 of the IBC were made last year.
“President while exercising his power chose not to make the ordinance retrospective,” ED had argued in its submission to NCLAT.
ET has seen a copy of the submission.
“There are no powers conferred upon the NCLAT under the IBC (Insolvency and Bankruptcy Code) to interfere with a provisional attachment order passed under PMLA prior to the Ordinance,” it said.
Singal’s plea also states that NCLAT order usurps the power of other statutory authorities like Sales Tax Act, Income Tax Act and others. It alleged that NCLAT granted all sorts of benefits and concessions to JSW Steel “without jurisdiction and also without there being any power to override or give concessions under the said enactments”.
Matter is likely to be heard next week.
Source: The Economic Times, February 26, 2020