Bhushan Power’s Former MD Challenges JSW Deal In SC

Bhushan Power & Steel Ltd’s (BPSL) former managing director Sanjay Singal has moved the Supreme Court challenging BPSL’s sale to JSW Steel under insolvency law.

Singal has filed a special leave petition before the Supreme Court contenting that the National Company Law Appellate Tribunal (NCLAT) has erroneously allowed JSW Steel to retain BPSL’s earnings before interest, tax, depreciation and amortization (EBITDA) to the tune of Rs 3,000 crore generated during the corporate insolvency resolution process (CIRP).

Incidentally, the Enforcement Directorate (ED) too is likely to challenge the Rs 19,700-crore deal before the Supreme Court. This is because, while allowing the deal to go through, the NCLAT provided immunity to BPSL’s new owners from ongoing criminal proceedings against erstwhile promoters of the company, who include Sanjay Singal.

It may be recalled that in its submission before the NCLAT, the ED had called JSW Steel a “related party” and refused to grant immunity to it from the scope of criminal investigation.

Singal’s lawyer Vijay Aggarwal stated that there are a lot of legal issues involved in the NCLAT order and that it would not stand the scrutiny by the Supreme Court.

Singal’s petition argued that by allowing the buyer JSW Steel to retain BPSL’s Earnings Before Interest, Tax, Depreciation & Amortization (EBIDTA) generated during the insolvency process, the NCLAT has given the buyer JSW Steel a windfall gain at the cost of BPSL’s creditors.

In its submission before the NCLAT, the ED had argued that the amended provisions in bankruptcy laws that shield buyers of distressed assets from criminal and regulatory proceedings subject to the fulfillment of conditions cannot be applied retrospectively.

More than Rs 4,000-crore worth of properties belonging to BPSL have been attached by the ED under the Prevention of Money Laundering Act (PMLA) before the amendment to Section 32 of the Insolvency and Bankruptcy Code (IBC) was made in 2019.

“There are no powers conferred upon the NCLAT under the IBC to interfere with a provisional attachment order passed under PMLA prior to the ordinance,” the ED’s plea stated.

Singal’s plea has also stated that the NCLAT order has usurped the power of other statutory authorities like Sales Tax, Income Tax and others. It alleged that the NCLAT has granted all sorts of benefits and concessions to JSW Steel “without jurisdiction”.