The National Company Law Appellate Tribunal (NCLAT) has given JSW Steel Ltd immunity from all criminal investigations for its takeover of Bhushan Power & Steel Ltd, pushing the deal closer to the finish line.
The tribunal, in a February 17 order, allowed JSW’s appeal under the newly introduced Section 32A of the Insolvency and Bankruptcy Code that provides immunity to the new management of a distressed company acquired under the IBC. It also dismissed other related appeals filed by Bhushan Power’s operational creditors and former promoters
Billionaire Sajjan Jindal-led JSW Steel had last year offered Rs 19,700 crore ($2.7 billion) for the takeover of Bhushan Power to outbid Tata Steel Ltd and the UK’s Liberty House Group. The National Company Law Tribunal (NCLT) approved JSW’s offer in September last year, but it added certain modifications and didn’t grant certain reliefs the company had sought.
JSW contested the modifications and sought immunity against prosecution of Bhushan Power. Separately, some of Bhushan’s operational creditors and its erstwhile promoters also challenged the NCLT order.
Bhushan Power faced a probe by investigative agencies after state-owned Punjab National Bank and Allahabad Bank reported fraud amounting to Rs 5,500 crore ($770 million) committed by its erstwhile promoters. The Enforcement Directorate had sought to attach Bhushan Power’s assets due to alleged fraud by its former management.
JSW Steel had moved the appellate tribunal seeking to extinguish all present and future liabilities on account of criminal investigations against Bhushan Power, contending that an absence of any such protection would jeopardise the viability of its resolution plan.
The government had in December last year amended the insolvency law to ring-fence a distressed company after its takeover in a bankruptcy auction from criminal proceedings arising from offences committed by the previous management. However, the ED argued that the immunity is not retrospective in nature and does not cover companies whose resolution plan was approved prior to the law.
On Monday, the NCLAT held that the Enforcement Directorate and other investigating agencies do not have the powers to attach assets of Bhushan Power after a resolution plan has been approved. Previously, a bench headed by Justice SJ Mukhopadhyay in January had reserved its judgment on JSW’s purchase of Bhushan Power.
Bhushan Power is one of the 12 biggest corporate defaulters that the Reserve Bank of India had listed in June 2017 for banks to start insolvency proceedings. The debt-laden firm owes its lenders more than Rs 47,000 crore and over Rs 780 crore to operational creditors.
The acquisition will help JSW, one of India’s biggest steelmakers, add annual capacity of 3.5 million tonnes.