18 September 2019: JSW Steel, the highest bidder for Bhushan Power and Steel (BPSL), has informed the National Company Law Appellate Tribunal (NCLAT) that it would be impossible for it to implement the resolution plan for BPSL if it has to share profits earned by the insolvent firm during the resolution period with creditors. The Sajjan Jindal-led company has also expressed concerns over the chances of BPSL’s assets being undermined given it doesn’t have tribunal’ protection against possible attachment of assets for offence committed by the erstwhile promoters.
Challenging NCLT’s September 5 order that approved its `19,700-crore bid for the insolvent firm, JSW said: “The direction in relation to treatment of CIRP Ebitda amounts to modifying the resolution plan in a material manner, without the consent of the appellant (JSW Steel) and imposition of such a condition would make it impossible for the appellant to implement the resolution plan.”
In its order, NCLT had directed JSW Steel to distribute profits earned during the Corporate Insolvency Resolution Process (CIRP) period among financial and operational creditors on pro-rata basis. In the application, JSW Steel has said BPSL’s earnings before interest, tax, depreciation and amortisation (Ebitda) during the CIRP period was factored in as an asset of the company and based on that it had submitted the resolution plan. “In the present matter, the issue of entitlement of CIRP Ebitda was discussed between the appellant and the committee of creditors (CoC) and agreed that the CoC would not have a claim on it and CIRP Ebitda would continue to remain with the corporate debtor,” JSW Steel said.
Also did not gel well with JSW Steel the NCLT’s decision not to grant BPSL protection from penal financial liability and attachment of assets on account of acts of omission or commission of the previous directors under the Prevention of Money Laundering Act (PMLA), 2002. The CBI had on April 5 registered an FIR against the erstwhile directors and the debt-ridden firm for alleged siphoning of thousands of crores of funds borrowed from banks on behalf of BPSL.
Sans such protection, particularly in view of the Delhi High Court judgement that ruled that provisions of the Insolvency and Bankruptcy Code (IBC) do not override the provisions of the PMLA, the basis of the IBC was vitiated. The non-grant of such protection from penal liability and attachment under PMLA and other laws would also defeat the objects of the (IBC) code.
“It is respectfully submitted that in the absence of protection as prayed from attachment and liability resulting from criminal proceedings, the appellant would not be able to implement the resolution plan and the same would be an unviable and unfeasible plan incapable of even being approved under the code,” JSW Steel said.