Clearing the hurdles in the corporate insolvency resolution process (CIRP) of Bhushan Power and Steel, the National Company Law Appellate Tribunal (NCLAT) Monday gave complete immunity to JSW Steel from investigation by the Enforcement Directorate (ED) for alleged money laundering by erstwhile promoters of the debt-laden company.
The probe against Bhushan Power’s erstwhile promoters, however, will continue in accordance with the law, said the two-member NCLAT bench. In its judgment, the appellate tribunal held that the corporate debtor, Bhushan Power, will be immune from all probe by the ED, the Central Bureau of Investigation and the Serious Fraud Investigation Office.
However, if the ED were to eventually establish through its probe that the assets created at Bhushan Power were from “proceeds of crime”, a fair value for those assets will be determined, and the investigative agency could file its claims in the CIRP process as an operational creditor.
The ED — which is probing Bhushan Power for alleged irregularities and money laundering — had in January told the NCLAT that it would, apart from probing the former promoters of Bhushan Power and the company, also probe JSW Steel, as it was a related party. Citing a joint venture (JV) formed by JSW Steel and Bhushan Power, the Directorate had told the NCLAT that the new amendment would only apply prospectively, and not retrospectively.
The NCLAT on Monday, however, overruled this stance of the ED and held that just because JSW Steel had formed a JV with Bhushan Power for Rohne coal block, it did not make the two related parties. The JV, the NCLAT held, was formed because of certain conditions stipulated by the Centre, and therefore would not make both the companies related parties as defined under Insolvency and Bankruptcy Code (IBC).
The appellate tribunal also overruled the attachment of properties by the ED, and said that as the action had been taken after the approval of JSW Steel’s resolution plan on September 5, it must be annulled. JSW Steel — which had at Rs 19,700 crore placed the winning bid for Bhushan Power — had been wary, owing to cases pending against the latter. This was after the ED remained firm on its idea to attach the properties of Bhushan Power, as well as its former promoters and directors for alleged money laundering. The ED had, last October, started attaching properties worth nearly Rs 4,000 crore belonging to Bhushan Power. Following the raids, JSW Steel approached the NCLAT.
The stance taken by the ED was in direct contrast with the Ministry of Corporate Affairs’ (MCA) understanding of the IBC, where the latter said that though ED can continue with its probe against the erstwhile promoters under the Prevention of Money Laundering Act, the assets of the corporate debtor — after the resolution plan is approved — must remain immune to any proceedings.
Later, the MCA absolved itself of any responsibility, and said that the onus of checking whether the resolution plan for Bhushan Power submitted by JSW Steel passed all IBC checks lay with the adjudicating authority and investigating agencies, and not the Centre.