JSW Steel has filed an appeal at the National Company Law Tribunal, contesting the conditions of its takeover of bankrupt steel mill Bhushan Power and Steel (BPSL). The appeal is expected to come up for hearing on Monday.
In a filing with stock exchanges, JSW Steel said: “In continuation of our earlier disclosure dated September 06, 2019 and pursuant to the provisions of Regulation 30 of the LODR (Listing Obligations and Disclosure Requirements) Regulations, we hereby inform you that on detailed examination of the terms and conditions of the NCLT order approving the resolution plan, it has come to our notice that the approval contains certain modifications. Further, certain important reliefs sought by the company have also not been granted. The company has therefore appealed against the said order dated September 5, 2019 before the relevant judicial forum."
On September 5, Mint was the first to report that JSW Steel was unhappy with the conditions of its takeover of BPSL under the Insolvency and Bankruptcy Code. JSW Steel, which has offered an upfront cash payment of ₹19,700 crore to BPSL’s lenders, was the highest bidders for the stressed steel plant. However, as conditions of its takeover, JSW Steel had approached the NCLT seeking protection from future litigation, considering that a forensic audit of the company’s finances had revealed potential fraud and siphoning off of money by its erstwhile promoters. The allegations are being investigated by the Central Bureau of Investigation.
The Delhi bench of the NCLT, which passed the order approving the sale of BPSL’s assets to JSW Steel, also ruled that the operating profits that BPSL earned during its two-year-long resolution period should be distributed among the company’s financial and operational creditors. JSW believes, however, that these profits were part of the company’s assets and should stay with BPSL.
A person aware of JSW Steel’s appeal at NCLAT said that the company will make these two key requests – for protection of its assets after the takeover from possible action under the Prevention of Money Laundering Act and for the operating profits to remain within the company and not be redistributed to lenders.
Over this past week, the financial creditors of BPSL, led by the State Bank of India, Punjab National Bank and Bank of India, have held a series of meetings with the top management of Sajjan Jindal-promoted JSW Steel to try to discourage them from appealing the NCLT decision. Mint reported on 11 September that the BPSL’s committee of creditors preferred to finalize terms of a takeover that were agreeable to all parties rather than run the risk of more litigation, which would drag on the resolution process. The resolution process for BPSL has already lasted over 800 days, against the 330-day deadline mandated by the Insolvency and Bankruptcy Code.