Bhushan Power liquidation will hurt all stakeholders, JSW Steel and lenders tell SC

Time of India

2 days ago

New Delhi:
JSW Steel
has transformed
Bhushan Power & Steel Ltd
(BPSL) into a viable and going concern after acquiring it out of bankruptcy in 2021, and its liquidation would have adverse ramifications on all stakeholders, the Sajjan Jindal-led steelmaker and BPSL's lenders told the
Supreme Court
.
They also sought an "open court" hearing of their petitions seeking a review of the top court's May 2 order scrapping JSW's acquisition of BPSL under the bankruptcy law. While JSW filed the review petition on Wednesday, the lenders that include
Punjab National Bank
and
State Bank of India
approached the top court with their plea last week.
JSW said it transformed the bankrupt firm's financial health and that its operational capacity has almost doubled to 4.5 million tonnes per annum now from 2.3 MTPA in 2017. BPSL's sales have since increased almost three times to ₹25,973 crore in the last fiscal year ended March 31 and exports have resumed with an annual average of ₹2,976 crore in the last four years, the company said in the review petition.
BPSL contributed ₹16,900 crore in taxes to the exchequer since 2021, the petition stated. Also,
JSW Steel
, which acquired BPSL under a ₹19,350-crore resolution plan, has made a capital investment of ₹5,788 crore in it.
In its order on May 2, the top court had termed JSW's resolution plan for BPSL 'illegal' and 'in gross violation' of the Insolvency and Bankruptcy Code (IBC). The court had also directed the National Company Law Tribunal (NCLT) to initiate liquidation proceedings against BPSL. The SC later ordered status quo on the liquidation proceedings, after JSW Steel and the lenders said they would file review petitions.
About the allegation in the May verdict that JSW suppressed existence of a joint venture agreement with BSPL on the Rohne Coal block, the company's review petition said it had made due disclosures about it in the resolution plan and even the National Company Law Appellate Tribunal (NCLAT) had noted them. 'When the ED (Enforcement Directorate) first raised the issue before NCLAT to clarify the relationship further, the petitioner (JSW) voluntarily submitted the JV agreement before NCLAT, despite there being no requirement to do so under law, to explain the background of formation of the JV,' the review petition filed through Karanjawala & Company said.
Supporting JSW's claims, the lenders said the resolution plan was successfully implemented by March 2021 and that the company had made an upfront payment of ₹19,350 crore.
The banks in their review plea said the May 2 judgement suffered from 'patent errors' on the face of the record. '…the impugned judgment's observations with respect to the JSW's eligibility under Section 29A being doubtful, not being properly verified by inter alia the CoC (committee of creditors) or not being supported by documents on record constitute an error apparent on the face of the record,' the lenders said, adding that the issue was not argued before the SC and hence, the observations in relation that were in violation of the principles of natural justice.
Section 29A of the IBC details conditions under which some individuals and entities are disqualified from submitting a resolution plan.
With regard to the SC finding that equity infusion of ₹8,550 crore as mandated by the resolution plan was not complied with and there was no material on record to substantiate that, the banks submitted that this 'conclusion has been reached without adequately considering that there is in fact documentary evidence, particularly minutes of meeting of the reconstituted board on March 26, 2021, to substantiate infusion of ₹8,550 crore equity.'
The May judgement failed to consider the factors that contributed to the delay in equity infusion, according to the banks' review plea filed through law firm Cyril Amarchand Mangaldas.
The petition also noted that the ED order for provisionally attaching BPSL assets had been issued on October 10, 2019, about 35 days after the NCLT approved the dent resolution plan on September 5 that year. 'The attachment by the ED was effectively released approximately five years later' on December 11, last year, the banks said in the petition.
The lenders told the SC that the May 2 judgement will likely have significant ramifications on future resolution plans because it might create uncertainty with respect to their implementation. Also, implementation of plans may effectively come to a standstill pending final adjudication of all legal challenges to the plan, which can take several years, they said.
BSPL owed more than ₹47,000 crore to lenders when the Reserve Bank of India put it on a list of companies for bankruptcy resolution in 2017. The NCLT began the resolution process in July that year, based on a petition filed by lead lender
Punjab National Bank
, which also initiated criminal proceedings in 2019 against former directors of the company after unearthing a ₹3,800 crore alleged fraud. JSW Steel acquired BPSL in March 2021 after its proposal was approved by the CoC and the NCLAT.
The NCLT had approved JSW Steel's offer in 2019, while holding that the successful bidder could not be held responsible for any alleged misdeeds of the previous promoters at any stage. The NCLAT upheld that decision in February 2020.