NCLAT upholds JSW Steel Resolution Plan for Bhushan Power & Steel, declares attachment of property by ED as illegal

The National Company Law Appellate Tribunal today upheld the NCLT order approving JSW Steel’s Resolution Plan for Bhushan Power and Steel. (JSW Steel vs Mahender Kumar Khandelwal).The NCLAT has also held that in view of Section 32A(1), the Enforcement Directorate and other investigating agencies do not have the powers to attach assets of a Corporate Debtor after the Resolution Plan stands approved and the criminal investigations against the Corporate Debtor stand abated..Accordingly, the Appellate Tribunal has also declared the attachment of assets of Bhushan Power & Steel by the Enforcement Directorate as illegal and without jurisdiction..It has nonetheless clarfied that investigating Agencies were free to proceed with the investigation or to take action in accordance with law against erstwhile promoters, officers etc of Bhushan Power & Steel. .The Judgment was passed by a two-member Bench of Chairperson, Justice SJ Mukhopadhyay and Member (Judicial) Justice Bansi Lal..The National Company Law Tribunal (NCLT) had approved JSW Steel Ltd’s resolution plan for Bhushan Power and Steel Ltd in September 2019..NCLT approves JSW Steel bid for Bhushan Power and Steel, imposes costs on former Directors.Thereafter, appeals against the NCLT order were preferred by Bhushan Steel Promoter, JSW Steel and other creditors..One of the grievances of JSW Steel was directed against the attachment of parts of assets of the Corporate Debtor by the Enforcement Directorate after the approval of its Resolution Plan.. JSW Steel had thus sought immunity against the prosecution of the Corporate Debtor..Bhushan Power and Steel: NCLAT issues notice to Centre, ED in JSW Steel’s plea for immunity.In view of the IBC Ordinance issued on December 28, 2019 which had inserted Section 32A, the Central Government submitted that with JSW Steel taking over the assets of the Corporate Debtor were immune from further coercive action..The Enforcement Directorate, however, took a contrary stand and argued that JSW Steel was ineligible for immunity in terms of Section 32A as it was a 'related party' to the Corporate Debtor..The Enforcement Directorate informed the Court that Bhushan Power & Steel Limited and JSW Steel Limited were shareholders in a Joint venture company namely M/s. Rohne Coal Company Private Limited..The Enforcement Directorate also argued that the introduction of Section 32A was prospective and would not apply to JSW Steel as the Resolution Plan was approved under Section 31 IBC much earlier..After hearing the parties, the NCLAT stated that once a Resolution Plan is approved by NCLT i.e. the Adjudicating Authority, it was binding on Corporate Debtor, its employees, creditors including the Central Government, any State Government or any local authority. .The NCLAT then perused the December, 2019 IBC Ordinance as well as Section 32A and stated that it was “ex facie evident” that the Ordinance was clarificatory in nature and must be applied retrospectively..The NCLAT said,.“.. the intent and purpose of the insertion of Section 32A is to provide certainty to the ‘Resolution Applicant’ that the assets of the ‘Corporate Debtor’ as represented to him and for which he proposes to pay value/ consideration in terms of the ‘Resolution Plan’, would be available to him in the same manner as at the time of submissions of the ‘Resolution Plan’.”NCLAT.The NCLAT opined that upon perusing Section 32A (1)(a) IBC, it was ex facie evident that JSW Steel Limited was not an associate company/ related party of the Corporate Debtor and was not ineligible..It said,“..by virtue of both having investment in such downstream joint venture company i.e. ‘Rohne Coal Company Private Limited’, the ‘JSW Steel Limited’ and the ‘Corporate Debtor’ do not become related parties of each other… where a party for the purpose of its business, if mandated by the Central Government to join hands together and are forced to form a consortium or as joint associate, such person (‘Resolution Applicant’) cannot be held ineligible in terms of Section 32A (1) (a) on the ground of ‘related party’.”.The NCLAT clarified that an entity could not be held to be ineligible till it was shown that it came within any of the disqualifications under clauses (a) to (j) of Section 29A. .The NCLAT added that the mere assertion by Enforcement Directorate that further investigation was required to ascertain if there was "any abetment or conspiracy" by JSW Steel was no reason to conclude that the criteria under Section 32A (1)(b) IBC for denial of immunity was satisfied..The NCLAT further clarified that the Enforcement Directorate did not have the power to decide ineligibility of a Resolution Applicant under Section 29A or 32A (1) (a)..Such an exercise, the NCLAT stated, could be undertaken by the following Authorities:- The ‘Resolution Professional’ in terms of Section 30(1).- The ‘Committee of Creditors’ in terms of Section 29A.- The Adjudicating Authority while passing order under Section 31..In view of the above, the NCLAT declared the attachment of assets of Bhushan Power & Steel by the Enforcement Directorate as illegal and without jurisdiction..The NCLAT also rejected appeal by Corporate Debtor’s promoter, Sanjay Singal..As asserted by the Enforcement Directorate, Singal had alleged that JSW Steel Limited was barred under Section 29A since it was Bhushan Power & Steel's ‘joint venture partner’ and was thus ineligible to file any Resolution Plan. .Singal’s contention that the Resolution Professional had not supplied the Resolution Plan and other documents were also found to be contrary to the facts..Appeals by certain creditors with respect to their dues were also rejected..JSW Steel was represented by Senior Advocates Kapil Sibal, Arun Kathpalia and Neeraj Kishan Kaul with L&L Partners Advocates Manmeet Singh, along with Anugrah Robin Frey, Nishtha Chaturvedi, Kauser Husain, Diksha, Deepak Joshi, Abhilasha Khanna..The Resolution Professional was represented by Senior Advocate Abhinav Vasisht with Advocates Saurav Panda, Shantanu Chaturvedi, Charu Bansal, Mahima Sareen, Priya Singh, Shreyas Gupta..CoC was represented by Senior Advocate Ramji Srinivasan with Cyril Amarchand Mangaldas Advocates Spandan Biswal, Bishwajit Dubey, Srideepa Bhatacharyya, Prafful, Sylona..Enforcement Directorate was represented by Advocates Zoheb Hossain, Agni Sen. .Sanjay Singal was represented by Senior Advocate Harin Raval with Advocates Arvind Kumar Gupta, Henna George, Kartikey Kanojiya, Sukanya Singh..CBI was represented by SPP Chandrashekhar..Read the Judgement: