Tribunal stays sale of BPSL to JSW

THE NCLAT STAYED TRANSFER OF JSW’S PAYMENT TO BPSL CREDITORS TILL PROBE INTO FRAUD BY FORMER OWNERS IS OVER

MUMBAI: A bankruptcy appeals court on Monday halted the transfer of Bhushan Power and Steel Ltd (BPSL) to JSW Steel Ltd and stayed the Enforcement Directorate’s (ED) move to attach assets of the insolvent steel maker, scuttling hopes of a swift resolution of the distressed asset.

The National Company Law Appellate Tribunal (NCLAT) stayed the transfer of the payment by JSW Steel to the creditors of BPSL till investigation into allegations of fraud and money laundering by the former owners of the steel mill is decided. NCLAT will issue final orders on October 25.

The tribunal’s ruling could have far-reaching implications, especially for BPSL’s lenders, as the resolution process has lingered on for more than two years. Swift resolution of distressed assets such as BPSL is key to the government’s effort to free up bank capital and revive credit growth.

Mahendra Khandelwal, resolution professional in the BPSL case, however, remained hopeful of a quick resolution. “I expect everything to be sorted out at the next hearing. The NCLAT has addressed all of JSW Steel’s concerns. The ministry of corporate affairs has called for a meeting of officials from all departments of financial services and all government agencies. This includes the ED too,” he said.

The government too is keen to settle soon the question of fraud affecting resolution. In court, Sanjay Shorey, director (legal prosecution) at the ministry of corporate affairs (MCA), argued that ED has no jurisdiction to attach the property of BPSL. MCA argued that the rights of secured financial creditors (banks) are to be protected through the resolution process.

“Once a resolution plan is approved, it is binding on all stakeholders, including government agencies,” MCA’s submission reads in the stay order from NCLAT.

On September 5, NCLAT finally approved the sale of the stressed steel plant to Sajjan Jindal’s JSW Steel for ₹19,700 crore.

A person privy to discussions within JSW Steel indicated that if the ED attachment on BPSL’s assets holds firm, then the value of JSW Steel’s bid will also fall proportionately, forcing a much larger haircut on bankers in their ₹47,000 crore exposure to the bad loan.

The spokesperson for JSW Steel did not respond to queries seeking comment. Officials of two of BPSL’s creditors declined to comment.