The committee of creditors (CoC) of debt-ridden Bhushan Power and Steel (BPSL) on Monday moved the Supreme Court seeking clarity on the primacy of the Insolvency and Bankruptcy Code over the money-laundering and other laws.
The appeal comes in the wake of the Enforcement Directorate (ED) provisionally attaching the assets of BPSL and the National Company Law Appellate Tribunal (NCLAT) staying the implementation of JSW Steel’s resolution plan.
After the NCLT on September 5 approved the JSW Steel’s Rs. 19,700-crore bid for debt-ridden BPSL, the ED on October 10 provisionally attached BPSL’s assets worth over Rs. 4,025 crore for diversion of funds by the erstwhile management prior to the commencement of insolvency proceedings. Even the NCLAT on October 14, despite staying the provisional attachment order, went on “to unfairly and unreasonably stay the implementation of the RP as well and held that ‘to ensure that the RP is not given effect before deciding the issue, we stay the impugned order of September 5 so far it relates to the payment of the creditors,’” the CoC led by Punjab National Bank in its appeal stated. Despite the stay on the provisional attachment order, the ED has continued proceedings under the PMLA and its adjudicating authority has now issued show cause notice on November 22 to BPSL and hearing has also scheduled its hearings, the lenders said.
The CoC said that the two impugned orders have raised questions over primacy of the Insolvency and Bankruptcy Code over the Prevention of Money Laundering Act. And also whether parallel proceedings dealing with the same subject matter in different statutory tribunals can be raised as this would give rise to a situation where one tribunal issues directions to another, thus resulting in a breach of judicial proprietary.
The ED has already clarified that it will not submit to the NCLAT jurisdiction despite its claims/attachment being in civil nature and being under the NCLAT’s adjudication, it said.
The apex court will hear the case on Wednesday.
The petition filed through counsel Bishwajit Dubey further stated that such orders will cause grave loss to the operational and financial creditors of BPSL pursuant to the stay on the implementation of the JSW Steel’s resolution plan, which has been approved by 100% CoC.
According to the lenders, different stands will be taken by the government (other than the CBI) and ED on the primacy of IBC over PMLA, thus resulting in the government speaking in more than one voice. This, according to the appeal, will be like throwing a spanner in the working of the IBC “as resolution applicants are unclear as to whether the assets of the corporate debtor will be available to them to implement the resolution plan in the face of any proceedings by ED against such corporate debtor for acts prior to the commencement of CIRP”.
JSW Steel had offered to pay Rs. 19,350 crore to the financial creditors of the debt-ridden BPSL, implying a near 60% haircut for lenders. Apart from this, the Sajjan Jindal-promoted company has offered to pay operational creditors a sum of Rs. 350 crore against their admitted claims of Rs. 733 crore.
Source- Financial Express.