JSW Steel can’t ring-fence BPSL assets from attachment, ED tells NCLAT

JSW Steel can’t ring-fence BPSL assets from attachment, ED tells NCLAT

The NCLAT on Thursday, by way of a last chance, directed the ministry to make its submission before the next hearing scheduled for January 31.

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The Enforcement Directorate on Thursday told the National Company Law Appellate Tribunal (NCLAT) that JSW Steel cannot seek to ring-fence Bhushan Power and Steel (BPSL) and its assets from attachment by it on charges of money laundering by its former promoters, as Section 32A of the Insolvency and Bankruptcy Code (IBC) does not apply retrospectively.

The section prohibits prosecution, in case the resolution plan results in change of the management to a person who was not a promoter or in the management or control of the corporate debtor or a related party of such a person, from the day the resolution plan is approved by the insolvency court.

JSW Steel’s resolution plan was approved by the National Company Law Tribunal on September 5, 2019; while Section 32A was notified on December 28, 2019.

“Therefore, the amendment in the form of Section 32A having come into force after the resolution plan was approved in this case, and the fact that Section 32A had not been given retrospective effect, would mean that the benefit of Section 32A cannot be claimed by the successful resolution applicant in this case,” the ED said.

“Even assuming without admitting that Section 32A were to apply to the present case, it is submitted that the successful resolution applicant is a related party as per Section 5 (24) of the IBC, which includes associate company of the corporate debtor,” the ED, which had in October attached BPSL assets worth over `4,000 crore in connection with a money-laundering probe, said.

The investigation agency informed the NCLAT that during the course of investigation under the Prevention of Money Laundering Act (PMLA), it found that BPSL and JSW Steel were associated as shareholders, holding 24.09% and 49% equity, respectively, in a joint venture, Rohne Coal Company.

The JV, according to its 2018-19 annual return filed with the ministry of corporate affairs, was formed in 2008 and “is still operational”. “That in the light of the above, as provided under Section 32A (1), the liability of the corporate debtor shall not cease for the impugned offences under PMLA, 2002, as the resolution plan approved by NCLT is not resulting in change in management or control of the corporate debtor to a person who is not related party of the corporate debtor, for the reason that JSW Steel is a related party of the corporate debtor, being as associate company which has formed joint venture company with the accused corporate debtor as defined under the Companies Act,” it said.

“Similarly, the benefit of the provisions of Section 32A (2) are not available to the properties attached of the corporate debtor,” it added.

The NCLT, while approving JSW Steel’s bid, did not grant JSW Steel protection from attachment of assets on account of acts of omission or commission of the previous directors under PMLA. JSW Steel had on September 13, 2019, filed an application with the NCLAT seeking protection of the insolvent firm’s assets, post-take over.

Though the ministry of corporate affairs had earlier said that once corporate insolvency resolution process (CIRP) is completed against an insolvent firm, there cannot be any attachment or confiscation of the assets of the corporate debtor by any enforcement agencies after approval of the resolution plan, it is yet to file a reply affidavit as suggested by NCLAT through its January 13 order.

The NCLAT on Thursday, by way of a last chance, directed the ministry to make its submission before the next hearing scheduled for January 31.

Source- Financial Express.

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