In a landmark ruling, the Supreme Court on Friday directed the Enforcement Directorate (ED) to hand over the properties of Bhushan Power & Steel Limited (BPSL), valued at Rs 4,025 crore, to JSW Steel. These assets had been provisionally attached by the ED in 2019 as part of an ongoing money laundering investigation linked to an alleged bank loan fraud orchestrated by the former management of BPSL.
This ruling marks a significant development after nearly four years of legal proceedings and disputes surrounding the sale of BPSL to JSW Steel. The ED, which had initially moved to block JSW Steel’s acquisition of the debt-ridden company, has now agreed to permit the transfer of control over the attached properties to JSW, treating it as “restitution.” In February 2020, the National Company Law Appellate Tribunal (NCLAT) upheld the National Company Law Tribunal’s (NCLT) approval of JSW Steel’s resolution plan for BPSL, allowing the steel giant to take over the company under Section 32A of the Insolvency and Bankruptcy Code (IBC), which grants immunity to new owners from the misdeeds of previous promoters. This immunity was contested by the ED, which argued that the relationship between JSW Steel and BPSL, particularly through their joint venture, Rohne Coal Company, would invalidate the protection under Section 32A.
Despite the ED’s opposition, which included claims of improper conduct by the former BPSL promoters, the Supreme Court confirmed that JSW Steel’s resolution plan, which offered a Rs 19,350 crore payment to financial creditors and Rs 350 crore to operational creditors, had been finalized and should proceed. This plan effectively represented a nearly 60% loss for the lenders, but still offered a substantial recovery. The ED had initially attached BPSL’s assets after alleging the diversion of Rs 4,025 crore in loans before the insolvency proceedings began. However, in a turn of events, the Supreme Court clarified that while it had not passed judgment on the interpretation of Section 32A or the ED’s powers to attach properties during the insolvency process, it allowed the assets to be transferred to JSW Steel as restitution under the provisions of the Prevention of Money Laundering Act (PMLA).
Justice Bela Trivedi, presiding over the bench, noted that the matter involved the jurisdiction of the ED in attaching the properties of a company undergoing insolvency proceedings, particularly in light of the protections offered to new owners under Section 32A of the IBC. This development clears the path for JSW Steel to take full control of BPSL’s assets and move forward with its resolution plan, marking a pivotal moment in the ongoing efforts to resolve one of India’s high-profile corporate insolvencies.
