Bhushan Steel Ltd.’s erstwhile promoter Neeraj Singhal has called the resolution process under India’s bankruptcy law “non-transparent” and “opaque” in his petition as he tries to prevent Tata Steel Ltd. from taking over the insolvent steelmaker.
Erstwhile promoters were not given any opportunity to review the resolution plan submitted by Tata Steel, according to the petition filed in the National Company Law Appellate Tribunal. The NCLAT denied a stay on the sale but issued notices to Tata Steel, the resolution professional and creditors of Bhushan Steel. BloombergQuint has reviewed a copy of the petition.
The National Company Law Tribunal on May 15 approved Tata Steel’s bid under the Insolvency and Bankruptcy Code which proposed to acquire a 73 percent stake in Bhushan Steel. Lenders to the steelmaker, led by State Bank of India, received Rs 35,200 crore to settle their dues worth over Rs 56,000 crore, BloombergQuint reported earlier. That worked out to a 37 percent haircut for financial creditors.
Pointing to the haircut, Singhal said Tata Steel itself was borrowing funds from these lenders to pay off Bhushan Steel’s debt. That’s nothing but “evergreening in another form and the very same lenders are financing the takeover of the corporate debtor”, the petition said.
Tata Steel, in response to BloombergQuint’s queries, said the company has all necessary approvals required for the IBC process and has “moved in and taken charge” of Bhushan Steel.
Singhal said the erstwhile promoters had sent repeated emails to the resolution professional seeking a copy of the bids so that they can review and submit their objections and suggestions, but their requests were rejected.
Moreover, his father had given guarantees and the erstwhile promoters didn’t know how these were dealt with since the resolution plan wasn’t shared with them. Bhushan Steel’s representatives were asked to leave the meeting when the bids were being discussed, the petition said.
Singhal attributed the financial troubles of Bhushan Steel to circumstances that were not in the control of the management, including a delay by the government in dealing with dumping of steel from China and other countries. “The government took too long to act which resulted in two years of irreversible damage to the steel industry.”
The petition will come up for hearing at the NCLAT on May 30.