Bhushan Steel And Power Insolvency: NCLAT Seeks Enforcement Directorate’s Response On JSW Steel’s Liability
The National Company Law Appellate Tribunal has directed the Enforcement Directorate and Serious Fraud Investigation Office to verify if JSW Steel Ltd. is protected from Bhushan Steel and Power Ltd.’s past criminal liabilities.
It has also directed the agencies to file an affidavit to confirm whether JSW Steel would be covered under the newly added section 32A of the Insolvency Code and provide reasons if no such immunity is granted.
That comes after the Enforcement Directorate filed a case of money laundering against Bhushan Power and Steel, its promoters and former directors in May 2019. The Central Bureau of Investigation had filed a first information report against the company and some of its erstwhile directors.
Four months later, JSW Steel sought immunity from the power producer’s criminal liabilities, contending that the absence of any such protection jeopardised the feasibility and viability of its resolution plan. While the tribunal approved JSW Steel’s resolution plan for Bhushan Power, it refused to grant any immunity from ongoing criminal investigations.
Immunity Against Criminal Liabilities
The parliament proposed to amend the insolvency code to protect resolution applicants from criminal liabilities of a corporate debtor. Section 32A was added to the insolvency code through an ordinance in December 2019.
A corporate debtor will get immunity from any offence committed before the initiation of insolvency proceedings and while the process is ongoing. A corporate debtor cannot be prosecuted for offences from the date a resolution plan is approved by the adjudicating authority. Such immunity also extends to the property or assets of a corporate debtor, which cannot be attached, seized, confiscated or retained.
In the absence of any statutory immunity, investigative agencies retain power to attach Bhushan Power’s properties under the Prevention of Money Laundering Act.
The appellate tribunal has directed the parties concerned to file replies by Jan. 20 and will hear the matter on Jan. 23.