New Delhi, May 2: The Supreme Court on Friday ordered the liquidation of cash-strapped Bhushan Power and Steel Limited (BPSL), holding that JSW Steel’s resolution plan for the bankrupt company was not in consonance with the provisions of the Insolvency and Bankruptcy Code (IBC), 2016.

A bench of Justices Bela Trivedi and S.C. Sharma came down heavily on the resolution professional, the Committee of Creditors (CoC), and the National Company Law Tribunal (NCLT) for undermining the very objectives of the IBC, which includes time-bound resolution of insolvency and maximisation of asset value, and and its associated regulations.

The Justice Trivedi-led Bench ruled that JSW Steel’s resolution plan did not protect the interest of creditors and was apparently approved by the CoC without proper application of its commercial wisdom. JSW Steel implemented the resolution plan for BPSL, making the payment of Rs 19,350 crore to the financial creditors to acquire the bankrupt company.

JSW Steel's bid to acquire BPSL had hit a stalemate following the Enforcement Directorate (ED) approaching the Supreme Court against the National Company Law Appellate Tribunal (NCLAT) order to lift the attachment order against BPSL's properties. The ED has argued that the appellate tribunal has no jurisdiction to unfreeze and approve the sale of an asset attached by the federal anti-money laundering agency.

Later, the ED decided not to pursue its appeal before the apex court and returned the attached assets to JSW Steel pursuant to the insolvency resolution process.

The ED had attached assets worth more than Rs 4,000 crore of BPSL in connection with its money laundering probe linked to an alleged bank loan fraud by the company's former promoters It alleged that the promoters, directors, and officials of Bhushan Steel engaged in fraudulent activities, including forging documents and making false representations to banks. Funds were misappropriated through fabricated Letters of Credit in favour of JSW Steel Limited and Hindustan Zinc Limited.

The ED initiated the investigation based on a prosecution complaint filed by the Serious Fraud Investigation Office (SFIO) against Bhushan Steel Limited, invoking scheduled offences under the Prevention of Money Laundering Act (PMLA) 2002. The investigation revealed that Bhushan Steel and its Managing Director, Neeraj Singal, formed shell companies to rotate funds, causing wrongful loss to the State Bank of India and the Punjab National Bank. In September last year, the Supreme Court granted bail to Singal in the money laundering case, taking into consideration the unlikely conclusion of the trial in the near future and his long pretrial incarceration.

--IANS

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