14-Dec-2024, 11:26 AM
The Enforcement Directorate (ED) has been ordered by the Supreme Court of India to transfer control of properties belonging to Bhushan Power & Steel Ltd. (BPSL) valued at approximately ₹4,025 crore to JSW Steel. This decision marks a significant development in a lengthy legal battle that has spanned nearly four years since JSW Steel’s successful bid for BPSL under the Insolvency and Bankruptcy Code (IBC) was finalized.
In 2020, the National Company Law Appellate Tribunal (NCLAT) upheld the National Company Law Tribunal’s (NCLT) ruling, which stated that JSW Steel, as the successful resolution applicant, should not be held accountable for any alleged misconduct by BPSL’s previous management. Despite this, the ED had provisionally attached BPSL’s assets in October 2019, citing allegations of fund diversion amounting to ₹4,025 crore by former promoters before insolvency proceedings began. These properties were classified as “proceeds of crime” under the Prevention of Money Laundering Act (PMLA).
The Supreme Court’s recent ruling allows JSW Steel to take immediate control of these assets, treating the transfer as restitution. The court clarified that it did not express any opinion regarding the interpretation of Section 32A of the IBC or the ED’s authority to attach properties of a corporate debtor undergoing insolvency. The ED had previously argued that JSW Steel was a related party due to its joint venture with BPSL, which complicated its immunity under Section 32A.
This ruling is crucial for JSW Steel as it seeks to consolidate its acquisition of BPSL and restore operational stability. The company has been navigating significant challenges since its bid was approved, including ongoing investigations into the previous management’s financial activities. The Supreme Court’s decision is expected to facilitate smoother operations and enhance investor confidence in JSW Steel’s strategic direction.
The case highlights broader issues within India’s corporate governance and insolvency frameworks, particularly concerning the balance between regulatory oversight and the rights of resolution applicants. As JSW Steel moves forward with its plans, it remains imperative for stakeholders to monitor how these legal precedents will shape future insolvency proceedings in India.
