Bhushan Power & Steel case: enforcement directorate contests JSW Steel immunity
ED continues to believe JSW and BPSL are related parties and hence, no immunity should be given to JSW from investigation
- Published 22.02.20, 12:36 AM
- Updated 22.02.20, 12:36 AM
- 2 mins read
The enforcement directorate is in talks with the ministry of corporate affairs to decide on the next course of action for Bhushan Power & Steel even as JSW Steel is working actively to close the transaction by March 16.
Earlier this week, the National Company Law Appellate Tribunal had granted immunity to JSW Steel from the ongoing corruption cases against BPSL and its erstwhile owners, according to the amended Insolvency & Bankruptcy Code, 2016.
The ED, which is under the department of revenue, finance ministry, had claimed that JSW and BPSL (under the previous owner) were related parties and hence, such immunity cannot be extended to Sajjan Jindal’s flagship company.
Sources said the ED has sent the entire file higher up in finance ministry to obtain its view before deciding on the next course of action. The directorate will have to knock the Supreme Court if it wants to challenge the NCLAT verdict. “The money laundering probe against BPSL will continue. The agency has taken up the matter with the corporate affairs ministry as the new provision (IBC Code) is not applicable to JSW as both JSW and BPSL are related parties in a coal block,” an ED source said.
JSW owns a 49 per cent stake in Rohne Coal Company along with three others, including Calcutta-based Jai Balaji Industries Ltd. BPSL holds 24.09 per cent of the company formed in 2008, at the behest of the coal ministry, which had proposed the coming together of four firms for the mining and consumption of coking coal.
However, the NCLAT did not agree to the ED’s argument that BPSL and JSW are ‘related parties’.
“…JSW Steel is not an associate company/ related party of the ‘corporate debtor’ (BPSL). While ‘Rohne Coal Company Private Limited’ is an ‘associate company’ of the ‘corporate debtor’ as well as of ‘JSW Steel Limited’, but by virtue of both having investment in such downstream joint venture i.e. ‘Rohne Coal Company Private Limited’, JSW Steel Limited and the corporate debtor do not become related parties of each other,” the judgment read.
Emboldened by the judgment, JSW is preparing to pay up the lenders according to the resolution plan approved. However, it appears to be mindful of the rumblings in the corridors of North Block.
Government sources said a decision would be taken at the highest level of the administration.
In all likelihood, JSW would withhold payment to banks till the last day (March 15).
“The company is tying up finances but it is mindful of the legal issues involved. There’s enough time for the ED to decide on the next course of action,” a source in JSW Steel said. Financial and operational creditors are set to recover Rs 19,350 crore if JSW takes over BPSL. For now, it will take over BPSL alone but it may rope in a partner later to de-consolidate the balance sheet.