The Supreme Court on Monday directed parties to maintain status quo on the liquidation of Bhushan Power and Steel Ltd (BPSL), following a plea by JSW Steel to keep the liquidation proceedings in “abeyance.”
JSW argued that initiating liquidation would be “fatal” to the company and adversely affect other stakeholders, including lenders and workers.
A bench of Justices B V Nagarathna and Satish Chandra Sharma said liquidation of the BPSL might jeopardise the review petition, which was to be filed by JSW Steel Limited. “Without expressing any opinion at this stage, we are of the view that it would be in the interest of justice if status quo is maintained on the proceedings pending in NCLT,” the bench said.
This comes after the apex court had on May 2 rejected JSW’s 2019 resolution plan for BPSL citing non-compliance with rules and ordered the unit’s liquidation. JSW moved SC after BPSL’s former promoter Sanjay Singhal asked the NCLT to start liquidation proceedings and appoint a liquidator. But if the NCLT initiates the process, it will lead to “complicated litigation to reverse the damage”, JSW told the Supreme Court last week.
JSW had said that company is considering a review under Article 137 and requested the Supreme Court to pause any move by the National Company Law Tribunal (NCLT) to start liquidation proceedings until all legal remedies are exhausted.
The erstwhile promoters of BPSL have acted in unnecessary haste and without having any locus standi, JSW said.
During the hearing, senior counsel N K Kaul, representing JSW Steel, told the court that everyone had asked NCLT to hold on for some time as it is a highly complex matter. The date was preponed from May 30 to May 27. “If a liquidator is appointed then where will I go? We still have time to file a review,” he said.
Solicitor General Tushar Mehta, representing Committee of Creditors (CoC) said, “This was a resolution plan implemented 5 years back…now we have [to recover], they will have to return money.” He noted that “to reverse everything, even they have to give security,” pointing out some lenders involved are foreign banks and a solution must be found.
Kaul said that promoters have been filing applications every day in the NCLT. “They have siphoned off Rs 25,00 crore. We have 2 months to pay. This promoter is pressurising the NCLT to take up the matter case every day,” he said.
Senior counsel Dhruv Mehta, appearing for promoter Singhal, said, “My locus has been accepted by the SC.” He confirmed steps are underway to file a review petition.
The May 2 ruling scrapped JSW Steel’s acquisition of BPSL four years after it took place on the grounds that the resolution plan was “illegal” and “in gross violation” of the Insolvency and Bankruptcy Code (IBC).
While directing the NCLT to initiate liquidation proceedings against BPSL, the court had directed that payments made to financial and operational creditors and the equity contribution by JSW be refunded within two months, as undertaken by the lenders to the bankrupt firm.
JSW told the apex court in its fresh appeal the initiation of liquidation will cause irreparable damage to it and stakeholders at large–public sector banks being the new lenders, new operational creditors and around 20,000 employees.
Therefore, the continuation of NCLT proceedings without addressing and appreciating the legal remedies available to JSW and various other stakeholders would “frustrate the rights” of JSW, the appeal stated.
However, this could be an attempt at reopening the case, experts told ET.
JSW’s appeal assumes importance as the Committee of Creditors had also asked the tribunal to grant more time to assess the impact of the Supreme Court judgment and assist it on the way forward.
