In a recent case involving mergers and acquisitions, the NCLT gave it’s consent to the acquisition of Bhushan Power and Steel by JSW. This was a huge acquisition with a value of almost 19,000 Crore rupees. While approving the acquisition the NCLT was silent on grant of relief to Bhushan Power and Company and whether the applicability of insolvency proceedings in the instant case was good in the eyes of law.
JSW Steel thus filed an appeal to the NCLAT against the September 5th challenging the Order of the NCLT which did not grant relief against an ongoing case of economic fraud against Bhushan and Co. JSW expressed concern over the aftermath of the Delhi High Court 2019 judgement that held the primacy of bankruptcy law over insolvency law. Applicability of this judgement in the instant case will be detrimental to finances of JSW Steel. According to the mandate of the judgement initiation of warranted legal proceedings can be done in a prima facie case of economic fraud. Bhushan and Power Co has been slapped with a money laundering case.
Thus JSW is concerned over the possible attachment of assets of the Company but the Enforcement Directorate is detrimental to the interests of JSW Steel. Also the NCLT ordered that the profits raised during the insolvency period should be distributed among the creditors. JSW Steel asserts that the profits could be used as working capital and thus filed an appeal against the September 5th Order of the NCLT
The NCLAT has agreed to hear the plea by JSW Steel on October 14th. The NCLAT named the Enforcement Directorate (ED), the Central Bureau of Investigation (CBI) and the Ministry of Corporate Affairs as party to the instant case.
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