Supreme Court Censures Bhushan Power And Steel Promoters For Stalling JSW Steel Acquisition Process

The Supreme Court made blistering observations on the way Bhushan Power and Steel Limited's former promoters, led by Sanjay Singal, conducted themselves with regards to JSW Steel's acquisition of the former.

The court accused them of trying to systematically delay the corporate insolvency resolution process. The observations were made in a judgment which upheld JSW Steel's Rs 19,700 crore resolution plan for debt-ridden Bhushan Power and Steel Ltd.

It was delivered by a bench of Chief Justice of India BR Gavai and Justices Satish Chandra Sharma and K Vinod Chandran.

It upheld the Feb. 17, 2020, verdict of the National Company Law Appellate Tribunal, allowing JSW Steel to acquire BPSL. It did so by providing it immunity from prosecution by the Enforcement Directorate (ED).

Writing the judgment, the CJI stated that the former BPSL promoters' actions were not geared towards the constructive participation in the resolution process. And instead tried to frustrate its timely conclusion.

"The entire attempt of the appellants has been to thwart the CIRP and not to permit the same to be taken to its logical end," the judgment read.

The bench pointed towards the records placed before it, including the findings of the NCLT, which had earlier criticised the promoters for trying to slow the process down.

The court took note of the submissions made by the successful resolution applicant, JSW Steel, that Singal attended only one of the 46 Committee of Creditors meetings in person and only two more via his representatives.

His wife and co-promoter, Aarti Singal, did not attend any of the COC meetings.

"It can thus be seen that after the NCLT had heard the matter in detail, various applications had been filed by the erstwhile management, including Singal, before 48 various forums. This had led to a delay in the pronouncement of the approval order by the NCLT," the judgement said.

"A specific observation has been made by the NCLT that the erstwhile promoters were making efforts to cause delays, which indicated how desperate and frustrated they were. The NCLT also imposed a cost of Rs 1 lakh on the appellants -- the erstwhile promoters -- as it concluded that the application seeking copies of the resolution plan filed by them was frivolous," added.

The court said it could clearly be seen that the entire attempt of the former promoters was to thwart the insolvency proceedings and "not permit the same to be taken to a logical end."

The bench then proceeded to deal with the issues on merits. It said the approach reflected a "lackluster participation" by those who had once controlled the company but were now expected to engage responsibly in the resolution process.

The NCLT, in its 2019 order approving the JSW plan, had already recorded the promoters' disinterest, highlighting that they appeared more focused on procedural maneuvering than on constructive engagement.

The judgment noted how, after extensive hearings before the NCLT, the erstwhile management filed multiple applications across various forums, leading to delays in the pronouncement of the resolution order.

The NCLT, in fact, explicitly observed that the promoters were "moving places to delay the conclusion of proceedings", and even imposed a penalty of Rs 1 lakh on them for filing a frivolous plea seeking copies of the resolution plan.

(With PTI inputs)