An NCLAT bench headed by Chairman Justice S J Mukhopadhyaya slammed the ED, saying that Insolvency and Bankruptcy Code (IBC) would fail if the agency functions like this and directed it to file a reply in the next two days, along with CBI.
The National Company Law Appellate Tribunal (NCLAT) on Monday put on hold the Rs 19,700-crore payout by JSW Steel for acquiring debt-ridden firm Bhushan Power and Steel Limited till its further orders.
The appellate tribunal also asked the Enforcement Directorate (ED) to release the attached properties of Bhushan Power and Steel Ltd (BPSL) and directed not to attach any further assets without its permission.
An NCLAT bench headed by Chairman Justice S J Mukhopadhyaya slammed the ED, saying that Insolvency and Bankruptcy Code would fail if the agency functions like this. He directed the agency and the CBI to file a reply in the next two days.
The Enforcement Directorate on Saturday said it has attached assets worth over Rs 4,025 crore of BPSL in connection with its money laundering probe linked to an alleged bank loan fraud.
The central probe agency said it has attached land, building, plant and machinery of the firm located in Odisha under the provision of the Prevention of Money Laundering Act (PMLA).
"IBC cannot be annulled in this manner. Money laundering is by an individual," NCLAT observed.
The tribunal further said the ED has no jurisdiction to attach the property of a corporate debtor, particularly when an appeal is pending with regard to attachment.
The appellate tribunal has directed to list the matter on October 25 for further hearing.
"Under facts and circumstances, while we allow the ED to file a reply affidavit, the deputy director ED and any other officials of the ED are to release the property attached in favour of resolution professional immediately," the NCLAT said.
The ED's provisional attachment order of October 10 is stayed until the issue is decided by the appellate tribunal, it said. Officers and directors are also prohibited from attaching any property of Bhushan Steel and Power till permission from this appellate tribunal (is granted), it said.
Meanwhile, over the bid amount to be paid, the tribunal said that JSW Steel would not pay the funds until its further order.
JSW Steel does not have to pay the money as successful bidder till next date of hearing (October 25), said NCLAT.
During the proceedings, the Ministry of Corporate Affairs (MCA) told the NCLAT that the ED has no jurisdiction to attach assets under the insolvency process. The MCA's stand is in consultation with the Department of Financial Services and banks.
The NCLAT was hearing petitions filed by JSW Steel, former promoters of BPSL, among others, challenging the order of the principal bench of the National Company Law Tribunal (NCLT).
On September 5, the NCLT had approved the JSW Steel's Rs 19,700 crore resolution plan for BPSL.
However, JSW Steel approached the NCLAT seeking protection from the ongoing investigation in money laundering cases against former promoters of BPSL.
The steel company had also challenged the NCLT's direction to redistribute profits earned by BPSL during the Corporate Insolvency Resolution Process (CIRP), from July 2017 to August 2019, among the financial creditors and operational creditors of the debt-ridden firm.
While, in its 138-page-long order, the NCLT had given it protection from the criminal cases filed against the promoters, it was silent over the money laundering cases.
Bhushan Power & Steel Ltd. (BPSL), Sanjay Singal, the then CMD & others accused were booked by the Central Bureau of Investigation (CBI) for defrauding banks.The attachment order came after Punjab National Bank (PNB) and Allahabad Bank in July this year claimed that they had been defrauded by Bhushan Power & Steel Ltd to the tune of Rs 1,774.82 crore.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.