Events and Updates

Title: Clear winner: JSW Steel favourite in race for Bhushan Power and Steel as NCLAT rejects Tata plea

Posted on: 5th February 2019

Paving the way for JSW Steel to take over Bhushan Power and Steel (BPSL), the National Company Law Appellate Tribunal (NCLAT) on Monday dismissed Tata Steel’s objections that lenders had given the Sajjan Jindal-led firm undue chances to revise its bid even after declaring Tata Steel as the preferred bidder.

“We hold that Tata Steel’s appeal is premature, uncalled for. The appeal is also not maintainable,” a two-member NCLAT bench, headed by Justice SJ Mukhopadhaya, ordered. The appellate tribunal’s order comes even as BPSL’s promoters have written to the the Committee of Creditors (CoC) offering to pay their entire dues of over a period of 17 years, sources said.

The appellate tribunal observed that it was the prerogative of the CoC to update, modify, amend, annul or cease the resolution process at any point of time with respect to the conditions in a process document.

Financial creditors accounting for a 97.12% voting share in the CoC have approved JSW Steel’s plan. Since all of them voted in favour of JSW Steel, the NCLAT held that the resolution plan has been approved by 100% voting shares.

Lenders having 2.88% share abstained from voting. JSW Steel has offered to pay Rs 19,350 crore to the financial creditors of the debt-ridden BPSL, implying a near 60% haircut for lenders. Apart from this, the Sajjan-Jindal promoted company has offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore. Tata Steel’s total bid is for an amount of Rs 17,000 crore.
NCLAT has also asked the RP (resolution professional) to submit immediately the approved plan before the National Company Law Tribunal (NCLT). The NCLT will pass an order after evaluating the bid and keeping in mind the interests of operational creditors.

NCLAT’s order will expedite resolution of BPSL, which was admitted by the New Delhi bench of the NCLT on July 26, 2017 for the initiation of the corporate insolvency resolution process (CIRP), on the plea of Punjab National Bank.  A clutch of 34 financial creditors have claimed Rs 47,303 crore from the company as on January 3, 2019, of which, the RP has admitted claims worth Rs 47,150 crore. Operational creditors, numbering 1,778, have claimed Rs 2,320 crore from BPSL though the admitted amount is Rs 733 crore.

Though late-entrant Liberty House was in the reckoning for BPSL, the race was primarily between JSW Steel and Tata Steel. Lenders on July 31, 2018 selected Tata Steel as the H1 bidder and JSW Steel as the H2 bidder for BPSL.

This was done at the instance of the appellate tribunal which on July 20, 2018, asked the CoC to select the H1 and H2 bidders. However on July 27, 2018, the CoC allowed JSW Steel to submit a revised bid. Tata Steel challenged the CoC’s decision in NCLAT on July 30, 2018.

On August 1, 2018 NCLAT had again allowed submission of revised bids by all three bidders, including the UK-based Liberty House. Following this, on August 13, 2018 JSW Steel raced past Tata Steel to emerge as the most preferred bidder for BPSL which has around three million tonnes per annum steel-making capacity.

While Tatas have been consistently opposing CoC’s permitting a revised bid, JSW Steel had questioned its objections saying a financial bid can always be improved upon till the time the bids are voted on.

Under Section 12A, the adjudicating authority may allow the withdrawal of application under section 7 or section 9 or section 10 on an application made by the applicant with the approval of 90% voting share of the CoC.