Tuesday, 27 February 2018

Ongoing CIRP updates in Bhushan Steel Ltd, Bhushan Steel & Power Ltd and Bhushan Energy Ltd

Liberty house approach NCLT for rejection of its bid:- Interest of creditors at stake

                                                                                                 By- Soujanya Ketharaj
                                                                                       4th year BA.LLB 
                                                                            Intern at Veda Legal Advocates and Solicitors


  Sequence of Events

New Delhi, July 13, 2017

The National Company Law Tribunal (NCLT) issued notices to Bhushan Steel Ltd and Bhushan Steel and Power Ltd over insolvency proceedings initiated by their lenders State Bank of India and Punjab National Bank.
The Principal Bench of the NCLT headed by its President Justice M.M.Kumar had directed Bhushan Steel and Bhushan Steel and Power Ltd to file their reply. SBI is claiming to recover Rs 4390,75,41,611 from Bhushan steel along with USD 49,684,877 as foreign currency loan.

Both the petitions were filed under the Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, where the financial creditor initiated insolvency proceedings with a claim filed in FORM C (PROOF OF CLAIM BY FINANCIAL CREDITORS) [Under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016].

New Delhi, July 19, 2017

The National Company Law Tribunal reserved order on insolvency pleas against Bhushan Steel as well as Bhushan Steel and Power. A two-member bench headed by Justice M.M.Kumar reserved its order on SBI petition for initiating insolvency proceedings against Bhushan Steel Ltd and a similar plea by PNB against Bhushan Steel & Power Ltd.
During the proceedings, Counsel appearing for Bhushan Steel argued that 65 per cent loan shown by the SBI is for working capital and hence it is not a defaulter. However, this plea was rejected.

Meanwhile the Reserve Bank of India (RBI) issued directives to the banks to file insolvency proceedings against defaulters. (RBI Directives) (Refer to Para 16 of final order dated 26th July 2017)

New Delhi, July 26

The NCLT gave go-ahead to banks to start insolvency proceedings against Bhushan Steel Ltd and Bhushan Steel & Power Ltd (BSPL) to recover the loans which the companies have defaulted on.

Allowing the pleas filed by the lead bankers, SBI and PNB, NCLT appointed interim resolution professionals (IRPs) and directed the companies' managements, officials and promoters to assist them in the proceedings.
NCLT appointed Vijay Kumar V Iyer as IRP for Bhushan Steel Ltd and Mahender Kumar Khandelwal for Bhushan Steel & Power Ltd.

"All personnel connected with the corporate debtor, its promoter or any other person associated with the management of the corporate debtor are under legal obligation to extend every assistance and cooperation to the IRP as may be required by him in managing the affairs of the corporate debtor," court said.
NCLT further said that any objection with regard to amount would be maintainable before the committee of creditors.
The tribunal, in two separate orders, also rejected debtors' argument questioning the role of RBI, which had issued directives to the banks to file insolvency proceedings against 12 defaulters.

"We may observe in the passing that issuance of direction by RBI on June 30, 2017 can not be termed illegal because there is adequate power conferred by the banking regulation act by amendment of section 35 to issue directions to the bank being a regulator entitled to do so," NCLT observed.
NCLT did not agree with the submission that steps like restructuring are part of external process, which is beyond the scope of the Insolvency and Bankruptcy Code.

New Delhi, December 19, 2017

The NCLT directed initiating insolvency proceedings against Bhushan Energy Ltd after admitting a plea from SBI.
A two-member bench of NCLT appointed Navneet Kumar Gupta as the interim resolution professional (IRP) to initiate insolvency proceedings.
Bhushan Energy Ltd, the corporate debtor, had a default of Rs 494,09,47,034.76 as on October 31, 2017.

New Delhi, February 26, 2018

Following the rejection of its bid for acquiring Bhushan Power and Steel, UK-based Liberty House filed a case at the NCLT, elaborating as to why it wants its bid to be opened.

The Committee of Creditors had on Wednesday rejected the bid of Liberty House to acquire Bhushan Power and Steel Ltd, leaving Tata Steel and JSW Steel in the race for taking over the assets of the bankrupt firm, a source said.

"Committee of creditors (COC) in a meeting has rejected the bids of Liberty House (of the UK) because the company submitted the bids after the last date of submission date which was February 8," opined by the Senior advocates as the IBS process isa strictly time bound process.

Whereas Senior Advocate Abhishek Manu Singhvi on behalf of Tata Steel has objected to the application contending itself to be the successful applicant.

Senior Advocate Arun Katpalia appeared for the Resolution Professional and Senior Advocate Ramji Srinivasan appeared for the CoC.

Liberty House had submitted the bid on Tuesday.

In the COC meeting the bids of Tata Steel and JSW Steel were disclosed and the detailed terms and conditions of the bids were disclosed to the lenders, the source said.

Bhushan Power and Steel owes about Rs 45,000 crore to its lenders.

When contacted, Resolution Professional (RP) Mahender Kumar Khandelwal had declined to comment on the developments.

According to the source, while Tata Steel offered Rs 17,000 crore to the lenders as upfront amount and Rs 7,200 crore for operations of Bhushan, JSW made an offer of Rs 11,000 crore to the lenders and Rs 2,000 crore for the operations of the beleaguered power firm.

The COC will now meet on March 6 to take the process forward, including declaration of the highest bidder.

**All the views expressed above are personal comments of the author and does not form any sort of legal opinion** Viewers are requested to refer to orders passed by the Tribunal.
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