With the first such agreement, the Board of Trustees of Bhushan Power and Steel clarified JSW Steel’s proposal to pay the amount of 19,350 kroner for the purchase of the company, even when the Supreme Court was preoccupied with the matter.
The Supreme Court has not yet resolved an appeal filed by the Enforcement Directorate seeking to enclose the assets under stress as part of an investigation against the former owners of Bhushan Power and Steel.
Under an agreement now issued by lenders Bhushan Power and JSW Steel, banks will repay the bid amount if the Supreme Court upholds ED’s right to seize the property.
Earlier, JSW said it would pay the amount of the bid only after the Supreme Court clarified the appeal filed by the investigating agency. Subsequently, JSW agreed to deposit the money in an escrow account to be opened with Punjab National Bank within 30 days of the approval of its plan, provided that the amount was returned to him within two months if the Supreme Court ruling opposes the sale of power. Bhushan.
Sources said Friday that nearly 97 percent of lenders voted for JSW Steel’s plan in what is seen as an effort to determine their balance sheets before the end of the fiscal year.
In addition to shortening the balance sheet, banks are concerned that they have been financing Bhushan Power for the past four years to keep it as a continuing business, while the realized profit will go to the successful bidder JSW Steel, according to the approved resolution plan. .
For JSW, despite uncertainty over the Supreme Court ruling, the deal is speeding up plans to acquire additional capacity at a time when the steel market is growing.
When contacted, a senior JSW Steel official said the company is now unable to comment, but is in constant contact with the CoC.
Vaibhav Gaggar, general partner, Gaggar & Associates, said the whole transaction could be quite risky both legally and practically for all stakeholders. It seems to be based on unforeseen circumstances, and that is the decision of the Supreme Court, he added.
Interestingly, the ED refused to lift the seizure of Bushan’s property, despite the NCLAT ruling that the attachment was illegal.
Shiju PV, partner, IndiaLaw LLP, said that for now, approving the plan seems to be a way out for all stakeholders, but in the long run it could make the whole resolution process more murky.
Nadiya Sarguroh, a senior associate at MZM Legal, said compensation was key to making the closure of the four-year BPSL insolvency solution. The decision on JSW is subject to a proposal of full damages and immunity from any negative decision of the Supreme Court.
“I believe JSW would cover all ends to protect all consequences and seek full reimbursement of the amount of remediation in an attempt to protect its interests and secure compensation by a full CoC vote, which will be submitted to the Supreme Court,” Sarguroh said.
Creditors will recover over 41 percent of JSW Steel’s offer against recognized claims in the amount of 48,000 crore.
SBI is the largest lender to Bhushan Power and will collect over 4,000 crore against a recognized claim of 9,825 crore, while PNB will receive 4,400 CHE, ARCE ARC and Canara Bank will receive 5,257 crore and 2,244 crore, respectively.
Bhushan Power was on the first list of a dozen defaulters identified by the RBI and sent to the NCLT for resolution. The NCLT approved JSW Steel’s remediation plan for Bhushan in September 2019, but the case got stuck in the courts.