Odisha Mining Auction: ED Scanner Sajjan Jindal’s JSW Steel Surprises Many!

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By Anurjay Dhal

BHUBANESWAR: The Sajjan Jindal owned JSW Steel; it seems, on its way to play a key role in Odisha’s mineral rich Keonjhar and Sundargarh districts considering the performances of the tainted Steel maker in ongoing bidding of expiring mines in the State.

JSW Steel has bagged two iron ore mines with a total reserves of 980 million tonnes in the auction in Odisha, a source said. The company won Narayanposhi iron block with 190 MT reserve on Sunday, according to the industry source. Others in the fray for this iron ore mine include Arcelormittal Mittal India Pvt Ltd, Vedanta, Tata Steel and JSPL. On Friday, JSW Steel bagged the Nuagaon mine, which is the largest iron ore block in the auction in Odisha. It has a total estimated reserve of around 790 million tonne.

The new comer in Odisha’s mining sector, JSW Steel, surprised not the industry watchers but also some of big Steel makers as well as merchant miners, which has been active in this eastern Indian State for over several decades. It may be mentioned here that JSW Steel has been under scanner of Enforcement Directorate over the acquisition of Bhushan Steel and Power Ltd. The ED has rejected to drop criminal charges against JSW Steel even if it acquires Bhushan.

Big players in mining sector like Rungta Mines Ltd, KJS Ahluwalia, Sirrajuddin Mines, Big Steel makers like Anil Agarwal led Vedanta Group, Congress leader Naveen Jindal led Jindal Steel and Power Ltd and ArcelorMittal India of Laxmi Mittal, Goutam Adani led Adani Group, Tatas were seems overpowered by JSW Steel.

The much talked about big reserve capacity Nuagaon and Narayanposhi Iron-Ore and Manganese Mines under the Joda-Koira mining circle of Keonjhar and Sundargarh were earlier held by the KJS Ahluwalia and Prashant Ahluwalia and Naman Saraf led Aryan Mining and Trading Company Ltd, now will be under control of JSW Steel.

Sources said, behind JSW Steel’s success, B Prabhakaran of Thriveni Earth Movers Pvt Ltd played a key role as the Tamil Nadu’s Salem born mining contractor looking for big mines after his close aids Ahluwalia Brothers and Naman Saraf lost control over Nuagaon and Narayanposhi Iron-Ore and Manganese Mines respectively.

The Nuagaon block alone has a  deposits of 790 million tonnes of iron ore. Owing to its enormous deposits, the reserve price for the Nuagaon block was pegged at 50 per cent of the sale value of the embedded ore. Also, the net worth to bid for this block was fixed at around Rs 3800 crore, making the incumbent lessee- KJS AHluwalia ineligible to participate at the electronic auctions.

The Nuagaon block is expected to provide an assured raw material security to JSW Steel which is setting up a 13.2 million tonne per annum (mtpa) greenfield steel mill near Paradip. The steel plant, along with attendant infrastructure like Captive Power Plant (CPP), is coming up on land once acquired for the $12 billion POSCO project, touted as India’s highest FDI project then. JSW Steel has pledged an investment of Rs 55,000 crore on the steel mill complex to be set up in a staggered manner.

Moreover, a recent Ordinance to the Mines and Minerals-Development & Regulation (MMDR) Act permitting deemed extension of all statutory clearances for operative mines by two years will allow JSW Steel to start unearthing iron ore from Nuagaon block without hassles.

Odisha has resumed the online auctions after it was forced to annul the previous auctions started in October last year. Amid backlash from select bidders mostly from JSW Steel and its subsidaries, Odisha had to cancel tender process and relaunch online auction by notifying fresh Notice Inviting Tenders (NITs) on December 6, 2019 barely three days after the initial auctions were called off.

Interestingly, the row was over the alleged unfair bidding for the coveted Nuagaon block. Bidding for this huge block turned unsavoury as both parent companies and their subsidiaries contested concomitantly.

Six Group companies of the Sajjan Jindal controlled JSW Group had vied for this block that rankled rival bidders like ArcelorMittal and Vedanta, goading them to file written submissions with the state government, protesting the ambiguous terms of the tender documents.Given the contentious provisions and negative sentiment, Odisha was forced to bite the bullet and announce a sudden annulment of auctions on December 3.

Meanwhile, sources in Bhubaneswar on Sunday said the Enforcement Directorate has told the appellate bankruptcy court that JSW SteelNSE -2.37 % will not get immunity from the criminal charges being faced by Bhushan Power & Steel if it acquires the latter, because both are related parties.

The ED according to media reports from Mumbai, also said that a Section under the Insolvency and Bankruptcy Code, which gives protection to the acquirer from prior offences committed by a bankrupt company, will not apply in this case since the provision was added to the law after lenders cleared JSW’s proposal to acquire Bhushan Power. This provision under Section 32A, it told the court, cannot be applied retrospectively.

Bhushan Power’s former promoters are facing charges of financial irregularities and money laundering. In an affidavit filed in the National Company Law Appellate Tribunal, the ED said JSW and Bhushan Power are related parties through a joint venture.

The ED is looking into whether one party had helped the other in the alleged offences. JSW Steel, which has offered to pay over Rs 19,000 crore to acquire Bhushan Power, had sought to be excluded from regulatory and criminal probes against the target company under the watch of its erstwhile management. It has also sought exemption from attachment of the target company’s assets.

Last October, the ED had attached a factory of Bhushan Power in Odisha’s Sambalpur. Subsequently, the attachment was released by the NCLT. The agency has challenged the order in the appellate body.

In its affidavit filed on January 17, the ED said the relation between the two companies needs to be probed further. It said JSW Steel and Bhushan Power are shareholders, with stakes of 24.09% and 49%, respectively, in a venture called Rohne Coal Company. The agency said it wants to look at all the arrangements entered into between the two shareholders. Citing filings before the Ministry of Corporate Affairs, the affidavit said the joint venture company, founded in 2008, is “still in operation”.

On the application of Section 32A of IBC, included through an amendment in December 2019 to provide immunity to the corporate debtor and its assets from an offence committed prior to the commencement of the insolvency process, the ED said there is no provision that gives retrospective effect to the section.Ministry of Corporate Affairs sources is of the view that they cannot give a clean chit to anyone. In the ministry’s affidavit, it is likely to explain the intent of the provision.

“Section 32A is clearly worded, if investigation agencies have reasons to believe based on material facts, the protection will not be available. The MCA will merely explain intent of the provisions. We cannot give a clean chit to anyone,” said a senior official. In its affidavit, the ED said the Section was introduced with effect from December 28, 2019, while JSW’s resolution plan for Bhushan Power was approved on September 5, 2019.

“The liability of corporate debtor shall not cease for the impugned offences under PMLA as the resolution plan… is not resulting in change in management or control of the corporate debtor to a person who was not a related party of the corporate debtor, for the reason that JSW Steel is a ‘related party’ of the corporate debtor, being an associate company which has formed a joint venture with the accused-corporate debtor,” said the affidavit.

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