By Our Correspondent
BHUBANESWAR: Call it tough time for Sanjay Singhal of Bhushan Power and Steel Limited and Sajjan Jindal of JSW Steel. How highly indebted sick company like Bhushan Power and Steel Limited (BPSL) managed to transport its finished goods worth Rs 700 from its Plants located in Odisha without paying due taxes and duties?. Is Odisha Government Aware of this act of BPSL? Why so leniency to Sanjay Singhal led BPSL? These are few questions now raised in many circles after the Enforcement Directorate found that the company surreptitiously cleared finished goods worth Rs 700 crore without payment of applicable taxes and duties and without issuance of any statutory invoice.ED had said after conducting raids on Resolution Professional in the matter of BPSL – Mahender Kumar Khandelwal – for allegedly helping the former promoters of the company in surreptitiously clearing finished goods for which he was paid in cash.
“The appointment of several senior former employees of JSW in BPSL, that has gone through a long drawn-out corporate insolvency resolution process in the National Company Law Tribunal (NCLT), New Delhi, appears to have been planned and managed with the help of BPSL’s monitoring professional, Mahender Kumar Khandelwal, and accounting bigwig EY or Ernst & Young, which had been appointed in January to act as BPSL’s O&M––variously described as “operations and management” and “operations and maintenance”––agency,” a report in newsclick.in said. BPSL has more than 19,000 employees located at its three plants and sub-plants in Jharsuguda in Odisha, Kolkata in West Bengal and Chandigarh in Punjab, its offices in Delhi and Kolkata and its branch offices in 32 different locations across the country.
A clutch of former employees of JSW Steel Limited (JSW), headed by Sajjan Jindal, have been hired at senior levels in various offices of the ailing and debt-ridden Bhushan Power and Steel Limited (BPSL) despite the fact that JSW has not released the bid value of Rs 19,350 crore to the creditors of BPSL that comprise over two dozen Indian banks (mainly in the public sector) as well as foreign banks, financial institutions and private entities in the country and abroad, sources said adding these appointments reportedly took place with the approval of BPSL’s steering committee, which is currently overseeing the implementation of the resolution plan for BPSL.
The dispute currently pending before the Supreme Court relates to an apparently unrelated case concerning grant of immunity from investigations by the ED into financial fraud allegedly committed by the former promoters of BPSL, Sanjay Singhal and his wife, Aarti Singhal. The ED filed a case against the Singhals and other former directors of the company under the Prevention of Money Laundering Act for allegedly siphoning off Rs 2,348 crore from various banks.
While JSW seems unwilling to implement the resolution plan or to release the bid value to the financial creditors, it seems to be calling the shots in BPSL through its former employees, with the help of Khandelwal and the EY team, according to sources close to the development.
The EY team comprises several individuals. At least six of them, who have held senior positions in JSW in the past, have come on board as members of the EY team. They are:Pochappan Sasindran, former chief operating officer (COO) of JSW;Ranga Rao R V Ramachandruni, former vice president (commercial) of JSW;Bidyut Kumar Das, former vice president (projects) of JSW;
Poyyamozhi Venkatachalam, former vice president of JSW;Ravindranath Kolli, former vice president (projects) of JSW; and Major Prashant Kumar Das, former head (human resources).
“The BPSL had engaged in clandestine clearances of finished goods from its Plants in Odisha to its plants at Kolkata in West Bengal and Chandigarh in Punjab. Goods valued at Rs 700 crore had been cleared without payment of applicable taxes and duties and without issuance of any statutory invoice,” the ED said in the statement. BPSL’s plants in Odisha was a killing field as hundreds of workers died in the plant in several mishap.
The development comes at a time when the plea of JSW Steel seeking immunity from any ED action on erstwhile promoters of the BPSL is set to be decided by the Supreme Court in September. JSW’s bid worth Rs 19,350 crore for BPSL’s plant was approved by the National Company Law Appellate Tribunal (NLCAT) in February this year and the agency was asked to release the assets of BPSL. ED had challenged the NCLAT order.
ED has found that “…This practice which was resorted to by the erstwhile management of the company had continued even after initiation of CIRP (company insolvency resolution process) and some irregularities on part of Resolution Professional M K Khandelwal were also revealed.”
The raids were conducted at the offices and residence of Khandelwal in Delhi and Gurugram apart from the residence of BPSL’s former director.“Incriminating documents, laptops, mobile phones, extracts and other valuables such as jewellery worth Rs 86 lakh were seized. Incriminating documents indicating receipt of cash by M K Khandelwal while discharging duties of Resolution Professional/Interim Resolution Professional have also been seized,” ED said.
“Huge cash payments to various individuals outside the books of accounts indicate siphoning and generation of cash from various concerns undergoing process of CIRP under NCLT (National Company Law Tribunal),” the ED statement added. The former promoters of BPSL are under investigation for diverting Rs 4,025 crore bank funds taken as loans.
Last year, the ED attached assets worth over Rs 4,000 crore of BPSL for alleged bank loan fraud by the company’s former owners. The BPSL case is in the final leg of hearing in the Supreme Court. The ED had filed an appeal against a National Company Law Appellate Tribunal order that ordered the agency to release assets of BPSL attached under the Prevention of Money Laundering Act.
The attachment order came about seven months after JSW Steel was declared a successful resolution applicant for the debt-laden BPSL. JSW Steel was seeking immunity under Section 32A of the insolvency law, which provides immunity to the corporate debtor. However, the ED was objecting to the applicability of Section 32A of the insolvency law to the JSW-Bhushan deal on two counts.
Primarily, JSW Steel’s resolution plan was approved by the National Company Law Tribunal in October 2019, prior to the introduction of Section 32A. Second, JSW Steel and BPSL are associates in the joint venture firm Rohne Coal Company, which disqualifies the resolution applicant from the purview of Section 32A, being a related party.
With the lenders of Bhushan Power and Steel Ltd have claimed that Sajjan Jindal owned JSW Steel is using the ongoing investigation by the Enforcement Directorate to delay the implementation of the resolution plan approved by the NCLT, the Principal Bench of the National Company Law Tribunal at Delhi has sought response from the Monitoring Committee of debt-ridden BPSL in relation to its retirement policy issued to over 200 BPSL employees last month.
The Tribunal was hearing a challenge to the validity of the Retirement Policy which provides that all BPSL employees who are older than 60 years shall be retired with effect from July 31, 2020. The bench of NCLT President (Acting) BSV Prakash Kumar and Member (Technical) Hemant Kumar Sarangi has provided interim relief in the matter, noting that “no adverse action will be taken against the employee until further orders or until the new Board takes a decision on the issue, whichever is earlier. Further the Tribunal directed the Monitoring Committee to file a reply within ten days and listed it for hearing on August 28, 2020.
The corporate insolvency resolution process in relation to BPSL commenced in 2017 before NCLT, New Delhi. In September last year, the Tribunal approved the Resolution Plan in favour of JSW Steel Limited.The implementation of the Resolution Plan is being monitored by the Monitoring Committee, which includes the erstwhile Resolution Professional and a Steering Committee comprising three largest financial creditors.
In July 2020, the Monitoring Committee sought to implement a Retirement Policy according to which all BPSL employees who are older than 60 years shall be retired with effect from July 31, 2020.The validity of the Retirement Policy was challenged by Madan Kumar Goel, who is currently working as the Deputy General Manager, Indirect Taxation. It has been argued that BPSL has no power or authority to formulate and implement the policy once the Resolution Plan is approved.
The respondent submitted that even though it was a policy that had been formulated by the Monitoring Committee, the new Board had already been in place since Feb 2020. Therefore, if the said policy had been ratified by the Board, it would become valid. The respondent submitted that no adverse action would be taken against Madan Kumar Goel until further orders or until a decision by the Board, whichever was earlier.
Goel was represented by Senior Advocate Sharan Jagtiani and Advocates Ashish Goel, Himanshu Bhushan, Shilpa Goel and Surabhi Agrawal. BSPL was represented by Senior Advocate Abhinav Vaishisth with Advocates Misha, Vaijayant Paliwal and Charu Bansal.
Meanwhile, the current appeal has been filed by the Enforcement Directorate challenging the sale of the bankrupt BPSL to JSW Steel. ED has filed a complaint stating that the cases against the BPSL should continue and argued that National Company Law Appellate Tribunal has no jurisdiction to unfreeze assets attached under PMLA and allow sale of those assets.
The Supreme Court said that will hold the final hearing in the Bhushan power and steel Ltd insolvency case on September 8 and has directed all the parties to file their affidavits, replies and rejoinders within four weeks.
JSW Steel, whose resolution plan has been approved by the National Company Law Tribunal and the appellate tribunal to take over the bankrupt Bhushan Power and Steel, told the Supreme Court that it iss not possible for it to pay the lenders and then wait for the outcome of the Enforcement Directorate’s proceedings against the old management in an alleged money laundering case.
JSW Steel had offered to pay INR 19,350 crore to the financial creditors as part of its resolution plan, which was a near 60% haircut for the lenders and had earlier missed the deadline of March 17 to make the payment as per approval from National Company Law Appellate Tribunal.
