By Our Correspondent
NEW DELHI/BHUBANESWAR: The Bhushan Power and Steel Limited of Sanjay Singhal and JSW Steel of Sajjan Jindal seems misguiding both the Supreme Court as well as the Enforcement Directorate. If highly placed sources in New Delhi and Bhubaneswar those are keeping close watch on this development, are to be believed, the Steering Committee – led by three largest creditors of BPSL including Punjab National Bank and State Bank of India – has appointed the Reconstituted Board of debt-ridden Bhushan Power & Steel Limited (BPSL).The three members of the Reconstituted Board comprises Jitender Balakrishnan (former IDBI employee), Bomi Daruwala (Partner of law firm Vaish Associates) and Nagesh Pinge (former employee of ICICI Bank).
As per sources, the Steering Committee (comprising India’s top government banks) has approved over Rs. 75 lakhs rupees (approximately) for one Jitender Balakrishnan to act as the Director in the Reconstituted Board. If true, approving over Rs. 75 lakhs rupees to act as a Director in the Reconstituted Board of a debt-ridden company is indeed questionable. Are the other two Directors also getting the same fees?
At the time of appointment, the Steering Committee had empowered the Reconstituted Board to take decisions with respect to appointments, among other things. Pertinently, there is no information in public domain as to the existence of the Reconstituted Board and the opaqueness with which the Reconstituted Board is acting (including in relation to appointments) and the decisions that it is taking is seriously questionable.
As per reports, the Enforcement Directorate (ED) is currently investigating the role of Mahender Kumar Khandelwal (who acted as the Resolution Professional of BPSL) in a INR 700 crores bank fraud case. The ED has alleged that Khandelwal has attempted to destroy crucial evidence in the matter and has conspired with ex-promoters of BPSL in the bank fraud case. There are also allegations of Khandelwal paying a commission to the banks.
The ED seems to have impleaded Khandelwal as an accused in the bank fraud case. However, Khandelwal has sought protection from the Delhi High Court against any coercive action in the matter. The matter will be heard by the Delhi High Court coming month.
It is not clear if members of the Reconstituted Board have received any summons from the ED in connection with the bank fraud case. This becomes important because the ED has alleged that several suspicious transactions took place even after the approval of the Resolution Plan and the Reconstituted Board is in place since February 2020. Perhaps, the ED would be best-placed to also find out if the Steering Committee has actually approved such a high sum of money to be paid to the Directors of the Reconstituted Board as fees.
The Director General of Central Excise Intelligence is also investigating an excise tax evasion case in BPSL in which it had also summoned Khandelwal and other employees of BPSL.
The Resolution Plan in BPSL’s case was approved by the NCLAT in February 2020 but JSW Steel Limited has till date not released the bidding amount, nor have the banks approached the NCLT for taking action against JSW Steel Limited for not implementing the Resolution Plan as per the Order of the NCLAT.
Earlier, ED had moved the Supreme Court seeking a stay on the National Company Law Appellate Tribunal’s (NCLAT) order that approved the JSW Steel’s bid for debt-ridden BPSL under the new amendment (under Section 32(A) to the IBC) that provides immunity to the new owners from ongoing criminal proceedings against the erstwhile promoters of the company. The ED is opposing the BPSL’s committee of creditors’ appeal seeking direction to JSW Steel to implement the resolution plan it had proposed for the bankrupt company.
ED had said that while investigating the role of RP , they found documents revealed that “commission of Rs 60 lakh is shown to be payable to the bank officials including Rs 50 lakh for PNB officials and Rs 10 Lakh for PFC officials. PNB is the lead Bank in the committee of creditors.
Seeking a stay on the appellate tribunal’s decision, the ED, in its appeal, told the SC that BPSL and JSW Steel are associated as shareholders, holding 24.09% and 49% equity, respectively, in a joint venture called Rohne Coal Company. Therefore, JSW is a related party of the corporate debtor, and the protection under Section 32A will not be available to it, it said.
Saying that the formation of JV was not mandatorily required, the investigating agency said the NCLAT conclusion was based on the incorrect assumption that JSW was mandated by the Central government to join hands with the corporate debtor by virtue of which they could not be related persons. It said the resolution applicant was responsible for the acts of the old management.
Citing recent developments, ED stated it had raided BPSL resolution professional (RP) Mahender Kumar Khandelwal at Gurgaon and Delhi for allegedly helping its former promoters “clandestinely” in clearing the finished goods from its Odisha plant to other plants in Kolkata and Chandigarh. This practice resorted to by BPSL’s erstwhile management had continued even after initiation of the CIRP on August 5, 2017, it had said.
According to ED, the search operations conducted on August 19 and 20 on the residential premises of Khandelwal, BPSL office and the residence of one of BPSL ex-directors found incriminating documents, indicating a receipt of cash in lieu of preferential selection of coal suppliers and preferential selection of insurance firm for concerns under the NCLT were also found.
“The RP also attempted to destroy a crucial piece of evidence but it was prevented. Huge cash payments to various individuals outside the books of accounts indicate siphoning of cash from various concerns undergoing CIRP under NCLT. Further investigations are being conducted by way of recording of statements of various persons involved,” the ED stated.
Further investigation had revealed that in May this year, sale of coke worth Rs 43 crore had taken place from BPSL to Monnet Ispat and Energy, a JSW group company, the petition stated, adding that the sale had taken place without any tender.
JSW had offered to pay Rs 19,350 crore to the financial creditors as part of its resolution plan, a near 60% haircut for the lenders. Apart from this, JSW had offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore.
The ex-promoters of BPSL are under investigation for diverting Rs 4,025-crore bank funds taken as loans. The ED in October last year had provisionally attached BPSL’s assets worth over Rs 4,025 crore for diversion of funds by the erstwhile management prior to the commencement of CIRP. Though the attachment was lifted by NCLAT, the ED had then appealed against the order in the SC.
JSW has accused the CoC of deliberately misleading it by not disclosing the fact of siphoning of funds and fraud. The SC has not stayed the resolution plan, but has told the CoC that if JSW makes the payment but loses the case, the lenders should return the money within 60 days.
