ED hands over ₹4,025-cr asset of Bhushan Power and Steel to JSW

The Directorate of Enforcement (ED) has restituted assets worth ₹4,025 crore to JSW Steel Ltd., the Successful Resolution Applicant (SRA) of the erstwhile Bhushan Power and Steel Ltd. (BPSL) under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code (IBC).

The assets, provisionally attached by ED under Section 5 of the Prevention of Money Laundering Act (PMLA), were linked to allegations of fund diversion and bank fraud by BPSL’s former promoters. The ED investigation stemmed from a CBI FIR dated April 5, 2019, which alleged that Bhushan Power and Steel Ltd defrauded banks of ₹47,204 crore. ED’s findings revealed the diversion of bank funds into private investments via fictitious expenses, shares, properties, and cash routed through shell companies. Based on these findings, ED attached properties worth ₹4,025 crore on October 10, 2019.

Key Developments in the Investigation

• Arrest and Prosecution: Sanjay Singal, the main promoter of Bhushan Power and Steel Ltd, was arrested by ED on November 22, 2019. A Prosecution Complaint (PC) was filed against Singal and key employees on January 17, 2020, with the trial currently pending.
• Further Attachments: ED later attached additional assets worth ₹427 crore, including immovable properties and an aircraft owned by entities beneficially controlled by Singal. A prosecution complaint regarding these assets is pending.

Resolution Process under IBC

BPSL’s creditor banks initiated CIRP, with JSW emerging as the SRA for a resolution plan amounting to approximately ₹19,350 crore. Against outstanding loans of ₹47,204 crore, banks agreed to a significant haircut. Although the resolution plan was approved by the NCLT on September 5, 2019, it faced legal challenges, including disputes involving ED’s attachment of properties.

Supreme Court Intervention

To facilitate restitution of attached assets to JSW as part of the CIRP, ED filed an affidavit before the Supreme Court. It argued for the restitution of assets under the second proviso to Section 8(8) of PMLA (restitution pending trial), in conjunction with Rule 3A of the PMLA Restoration of Property Rules. ED submitted that in CIRP cases involving attached assets, the SRA may approach the PMLA Special Court to seek custody of these properties for victim restitution.

The Supreme Court, in its order dated December 11, 2024, accepted ED’s affidavit and directed the restitution of attached assets to JSW, emphasizing the need for a harmonious interpretation of IBC and PMLA to ensure resolution objectives are met.

Unresolved Issues

The Supreme Court did not opine on broader questions regarding ED’s powers to attach properties of corporate debtors under CIRP or the interpretation of Section 32A(2) of the IBC, leaving these matters open for future adjudication.

Also Read: Rs 2,566-crore properties of Mehul Choksi up for sale