Corporate debtor needs immunity from criminal liabilities: JSW Steel MD

JSW Steel Joint Managing Director and Group Chief Financial Officer Seshagiri Rao
The Insolvency and Bankruptcy Code (IBC) requires a clarification or amendment to give immunity to the corporate debtor from all civil and criminal liabilities, said JSW Steel Joint Managing Director and Group Chief Financial Officer Seshagiri Rao (pictured).

Rao said it in the context of the banking frauds that have surfaced in Bhushan Power & Steel (BPSL), currently going through the insolvency process. JSW Steel’s Rs 19,700 crore offer for the company had emerged as the successful bid though the resolution plan is yet to get the NCLT (National Company Law Tribunal) nod.

However, a number of banks had reported fraud by BPSL since, on the basis of a forensic audit investigation and an FIR filed by the Central Bureau of Investigation (CBI).

BPSL had availed various loan facilities from 33 banks/ financial institutions between 2007 and 2014 and the outstanding defaulting amount was Rs 42,074 crore as on January 30, 2018. The CBI is probing an illegal diversion of funds through various modus-operandi.

The latest amendments to the IBC largely dealt with the approval of a resolution plan. It addressed the concerns of the lenders, the hierarchy of distribution and made it clear that the resolution plan was binding on all. But Rao pointed out a clarification on immunity to the corporate debtor was also required as there could be claims from other departments of the government which could eventually result into some problem in the future.

"What happens if there are ongoing litigations. Is the corporate debtor obliged to make any additional payment. This needs more clarity," he said.

JSW has already sought immunity from litigation at the NCLT in the BPSL case. The NCLT is likely to take it up when it passes an order on the resolution plan. 

It has also raised the issue with the Ministry of Corporate Affairs (MCA) and the Insolvency and Bankruptcy Board of India (IBBI).

Among the latest set of amendments brought about by the government in the IBC, one of the aspects is that the plan would be binding on all stakeholders including the central government, any state government or local authority to whom a debt in respect of the payment of dues may be owed.

However, Saurav Kumar Partner, IndusLaw, said, while the amendment had great persuasive value, either the IBC would need further clarification or amendments in other laws would have to be made. "It can't be taken as given," he said.

While the IBC had overriding powers on all other clauses, there was another section that said that the resolution plan should comply with all other applicable laws.

"There are interpretational issues," said Rao.

Claims from different departments had also come up in the case of Monnet Ispat & Energy which was acquired under IBC jointly by AION and JSW.

Based on that experience and what is happening in different IBC cases, in the case of BPSL, we approached for this specific immunity, explained Rao.

However, Rao clarified that while JSW has sought specific immunity on this count in BPSL, there were no second thoughts on the acquisition.