Insolvency case: NCLT admits bankruptcy plea against Bhushan Steel

The Delhi bench of National Company Law Tribunal (NCLT) admits insolvency petition against Bhushan Steel and Bhushan Power and Steel. While State Bank of India filed a petition against Bhushan Steel, Punjab National Bank filed a petition against Bhushan Power and Steel.

Bhushan Steel and State Bank of India (SBI) had last week contested each others’ estimation of the company’s liability at a hearing in New Delhi's NCLT.

The steel company’s counsel had said that SBI’s claims were about Rs 100 crore more than the actual dues. Countering the argument, SBI’s counsel said the difference was because the dues to SBI’s subsidiaries, now merged with the larger bank, had not been considered. Five subsidiary banks of SBI were merged with it on April 1.

SBI has staked a claim of Rs 4,295 crore from Bhushan Steel, along with $490 million in foreign currency loan.

In total, Bhushan Steel owes about Rs 40,000 crore to at least 20 lenders.

A similar argument had occurred in the case of Monnet Ispat — another of the top 12 non-performing accounts in the country identified by the Reserve Bank of India (RBI) last month. However, SBI was unable to give the exact figure of dues to the Mumbai bench of the NCLT.

Bhushan Steel’s lawyer also said the company’s restructuring plan was at an advanced stage of approval under the scheme for Sustainable Structuring of Stressed Assets (S4A) of the RBI; a parallel insolvency process was not required.

Under the RBI’s S4A scheme, banks are required to conduct a forensic audit to ensure there was no malfeasance by the promoter. If the audit finds anything amiss, S4A cannot be implemented, unless there is a change in ownership.

Bhushan Steel’s lawyer argued that such an audit had been conducted for the company, and it was established there had been a misappropriation of funds. The company tried to stop the insolvency petition from being admitted by the NCLT and claimed JSW has shown interest in acquiring it.

In response, the banker’s counsel said that since the company has been trying to restructure, it should be done in a time-bound manner. Hence, the insolvency petition should be accepted.

Under the insolvency process, the company gets 180 days for restructuring after approval of the application by the NCLT; this period can be extended by 90 days. If the loan is not restructured in this period, the assets are liquidated.

The NCLT reserved its order on the Bhushan Steel’s bankruptcy petition last Wednesday.

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