Tata Steel’s resolution plan for corporate debtor Bhushan Steel approved by NCLT

National Company Law Tribunal

National Company Law Tribunal: The Principal Bench comprising of CJ (Retd.) M.M. Kumar, President and S.K. Mohapatra, Member, accepted and approved the resolution plan submitted by Tata Steel Ltd. (TSL) for the insolvent corporate debtor Bhushan Steel Ltd.

A petition was filed by SBI against Bhushan Steel Ltd. under Section 7 of Insolvency and Bankruptcy Code 2016, pursuant to which Corporate Insolvency Resolution process was commenced. Under Section 15 of the Code, the Resolution Professional invited claims. He also invited resolution plans from prospective Resolution Applicants in terms of the Code, in pursuance to which, 3 Resolution Plans were received, out of which 2 (by TSL and JSW Living (P) Ltd.) were found to be in compliance with the Code and CIRP Regulations. Thereafter, on recommendation of the Committee of Creditors (CoC), TSL was notified as highest scoring resolution applicant. Finally, resolution plan submitted by TSL was approved by CoC. Thereafter, the said resolution plan was placed before NCLT for its acceptance and approval in terms of the Code and CIRP Regulations. According to Sections 30 and 31 of the Code, the Adjudicating Authority (NCLT) must be satisfied that the resolution plan concerned fulfills the requirements of Section 30(2). The Tribunal perused the plan submitted by TSL and found that it fulfills and satisfies all the 6 requirements as envisaged in Section 30(2).

Two objections were filed by ‘Bhushan Employees’ under Section 29(A) of the Code. First objection was that one C. Sivasankaran who was an undischarged creditor must be treated as a ‘connected person’ in terms of Explanation (i) of Section 29(A) as he controlled the Resolution Applicant (TSL). After fact finding, NCLT held that the said person could not be termed as a connected person, and there was no imputation that he was acting in concert with TSL in submitting the Plan. NCLT took notice that there was serious doubt as to locus standi of Bhushan Employees in filing the application as it was not filed by the Authorized body. Second objection pertained to the prosecution and conviction of ‘Tata Steel UK’, which is a 100% subsidiary of TSL. NCLT held that Section 29(d) provides ‘custodial sentence’ as a disqualification but since a Corporate Entity cannot be sentenced to custody, the said disqualification did not affect TSL. Further, it was held that the Resolution Plan protected the rights of the employees and raising objections to the same was a self-defeating proposition.

‘LARSEN AND TOUBRO LTD.’ also filed an application demanding that it may be treated as a ‘secured creditor’ in terms of Sections 30(2) and 31 of the Code. It placed reliance on Section 55(4)(b) of the Transfer of Property Act. However, NCLT held that the said Section applies to immovable property. The plant and machinery, for the payment of which L&T sought status of a secured creditor, could not be treated as immovable property. Thus, demand of L&T was found to be wholly unsustainable.

In view of the above and after extensive perusal of the resolution plan submitted by TSL, National Company Law Tribunal accepted and approved it and gave necessary directions to the Authorities concerned. Further, the applications filed by Bhushan Employees and L&T Ltd. were dismissed with costs amounting to Rs. 1 lakh each. [SBI v. Bhushan Steel Ltd., CA No. 244(PB) of 2018 in CP (IB) No. 201 (PB) of 2017, order dated 15.05.2018]

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