After the Supreme Court allowed JSW Steel’s review petition last week, the creditors have now reversed their stance.
Until May this year, BPSL’s creditors told the Supreme Court they had no objection to JSW Steel retaining the company's EBITDA.
Bhushan Power & Steel Ltd (BPSL) and JSW Steel’s legal ride is getting bumpier every time the case is heard in the Supreme Court. In a new twist, the creditors of the insolvent company have demanded EBITDA and interest on the same from billionaire Sajjan Jindal-led JSW Steel, CNBC-TV18 reported on August 8. The demand by the creditors is likely to deliver a blow to JSW Steel, which recently got relaxation after the Supreme Court allowed to hear the steel maker’s review petition.
What’s Behind Creditors’ U-Turn?
Until May this year, the creditors of the debt-ridden company had reportedly informed the top court that they have no issue if BPSL’s EBITDA remained with JSW Steel. But creditors have taken a U-turn following the SC’s decision last week to allow JSW Steel’s review petition. The lenders are now asking that the EBITDA generated by the financially troubled company during the Insolvency and Bankruptcy Code (IBC) process should be given to them. According to the lenders, EBITDA generated during the IBC process amounts to “thousands of crores”. The banks contested that they are dealing with public money and hence, have no other choice but to ask for EBITDA and interest for delays in implementation of the resolution plan.
The lenders told the apex court that under the IBC process, JSW is likely to gain over Rs 19,000 crore EBITDA, CNBC-TV18 reported. Taking SC’s recent decision into consideration, the creditors reportedly said they are in favour of Jindal’s resolution plan but are against unjust enrichment.
Why did SC Change Its Stance?
The apex court, under its power to review its own ruling, had admitted JSW’s review petition and had recalled its May 2 judgement. The SC bench headed by Chief Justice BR Gavai and Justice Satish Chandra Sharma on July 31 said that their earlier judgement “does not correctly consider the legal position as has been laid down by a catena of judgments.” The court highlighted that the move is crucial since it is likely to impact 25,000 workers.
“We therefore think that this is a fit case wherein the judgment under review needs to be recalled and the matter needs to be considered afresh,” CJI Gavai earlier said, according to Live Law. “We can’t just throw 25,000 people onto the street,” he added.
In its May 2 order, the SC bench headed by Justices Bela Trivedi and SC Sharma had set aside JSW’s Rs 19,700 crore resolution plan for BPSL, citing violation of IBC regulations and failure to perform duties by the Resolution Professional and Committee of Creditors. The court had observed that the Sajjan Jindal-led company delayed the resolution process and misrepresented significant facts before the creditors, including a tripartite joint venture agreement signed between JSW, Bhushan Power and Jai Balaji in 2008 for the allocation of the Rohne Coking Coal block. Additionally, the court had ordered BPSL’s liquidation.
