Bhushan Power & Steel’s Promoters Make Last Ditch Effort To Settle Dues

The promoter of Bhushan Power & Steel Ltd. made a last ditch effort to settle more than Rs 47,000-crore dues to financial creditors under Section 12A of the Insolvency & Bankruptcy Code.

Sanjay Singhal offered to convert the entire debt of Bhushan Power & Steel into cumulative redeemable preference shares, which will allow for repayment over 17 years, according to a letter addressed to the committee of creditors last week.

The offer comes at the final stage of resolution for the beleaguered steelmaker under IBC, where the National Company Law Appellate Tribunal is to decide on the winning bidder. JSW Steel Ltd., Liberty House U.K. and Tata Steel Ltd. submitted their final bids in the case. JSW Steel, with its Rs 19,300-crore bid, narrowly outbid Liberty House’s Rs 19,000-crore offer. Tata Steel offered to repay Rs 17,000 crore to financial creditors.

The Section 12A of the IBC allows creditors of Bhushan Power & Steel to withdraw insolvency proceedings if 90 percent of the CoC is in favour of settling dues. In its judgment last month, the Supreme Court upheld the constitutional validity of the IBC, specifically saying the right to withdraw from the IBC remains with the entity that had filed for insolvency proceedings at the beginning.

The CoC for Bhushan Power & Steel will be meeting next week, to consider the plan and decide whether they want to continue with the insolvency process or withdraw.

Bhushan Power was one of the 12 large corporate accounts shortlisted by the Reserve Bank of India in June 2017 for insolvency proceedings. Following this, lenders led by Punjab National Bank filed for the proceedings. The case, however, has seen considerable delays ever since.

In February 2018, Liberty House approached the appellate tribunal to submit a bid for Bhushan Power & Steel, even though the deadline for submission had already passed. After a prolonged hearing, the NCLAT allowed Liberty House to participate in the bidding process, in the interest of maximising returns for creditors.

By October 2018, the CoC had decided to back JSW Steel as the highest bidder in the case, owing to the higher offer. Bhushan Power’s promoter, however, had already approached the Supreme Court challenging the constitutional validity of the IBC. Singhal had claimed that the IBC did not allow promoters to bid for their own assets and was therefore against their fundamental rights. The apex court had dismissed this argument, upholding all the provisions of the code.

Bhushan Power’s promoters are the second such group to approach creditors for a settlement plan, after the Ruia family attempted to do so for Essar Steel Ltd. On Jan. 29, the Ahmedabad bench of the National Company Law Tribunal said the promoters did not have any fundamental right to settle their dues and that such a plan can only be entertained with the approval of the lenders.