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2020 (2) TMI 917 - AT - Insolvency and BankruptcyApproval of resolution plan - CIRP proceedings - immunity from Attachment of assets after approval of Resolution Plan - money laundering - whether after approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, is it open to the Directorate of Enforcement to attach the assets of the Corporate Debtor on the alleged ground of money laundering by erstwhile Promoters? HELD THAT - The Directorate of Enforcement has not been empowered under I B Code to decide the question. Even if the stand taken by the Directorate of Enforcement is accepted that JSW Steel Limited is a related party of M./s. Bhushan Power Steel Ltd. - ( Corporate Debtor ), the Directorate of Enforcement cannot decide whether JSW Steel Limited is ineligible under Section 29A or Section 32A (1) (a) which can be determined by the Committee of Creditors / Adjudicating Authority - Section 29A was inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2018 dated 18th January, 2018 with retrospective effect i.e. from 23rd November, 2017. The main object that persons, who are ineligible in terms of clauses (a) to (j) are excluded from acquiring the company. If a person becomes ineligible because of his own act, such person is not eligible to submit a Resolution Plan individually or jointly or in concert with - However, on the direction of the Central Government, if a person is asked to join hands with others for compliance of such direction a person cannot be held to be ineligible on the ground of related party . The attachment of assets of the Corporate Debtor by the Directorate of Enforcement pursuant to order dated 10th October, 2019 as illegal and without jurisdiction. The assets of the Corporate Debtor ( Bhushan Power Steel Limited ) of which JSW Steel Limited is a Successful Resolution Applicant is immune from attachment by the Directorate of Enforcement. Resolution plan - Held that - the distribution on the profit made during the Corporate Insolvency Resolution Process should be made in terms of addendum to the RFP as held by the Hon ble Supreme Court. - The Monitoring Committee with the help of the Resolution Professional will now go through the RPF issued in terms of Section 25 of the I B Code and as consented to by the Resolution Applicant ( JSW Steel Limited ) will make distribution of profit accordingly. The condition imposed at paragraph 128 (j) stands substituted with the aforesaid observations. The impugned Judgment dated 5th September, 2019 passed by the Adjudicating Authority approving the plan submitted by JSW Steel Limited is approved with aforesaid modification/ clarification as made above. The order of stay of implementation of the plan stands vacated. The approved plan be given effect immediately in the manner as ordered by the Adjudicating Authority and modified/ clarified by this Appellate Tribunal.
Issues Involved:
1. Legality of the Directorate of Enforcement's attachment of the Corporate Debtor's assets post-approval of the Resolution Plan. 2. Eligibility of JSW Steel Limited under Section 29A of the Insolvency and Bankruptcy Code (IBC). 3. Distribution of profits earned during the Corporate Insolvency Resolution Process (CIRP). 4. Treatment of claims by various creditors, including operational creditors and the State of Odisha. 5. Interim management mechanism and related ambiguities. Detailed Analysis: 1. Legality of Directorate of Enforcement's Attachment: The primary issue was whether the Directorate of Enforcement (ED) could attach the Corporate Debtor's assets after the approval of the Resolution Plan under Section 31 of the IBC. The Tribunal concluded that the ED's attachment order dated 10th October 2019 was illegal and without jurisdiction. The Tribunal emphasized that once a Resolution Plan is approved, it is binding on all stakeholders, including government agencies. The newly inserted Section 32A of the IBC provided immunity to the Corporate Debtor and the successful Resolution Applicant from prosecution for offenses committed prior to the commencement of the CIRP, provided they were not related parties or involved in the commission of the offense. 2. Eligibility of JSW Steel Limited: The Tribunal examined whether JSW Steel Limited was a "related party" under Section 29A of the IBC, which would make it ineligible to submit a Resolution Plan. The Tribunal found that JSW Steel Limited was not a related party to the Corporate Debtor, despite their joint venture in Rohne Coal Company Private Limited. The Tribunal clarified that the association was mandated by the Central Government for coal block allocation and did not make JSW Steel Limited a related party. Therefore, JSW Steel Limited's Resolution Plan was deemed compliant with Section 29A. 3. Distribution of Profits Earned During CIRP: The Tribunal addressed the condition imposed by the Adjudicating Authority regarding the distribution of profits earned during the CIRP. The Tribunal referred to the Supreme Court's decision in "Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors." and held that the distribution of profits should be made in terms of the addendum to the Request for Proposal (RFP). The Tribunal set aside the condition that required redistribution of profits earned during the CIRP. 4. Treatment of Claims: The Tribunal dealt with various appeals from operational creditors and the State of Odisha. It was held that claims not filed during the CIRP could not be entertained post-approval of the Resolution Plan. The Tribunal emphasized that all claims must be submitted and decided by the Resolution Professional to ensure the successful Resolution Applicant knows the exact liabilities. The Tribunal dismissed the appeal of the State of Odisha for filing its claim after the approval of the Resolution Plan and beyond the permissible period. 5. Interim Management Mechanism: The Tribunal clarified ambiguities regarding the interim management mechanism. The Tribunal stated that the direction in para 128(f) of the impugned order, which suspended the existing Board of Directors, was only to ensure that the previous board did not interfere with the interim management mechanism provided in the Resolution Plan. The Tribunal confirmed that the Reconstituted Board, as per the Resolution Plan, would manage the Corporate Debtor until the Effective Date. Conclusion: The Tribunal approved the Resolution Plan submitted by JSW Steel Limited with modifications and clarifications. The appeals by various operational creditors and the State of Odisha were dismissed. The Tribunal's judgment provided clarity on the application of Section 32A, the eligibility of JSW Steel Limited, the distribution of CIRP profits, and the treatment of claims, ensuring the successful implementation of the Resolution Plan without legal uncertainties.
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