Experts say whole process under IBC could be closed in 60-90 days if the tribunal's nod is not challenged in NCLAT
Tata Steel may well become the first company to complete the process of acquiring debt-ridden Bhushan Steel Ltd under the Insolvency and Bankruptcy Code (IBC) with the National Company Law Tribunal (NCLT) clearing its resolution plan on Tuesday.
Kumar Saurabh Singh, partner at law firm Khaitan & Co, told DNA Money that the road was now clear for Tata Steel to implement its plan unless somebody challenges it in the National Company Law Appellate Tribunal (NCLAT).
"Unless somebody challenges this (the approval by NCLT) in the NCLAT on any ground, the path is clear for Tata Steel to complete the process of acquisition now," he said.
Mining and metal firm Vedanta Ltd was the first company to get NCLT's clearance for its resolution plan for taking over Electrosteel Steels but it has been challenged by Renaissance Steel. Bhushan Steel was one of the 12 non-performing asset (NPA) accounts notified by the Reserve Bank of India (RBI) last year.
On Tuesday, NCLT also dismissed a plea by Bhushan Steel Employees Union against Tata Steel's resolution plan for being in violation of Section 29A of IBC and penalised it with Rs 1 lakh.
It also threw out a petition by Lasen & Toubro Ltd (L&T), which is one of operational creditors of Bhushan Steel, to be accorded higher priority while the loan was being paid off by Tata Steel as it was secured credit. The tribunal has fined L&T Rs 1 lakh.
The NCLT has also rejected Bhushan Energy's plea for continuance of its power purchase agreement (PPA) with Bhushan Steel. In its resolution plan, Tata Steel has proposed the termination of the PPA with the energy company.
Another senior advocate with a leading law firm, who spoke on condition of anonymity, said employee union petition against Tata Steel was engineered by vested interest and there was a possibility of it being further pursued in higher courts.
"It's (employee union petition in NCLT) nothing to do with employees. This is all being engineered. Without naming any company, I will tell you about an incident I know. Just like Bhushan Steel, there was another steel plant, which was sold to another steel company. It was a friendly takeover but the new owner paid the old owner to make sure that their entry is trouble-free and no employee created any problem. Tatas will not do anything like that. Because of integrity and honesty policy of the Tata group, things become difficult. Nobody can deny them (Tatas) legal entry now. It (Tatas) will always use a fair and legal means to get through. There may be some delay but they will get through," said the lawyer.
Khaitan & Co's Singh said now that Tata Steel has got the NCLT nod, it would take another 60-90 days to close the transaction. The whole process would require Tata Steel to make the proposed payment to the lenders and get necessary approvals from various authorities like the Securities and Exchange Board of India (Sebi) and others.
"They may take about 60-90 days for making payment to the lenders because they may have to tie up funds to repay the lenders and take necessary approvals which may be required and then close the transaction," he said.
Tata Steel Ltd has offered to make an upfront payment of Rs 35,200 crore to creditors of Bhushan Steel. It has offered a 12.27% stake in the acquired company. Bhushan Steel admitted that its financial debt stood at Rs 56,051.16 crore as on February 1. Tata Steel's resolution plan was reportedly approved by the Bhushan Steel's committee of creditors (CoC) with a 99.8% majority vote.
IT’S CONCRETISING
- Experts say whole process under IBC could be closed in 60-90 days if the tribunal's nod is not challenged in NCLAT
- NCLT also dismissed a plea by Bhushan Steel Employees Union against Tata Steel's resolution plan
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