Economy

As FM’s Right Hand Battles The Left, Bhushan Power Resolution Stuck In The Works For 3 Years

Union Finance Minister Nirmala Sitharaman 
Snapshot
  • It is a shame that an insolvency proceeding that began three years ago is being held hostage to an inter-ministerial difference of opinion.

Half the problems in litigation would be resolved if only the government can rein in its revenue and enforcement departments.

Both have managed to harass businessmen, neither have managed to do much to improve compliance or lawful behaviour.

If anything, they are part of the problem, forcing bankers to look over their shoulders before they lend, and businesses to flee India for fear of harassment.

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This is one reason why the Finance Minister, in her recent budget, offered an amnesty scheme of sorts, whereby direct taxpayers litigating against the tax department over demands can settle by merely paying what was originally demanded, minus the interest and penalties.

Even if there is not much revenue gain in this move, it will unclog the appellate courts.

Another case in point is the JSW Steel bid for Bhushan Power and Steel Ltd (BPSL), whose previous promoters are being investigated for fraud by several agencies, including the Enforcement Directorate (ED).

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BPSL, which was one of the first bad loan cases to be sent to the insolvency and bankruptcy courts in early 2017, is still stuck there as the winning bidder, JSW Steel, has sought immunity from prosecution on any misadventures involving by the previous promoters.

The Centre, which is apparently in sync with JSW’s demand for immunity for a wrong it was never involved in, issued an ordinance last December making relevant changes to the Insolvency and Bankruptcy Code (IBC) to protect bidders for Bhushan Power and other such cases.

But the Enforcement Directorate, which too comes under the Finance Ministry’s jurisdiction (it reports operationally to the Revenue Department) is playing hardball, refusing to recognise the applicability of the ordinance to JSW.

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The matter has now reached the National Company Law Appellate Tribunal (NCLAT), where two arms of the Finance Ministry — the Department of Corporate Affairs, and the Enforcement Directorate — are locked in combat. The former says JSW is immune under the new ordinance which operates retrospectively; the latter says JSW gets no immunity for crimes that may have been committed by the previous promoters.

This may sound daft, but the ED has argued that JSW is related to the previous promoters through a stake in Rohne Coal Company in which both JSW and Bhushan Steel had equity stakes.

That’s a rather thin dotted line to the previous promoters if you want to deny JSW immunity from the sins of Bhushan’s previous promoters in BPSL.

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Clearly, if the Finance Ministry cannot bash heads together and get the ED and the Company Affairs Department to come to an understanding on this issue, the PMO should step in.

Nirmala Sitharaman heads both the Finance and Corporate Affairs Ministries. She ought to solve this issue by behind-the-scenes discussions rather than allowing the NCLAT to decide on the ED’s efforts to nullify the immunity given to JCW.

It is a shame that an insolvency proceeding that began three years ago is being held hostage to an inter-ministerial difference of opinion and the likely pig-headedness of some officials.

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