by Harish Gupta, National Editor, Lokmat Group
Big Fight Erupts between two Govt bodies
Brings Sale of Sick companies to a Grinding Halt
1200 companies hit
Harish Gupta
New Delhi, Oct 18
A big fight has broken out between the Enforcement Directorate (ED) and the National Company Law Tribunal bringing the auctioning of sick companies to a grinding halt.
The Enforcement Directorate is firm in implementing the Prevention of Money Laundering Act (PMLA) which stipulates that assets of those involved in money laundering be attached along with the companies they owned. But the Insolvency & Bankruptcy Code (IBC) governing the NCLT and Appellate body are responsible for buying & selling the sick companies numbering nearly 1200.
The tussle brought the light the conflict between the ED under the Finance Ministry and the IBC under the Corporate Ministry with the ED attaching assets of sick Bhushan Power & Steel Ltd (BPSL) which had been purchased by the JSW Steel. The JSW was about to pay Rs 19700 crores for the debt-ridden BPSL. But it withheld the payment after the ED attached its assets. The ED's action, in fact, brought the entire process to a grinding halt at the National Company Law Tribunal (NCLT) which is supervising the sale/purchase of all sick companies in India. As on March 31, 2019, there were 1143 companies which are undergoing resolution process and its rising by the day.
Now the buyers are insisting that after payment of the bid amount, the companies should be free from all past liabilities including the criminal cases. The ED attached assets worth Rs 4000 crores of the Bhushan Power & Steel. The ED has refused to relent and so far the government has not intervened either. The National Company Law Appellate Tribunal (NCLAT) has directed the ED that assets be released forthwith and even asked the JSW Steel not to make the payment until the assets are released. But the ED is not bound by the NCLAT order saying it is governed by the PMLA. The government will have to amend the act if it wants to speed up the sale/purchase of sick companies.
As if this was not enough, ED has gone in appeal to attach the assets of Tech Mahindra to the tune of Rs 822 crores in a fraud case relating to Satyam Computers Services which was acquired by Tech Mahindra in 2009. The matter is sub-judice but giving nightmares to the buyer.
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