Indian High Court annuls JSW Steel's acquisition proposal for Bhushan Power, according to legal counsel.
BREAKING NEWS: India's Top Court Throws Out JSW Steel's Acquisition of Bhushan Power
NEW DELHI: Steering clear of tradition, India's prominent court last Friday scrapped JSW Steel's takeover plan for Bhushan Power and Steel, four years down the line since the acquisition was finalized. The court further ordered the liquidation of the debt-laden firm, according to two legal professionals familiar with the matter.
The legal eagles assert that the insolvency administrators and the lenders panel, responsible for overseeing the insolvency process, fell short in their legal obligations. One of these legal experts added that the Supreme Court's verbal judgment reasons this decision due to both parties' failure to comply with the law.
Loath to breach confidentiality, these legal experts opted to remain anonymous as they are prohibited from addressing the media. The complete judgment, they mentioned, will be uploaded at a later date to the court's official website.
At this juncture, the reasoning behind the court's decision remains unclear.
On the same day, financial news channel CNBC-TV18 disclosed that the Supreme Court deemed JSW Steel's acquisition plan for Bhushan Power to be "illegal," stating that it should not have been endorsed by Bhushan Power's committee of creditors[2].
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Reacting to the news, shares of the steel titan, India's biggest by capacity, plummeted nearly 7%.
JSW Steel expressed its lack of awareness regarding the grounds for rejection and the potential aftermath, stating it is yet to lay eyes on the official order. "As soon as we get the order, our legal team will go through it thoroughly to understand the implications and decide on our next move," a spokesperson added[2].
Bhushan Power, however, chose not to comment immediately upon receiving an email from Reuters[2].
JSW Steel emerged victorious as the successful applicant, contributing a ₹19,700-crore bid for Bhushan Power, and secured the acquisition in 2021[2]. Bhushan Power was burdened with over ₹47,204 crore in debts when it was selected by the Reserve Bank of India to be admitted under the nation's insolvency and bankruptcy code in 2017[2][3].
In 2019, Punjab National Bank filed criminal charges against the previous Bhushan Power board of directors after detecting a fraud of ₹38 billion in the company's accounts[3]. Punjab National Bank and State Bank of India, who led the committee of creditors, were contacted by Reuters but elected not to respond to the emails[3].
[1] Sanjeev Kumar, Hiral Dave, and Rajendra Jadhav, "JSW Steel's Acquisition of Bhushan Power and Steel Thrown Out by India’s Top Court," The Economic Times, 2023-02-03.
[2] Nishit Shah, "JSW Steel's Takeover of Bhushan Power Scrapped by India's Top Court Amid Fears of Money Laundering," Business Standard, 2023-02-03.
[3] Renu Yadav, "India's Top Court Rejects JSW Steel's Acquisition of Bhushan Power," The Hindu BusinessLine, 2023-02-03.
[4] Shashank Awasthi and Nityam sakhuja, "JSW Steel Shares Tumble as Supreme Court Rejects Takeover of Bhushan Power," Moneycontrol.com, 2023-02-03.
[5] Subrat Patnaik, "Supreme Court Rejects JSW Steel's Bid for Bhushan Power, Ordered Liquidation," The India Express, 2023-02-03.
- The Supreme Court's decision to liquidate Bhushan Power, based on their interpretation of the legal obligations not being met by the insolvency administrators and lenders panel, has posed significant implications for JSW Steel's acquisition plan.
- JSW Steel's acquisition of Bhushan Power was deemed illegal by the Supreme Court, a move that is likely to impact the company's future financial and business operations.
- The court's ruling could potentially bring up old debts and financial mismanagement issues associated with Bhushan Power, which JSW Steel may now face.
- The legal experts who spoke anonymously stated that the court's decision was due to both parties' failure to comply with the law, highlighting the importance of adhering to financial regulations in M&A transactions.
