Bhushan Steel Ltd.

Upfront amount, as printed

Rs. 35,200 crores (upfront payment offered by the H1 Resolution Applicant in respect of the Financial Debt owed to Financial Creditors and admitted by the RP)

Payout horizon as printed

Rs. 1,200 crores to Operational Creditors (other than Employees, Workmen and Related Parties) to be paid over a period of one year post completion of transaction

Cirp cost treatment

Resolution plan provides for payment of CIRP cost in priority to repayment of other debts of the company and identifies specific sources of funds for such payment, per Sections 6.4 and 8.1.2(i) of Annexure-3 and Annexure-5 of the plan (para 60)

Body of order · 7 rows

1. Seq

   1

   Beneficiary

   Financial Creditors

   Amount as printed

   Rs. 35,200 crores

   Timing as printed

   Upfront payment

2. Seq

   2

   Beneficiary

   Operational Creditors (other than Employees, Workmen, Related Parties) - pro-rata portion

   Amount as printed

   Rs. 200 Crore

   Timing as printed

   Paid to all operational creditors on a pro-rata basis, within a period of one year post completion of transaction

3. Seq

   3

   Beneficiary

   Operational Creditors (other than Employees, Workmen, Related Parties) - criticality-based portion

   Amount as printed

   Rs. 1000 Crores

   Timing as printed

   Paid based on criticality vis-a-vis continued business viability of the Corporate Debtor, within a period of one year post completion of transaction

4. Seq

   4

   Beneficiary

   Employees and Workmen

   Amount as printed

   Rs. 0.27 crores

   Timing as printed

   Based on claims admitted by the RP till 08.01.2018 (specific timeline not otherwise printed)

Entity type

company

Promoter / former management

No

Related party finding

Bhushan Employees alleged TSL was disqualified under Section 29A: (a) via an alleged connection to undischarged insolvent Mr. C. Sivasankaran, through Sterling Infotech Private Limited's 0.52% shareholding/pledge in Tata Teleservices Limited to Standard Chartered Bank, with TSL having given SCB a pre-emption undertaking (lapsed since 2009); and (d) via conviction of TSL's wholly-owned subsidiary Tata Steel UK under Section 33(1)(a) of the UK Health and Safety at Work Act, 1974. Both objections were examined and rejected by the Tribunal (paras 69-77): the Sivasankaran connection was found unsubstantiated and Section 29A(d) was held inapplicable to a corporate conviction where only a fine (not imprisonment) could legally be imposed

Sources of funds

The funding mechanism for payment of the resolution amounts has been provided in the plan (not itemized further in the text of this order)

Post plan management

A Monitoring Agency, comprising the Resolution Professional along with certain representatives of Deloitte Touche Tohmatsu India LLP, to be appointed by the Tribunal to function from the Effective Date until the Closing Date, with the same functions, powers and protections as the RP under the Code; powers of the Corporate Debtor's board of directors to remain suspended until the Closing Date and exercised by the Monitoring Agency

Operational creditors

Admitted claims of Operational Creditors (other than Employees, Workmen and Related Parties) approximately Rs. 1,332 crores; Resolution Applicant offered Rs. 1,200 crores in total (Rs. 200 crore to all operational creditors on a pro-rata basis; Rs. 1000 crore based on criticality vis-a-vis continued business viability) over a period of one year post completion of transaction; liquidation value entitlement of Operational Creditors under Section 30(2)(b) of the Code stated to be nil

Workmen employees

Resolution Applicant intends to retain all employees on the rolls of the Corporate Debtor (approximately 5,546 employees) with effect from the date of transfer of management/control; admitted employee/workmen claims of Rs. 0.29 crore against a claimed amount of Rs. 1.89 crore; Rs. 0.27 crores to be paid based on claims admitted by the RP till 08.01.2018; any additional dues to be adjusted from the Rs. 35,200 crores payable to Financial Creditors if not met through the Corporate Debtor's cash flows

Group entities

Bhushan Energy Limited (BEL), a group company of the Corporate Debtor separately undergoing its own CIR Process, owns and operates coal-based thermal power projects (300 MW and 185 MW) within the Corporate Debtor's Meramandali (Dhenkanal, Odisha) steel plant premises, supplying power under two Power Purchase Agreements (PPA-1: 01.04.2014-30.09.2024; PPA-2: 01.04.2013-31.12.2024) which the Resolution Plan seeks to terminate under Sections 10.1.16 and 10.1.17

Employees count as printed

approximately 5,546 employees on the rolls of the Corporate Debtor

Interim resolution professional

Mr. Vijay Kumar V. Iyer

RP replaced the IRP

No

Invitations for expressions of interest

1. Round no

   1

   Form g date

   2017-10-09

   Expressions of interest received

   22

   Final list count

   19

   Plans received

   3

   Outcome

   Only 2 of 3 plans (TSL and JSW Living Private Limited) found compliant with the Code and CIRP Regulations; TSL notified as H1 Resolution Applicant and its plan approved by CoC and by this Tribunal

Applicants considered

1. Name

   Tata Steel Limited (TSL)

   Stage reached

   approved

   Plan value as printed

   Upfront Rs. 35,200 crores to Financial Creditors plus equity of 12.27%/13.43%; Rs. 1,200 crores to Operational Creditors (other than Employees, Workmen and Related Parties)

   Vote pct

   99.80% rising to 100%

   Outcome note

   Notified as H1 (highest-scoring) Resolution Applicant vide email dated 07.03.2018 following evaluation by CoC Evaluator KPMG; submitted a first addendum dated 24.02.2018 and a second addendum dated 21.03.2018; plan approved by CoC in its 10th meeting/e-voting on 20.03.2018-22.03.2018; approved by this Tribunal on 15.05.2018

2. Name

   JSW Living Private Limited

   Stage reached

   plan_submitted

   Outcome note

   Plan found compliant with the Code and CIRP Regulations (discussed at 9th CoC meeting on 06.03.2018) but scored lower than TSL in the CoC's evaluation and was not selected as H1; also submitted an affidavit affirming eligibility under Section 29A

3. Name

   Bhushan Employees (group led by Mr. Rahul Sengupta, Former Executive Director)

   Stage reached

   disqualified_29a

   Outcome note

   Envelope containing a purported plan sent by the promoter was not opened on account of doubt regarding promoter eligibility under Section 29A; no clarifications/confirmations furnished despite being sought; plan found non-compliant with mandatory contents under Regulation 38 of the CIRP Regulations (no disclosure of source of funds, bid bond, identity of resolution applicant/connected persons, or details of convictions/investigations); the group's subsequent objections to TSL's and JSW's eligibility were separately heard and rejected by the Tribunal as frivolous and lacking locus standi

Bidding mechanism

negotiation

Evaluation matrix present

Yes

Clock events

1. Kind

   extension

   Granted date

   2017-12-15

   Reason

   CoC in its 6th meeting (15.12.2017) decided to seek extension of time beyond the 180-day period for the CIR Process to facilitate interested resolution applicants to submit their plans; the resolution was carried by 99.17% e-voting (by voting share) held on 18.12.2017 and 19.12.2017

Advisors

1. Role

   valuer

   Name

   Duff & Phelps India Private Limited

   Note

   Registered valuer appointed under Regulation 35 of the CIRP Regulations to ascertain the liquidation value of the Corporate Debtor

2. Role

   valuer

   Name

   PWC

   Note

   Registered valuer appointed under Regulation 35 of the CIRP Regulations to ascertain the liquidation value of the Corporate Debtor

3. Role

   CoC Evaluator

   Name

   KPMG India Private Limited

   Note

   Appointed at the 4th CoC meeting (27.11.2017) as evaluator of the resolution plans

4. Role

   CoC Legal Advisor

   Name

   Shardul Amarchand Mangaldas & Co.

   Note

   Appointed as legal counsel to the CoC

5. Role

   Forensic Consultant

   Name

   Deloitte Touche Tohmatsu India LLP

   Note

   Appointed by the RP to identify suspect (preferential, undervalued, extortionate credit and/or fraudulent) transactions under Sections 25(j), 43 to 51 and 66 of the Code; also proposed to provide representatives for the post-approval Monitoring Agency

1. Creditor

   IndusInd Bank

   Creditor class

   financial_creditor

   Vote

   for

2. Creditor

   Tata Capital Financial Services Limited

   Creditor class

   financial_creditor

   Vote

   for

3. Creditor

   ING Bank NV

   Creditor class

   financial_creditor

   Vote

   for

Dissenting fc treatment

The resolution plan provides for payment of the liquidation value due to dissenting financial creditors in priority to the financial creditors who voted in favour of the plan, identifying specific sources of funds for such payment (Sections 6.3, 6.5 and 8.1.2(iv), Annexure-3 and Annexure-5 of the plan) (para 60)

Section 30(2)(b) minimum stated

Yes

Business & treatment of stakeholders

Financial Creditors to be provided equity (in addition to upfront cash payment) in respect of the admitted Financial Debt, holding 12.27% of the equity shares of the Corporate Debtor (if the erstwhile promoter group shareholding is not counted towards promoter shareholding for the purposes of SEBI LODR Regulations, 2015) or 13.43% (if SEBI does not allow the erstwhile promoter group shareholding to be counted towards public shareholding)

Post plan shareholding

1. Holder

   Financial Creditors (as a class)

   After

   12.27% or 13.43%, depending on SEBI LODR treatment of erstwhile promoter group shareholding

Effective date definition

The date of approval of the Resolution Plan by this Tribunal shall be regarded as the Effective Date; the date on which all the steps for implementation set out in Annexure 5 of the CoC Approved Resolution Plan are completed shall be the Closing Date

Monitoring committee

Monitoring Agency comprising the RP along with certain representatives of Deloitte Touche Tohmatsu India LLP, appointed by the Tribunal to function from the Effective Date until the Closing Date, with the same functions, powers and protections as the RP under the Code; the CoC shall continue with its roles and responsibilities, and protections, as set out in the Code, including approving matters as were being approved during the period prior to the Effective Date; powers of the Corporate Debtor's board of directors to remain suspended until the Closing Date and exercised by the Monitoring Agency

Monitoring committee members

1. Name

   Resolution Professional (Mr. Vijay Kumar V. Iyer)

   Role

   Monitoring Agency

2. Name

   Representatives of Deloitte Touche Tohmatsu India LLP

   Role

   Monitoring Agency

1. Seq

   1

   Relief

   Termination of Power Purchase Agreements (PPA-1 and PPA-2) with Bhushan Energy Limited (BEL) under Sections 10.1.16 and 10.1.17 of the Resolution Plan

   Category

   contracts

   Disposition

   granted

   Reason

   BEL's objection to the termination rejected relying on Regulation 39(6) of the CIRP Regulations (no consent required from a party to an agreement of a similar nature to a shareholders'/joint venture agreement); the relief is not made a condition precedent per Section 8.9 of the second addendum to the plan (paras 78-79)

2. Seq

   2

   Relief

   Waiver of taxes, duties and other reliefs/concessions envisaged in the Resolution Plan (Annexure-8, not reproduced item-by-item in the order text)

   Category

   tax

   Disposition

   deferred_to_authority

   Reason

   'In respect of the relief and concession as set forth in Annexure-8 it is not possible for us to issue any directions except to say that the monitoring agency along with the resolution applicant may make a claim before the authorities which shall be considered in accordance with law.' (para 82)

3. Seq

   3

   Relief

   (all reliefs, en bloc)

   Disposition

   deferred_to_authority

   Reason

   Para 82-83: 'these reliefs and concessions are also not condition precedent for the acceptance of resolution plan and would not be any impediment for us to accept the Resolution Plan.' Direction (i): 'the relief and concession set forth in Annexure-8 must abide by the directions issued in the preceding paras. The Monitoring Agency and the Resolution Applicant-TSL may file appropriate applications before the Public Authorities/Government Authorities and it is needless to say that their applications would be duly considered in accordance with law. We make it clear that we are not expressing any opinion on the claim concerning reliefs and concession nor any part of this order shall be understood in that spirit.'

1. Objector

   Larsen & Toubro Limited (L&T)

   Objector class

   operational_creditor

   Ground

   Sought to be treated as a secured creditor (not operational creditor) in respect of its dues of Rs. 961,56,79,356 for supply and erection of the steel plant, claiming a charge under Section 55(4)(b) of the Transfer of Property Act, 1882

   Ia number

   C.A. No. 186(PB)/2018

   Disposition

   dismissed

   Effect on approval

   No effect on plan approval; L&T's status remains that of operational creditor; application dismissed with cost of Rs. 1 lakh, deposited in the account of the Corporate Debtor

2. Objector

   Bhushan Employees (represented by Mr. Rahul Sengupta)

   Objector class

   employee

   Ground

   Objected to eligibility of TSL and JSW Living Private Limited under Section 29A (Tata Steel UK's HSW Act conviction; TSL's alleged connection to undischarged insolvent Mr. C. Sivasankaran via Sterling Infotech's minority stake in Tata Teleservices Limited); alleged non-compliance with Sections 30(6)/31 and Regulation 38, incompleteness of the RP's application, and lack of an informed CoC decision; questioned RP's Code-of-Conduct compliance

   Ia number

   C.A. No. 217(PB)/2018; C.A. No. 237(PB)/2018

   Disposition

   dismissed

   Effect on approval

   Objections rejected as frivolous and for want of locus standi (no authorization from the ~5,546 employees produced); C.A. No. 217(PB)/2018 dismissed with cost of Rs. 1 lakh payable personally by Mr. Rahul Sengupta

3. Objector

   Bhushan Energy Limited (BEL)

   Objector class

   operational_creditor

   Ground

   Objected to termination of Power Purchase Agreements (PPA-1, PPA-2) under the Resolution Plan and sought recognition/provision of its claim (Rs. 1,14,59,83,000 as originally filed on 09.08.2017, later revised upward as re-filed on 20.03.2018) as an operational creditor, arguing its contractual rights are protected property under Article 300A of the Constitution

   Ia number

   Reply filed in C.A. No. 244(PB)/2018 (BEL's objections registered at Diary No. 3078/2018, RP's reply at Diary No. 1927/2018)

   Disposition

   dismissed

   Effect on approval

   Objection rejected as wholly frivolous, relying on Regulation 39(6) of the CIRP Regulations (consent of parties to agreements of a similar nature not required); PPA termination under the Resolution Plan allowed to stand

4. Objector

   Bhushan Employees

   Objector class

   employee

   Ground

   Sought a direction to the RP to decide their objections dated 22.02.2018 on the eligibility of the two resolution applicants, alleging no decision had been communicated

   Ia number

   C.A. No. 217(PB)/2018 (under Section 60(5)(a) & (c) of the Code)

   Disposition

   dismissed

   Effect on approval

   Same as the eligibility objections above - dismissed with costs; Tribunal noted the CoC had in fact considered and rejected the objections at its 10th meeting on 20.03.2018 pursuant to the Tribunal's earlier order dated 19.03.2018

1. Date

   2018-03-19

   What

   Tribunal (in C.A. No. 217(PB)/2018 / C.A. No. 237(PB)/2018) directed the RP to consider the objections of the Bhushan Employees regarding eligibility of the resolution applicants in accordance with law; the CoC thereafter deliberated on the objections at its 10th meeting on 20.03.2018

Applications

1. Ia number

   C.A. No. 176(PB)/2018

   Sections

   Sections 25(j), 43 to 51 and 66 of the Code

   Status

   pending

Transaction audit findings

RP appointed Deloitte Touche Tohmatsu India LLP as Forensic Consultant to identify suspect transactions (preferential, undervalued, extortionate credit and/or fraudulent) involving the Corporate Debtor under Sections 25(j), 43 to 51 and 66 of the Code ('Avoidable Transactions'); C.A. No. 176(PB)/2018 filed by the RP under Section 19(2) of the Code seeks reliefs including avoidance of suspect transactions identified by the Forensic Consultant; the Ex-Management is directed to cooperate in all respects during implementation of the resolution plan, with liberty granted to the Monitoring Agency to apply for further directions against the Ex-Management, its Directors or other officers if necessary

Conditions imposed

1. Condition

   The relief and concession set forth in Annexure-8 must abide by the directions issued in the order; the Monitoring Agency and Resolution Applicant-TSL may file appropriate applications before Public Authorities/Government Authorities, which shall be duly considered in accordance with law

   Addressed to

   Monitoring Agency / Resolution Applicant-TSL

2. Condition

   Ex-Management directed to cooperate in all respects during implementation of the resolution plan

   Addressed to

   Ex-Management, its Directors and other officers

Precedents cited

1. Case

   Standard Chartered Bank v. Directorate of Enforcement and Ors., (2005) 4 SCC 530

   Proposition

   A corporate entity may be prosecuted, but where imprisonment alone is the prescribed sentence, no sentence can be imposed on it since a company cannot be visited with a custodial sentence; the words 'imprisonment and fine' cannot be judicially read as 'imprisonment or fine'

2. Case

   Sube Singh and Ors. v. State of Haryana and Ors., 1989(1) SCC 235

   Proposition

   The word 'punishable' means deserving of, liable to, or capable of punishment - not that punishment must actually be imposed

3. Case

   Rakesh Kumar Paul v. State of Assam, (2017) 15 SCC 67

   Proposition

   Where no minimum or maximum sentence is prescribed, it is for the court to decide the sentence within the available range

4. Case

   Rajeev Chaudhary v. State (N.C.T.) of Delhi, (2001) 5 SCC 34

   Proposition

   Distinction between an offence 'punishable with imprisonment for two years or more' and one 'not exceeding two years'

5. Case

   Balco Employees Union (Regd.) v. Union of India, (2002) 2 SCC 333

   Proposition

   Employees adversely affected by a commercial/disinvestment decision must accept it as an incidence of service and cannot tinker with a plan that otherwise protects employee interests

6. Case

   Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407

   Proposition

   Relied on for the limited scope of the Adjudicating Authority's inquiry under Sections 30 and 31 of the Code (paras 33, 58, 59 cited)

7. Case

   Clutch Auto Limited, C.P.(IB) No. 15(PB)/2017, decided 15.02.2018 (Principal Bench)

   Proposition

   The commercial wisdom of the CoC and RP ought not to be interfered with; interference is the exception and approval is the rule

8. Case

   ICICI Bank Limited v. SIDCO Leathers Ltd., (2006) 10 SCC 452

   Proposition

   A right in property cannot be snatched even by an act of Parliament - cited by BEL for its Article 300A argument, ultimately not accepted

9. Case

   Indian Oil Corporation Limited v. Amritsar Gas Service and Ors., (1991) 1 SCC 533

   Proposition

   Commercial contracts are, by their nature, determinable even absent an express termination clause

10. Case

    Rajasthan Breweries Limited v. The Stroh Brewery Company, AIR 2000 Del 450

    Proposition

    Determinable contracts cannot be specifically enforced, per Section 14(1)(c) of the Specific Relief Act

Judicial observations

1. "...it cannot be concluded firstly that Sterling Infotech Private Limited qualifies as a 'connected person' or 'related party' or 'associated company'... Accordingly, it is held that the objection is frivolous and the same is hereby rejected." (p.67-68)
2. "...we find that Section 29A (d) does not provide for imposition of fine and therefore, it would not be applicable to the facts in the present case because a Corporate Entity cannot be subjected to any custodial sentence which is the only provision made by sub section (d) of Section 29A of the Code." (p.75)
3. "If the Resolution Applicant has found the terms of PPAs as onerous and it has been approved by the CoC then it is no ground for the BEL to argue that it is a constitution right conferred by the Article 300A and the same cannot be taken away without due process of law. The IBC Code provides for due process of law." (p.79)

Directives to third parties

Ex-Management directed to cooperate in all respects during implementation of the resolution plan; Monitoring Agency granted liberty to apply for further directions against the Ex-Management, its Directors or any other officers, if such necessity arises

1. Case number

   C.A. No. 244(PB)/2018

   Outcome line

   Application by the Resolution Professional for accepting the CoC-approved Resolution Plan of TSL is accepted; relief/concession in Annexure-8 to abide by the directions issued in the order

2. Case number

   C.A. No. 186(PB)/2018

   Outcome line

   Dismissed with cost of Rs. 1 lakh (Larsen & Toubro's claim to be treated as secured creditor rejected)

3. Case number

   C.A. No. 217(PB)/2018

   Outcome line

   Dismissed with cost of Rs. 1 lakh payable personally by Mr. Rahul Sengupta

4. Case number

   C.A. No. 176(PB)/2018

   Outcome line

   Ex-Management directed to cooperate in implementation; liberty granted to the Monitoring Agency to seek further directions against Ex-Management if necessary

5. Case number

   C.A. No. 237(PB)/2018

   Outcome line

   Objections raised by Bhushan Employees considered and rejected together with C.A. No. 217(PB)/2018

6. Case number

   C.A. No. 250(PB)/2018

   Outcome line

   IndusInd Bank's application for recording its affirmative vote on the CoC-approved resolution plan allowed vide order dated 28.03.2018

Companies named in the order

1. Bhushan Steel Limited

Order date

2018-05-15