SAT Order in the matter of Bhushan Power and Steel Limited

JSA advised and successfully represented Bhushan Power and Steel Limited (“BPSL”) before the Hon’ble Securities Appellate Tribunal (“SAT”) against an adjudication order dated April 12, 2022 (“SEBI Order”) passed by the Securities and Exchange Board of India (“SEBI”) against BPSL and others. Vide its order dated June 28, 2023 (“SAT Order”), SAT set aside the SEBI Order qua BPSL.

In terms of the SEBI Order, BPSL and 22 other entities were directed to pay a penalty for violating provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. SEBI held that one of the noticees to the proceedings (Unisys Softwares and Holding Industries Ltd. (“Unisys”)) had made a preferential allotment of shares and had given financial assistance to other noticees to subscribe to such shares. It was held that BPSL was one of the conduits through which the fund transfer had taken place which allowed Unisys to fund its preferential allotment.

An appeal was filed on behalf of BPSL before SAT and it was urged that BPSL had undergone a Corporate Insolvency Resolution Process (“CIRP”) under the provisions of the Insolvency Bankruptcy Code, 2016 (“IBC”) and that the successful resolution applicant could not be foisted with liability on account of violations committed before the initiation of insolvency proceedings in accordance with the ‘clean slate principle’ laid down by the Supreme Court in the matter of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta [(2020) 8 SCC 531].

SEBI contended that it was entitled to issue the show cause notice and was entitled to crystalise its claim and file the same before the resolution professional even after passing of an order of moratorium under Section 14 or a resolution plan being approved under Section 31.

The SAT Order sets aside the SEBI Order while rejecting SEBI’s contention. It was held that once a resolution plan had attained finality, Sections 31 and 32A of the IBC would come into play and no order could have been passed against BPSL by virtue of the ‘clean slate principle’.

Our Securities Litigation Team comprised Partner – Vikram Raghani, Partner – Pulkit Sukhramani, Senior Associate – Vidhi Jhawar, and Associate – Deepank Anand.

Our Restructuring and Insolvency Team Partner – Varghese Thomas and Partner – Aditi Deshpande.