SG Requests Supreme Court To Sustain Observation In JSW-BPSL Judgment That NCLT Cannot Review ED's Actions

During the hearing of the Bhushan Power & Steel Insolvency matter, Solcitor General of India Tushar Mehta, appearing for the Committee of Creditors of BPSL, requested the Supreme Court to sustain the observations in the May 5 Judgment that NCLAT/NCLT has no jurisdiction to review the actions taken by the Enforcement Directorate under the Prevention of Money Laundering Act.  

The bench of CJI BR Gavai and Justices SC Sharma and K Vinod Chandran was hearing the appeals challenging the resolution plan of JSW Steel for Bhushan Power and Steel Ltd (BPSL), which are being heard afresh after the Court recalled the May 5 judgment, which had rejected JSW's resolution plan for BPSL.

In the May 5 decision, the bench emphatically stated that the National Company Law Tribunal (NCLT) or the National Company Law Appellate Tribunal (NCLAT) cannot review the actions taken by statutory authorities under other laws. 

The SG submitted that while he supported the resolution plan by JWS Steel, the observations regarding the powers of NCLAT/NCLT in relation to the pending ED cases against the ex-promoters of BPSL should be sustained. The SG submitted that he supported the judgment to the extent of its holding that NCLT cannot interfere with orders passed under the PMLA.

However, CJI BR Gavai replied that the Court would leave that issue of law open for now. SG replied that he would leave it to the discretion of the Court.

Notably, the NCLAT held that in view of Section 32A(1)(2), the Directorate of Enforcement/Investigating Agencies did not have the powers to attach assets of the Corporate Debtor, once the Resolution Plan had stood approved, and that the criminal investigations against the Corporate Debtor also would stand abated. The NCLAT also declared that the attachment of assets of Corporate Debtor by the ED was illegal or without jurisdiction.

Criticising the interference made by the NCLAT with the ED's investigation, the bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma, in the May 5 Judgment, observed :

"In this regard, it is pertinent to note that the NCLT and NCLAT are constituted under Section 408 and 410 of the Companies Act, 2013 and not under the IBC. The jurisdiction and powers of the NCLT and NCLAT are well circumscribed under Section 31 and Section 60 so far as NCLT is concerned, and under Section 61 of IBC so far as the NCLAT is concerned. Neither the NCLT nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of Public Law."

When the NCLT could not exercise the powers of judicial review falling outside the purview of the IBC, or falling within the purview of public law, the NCLAT also, being an Appellate Authority under Section 61 over the orders passed by the NCLT, could not exercise any power or jurisdiction beyond Section 61 of IBC, the Court stated.

"The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA," the Court stated.

The Court held that the observations made and the findings recorded by the NCLAT with regard to the provisional attachment order passed by the ED as "coram non judice", as being made without any authority of law and without jurisdiction.

Case no. – KALYANI TRANSCO Vs MS BHUSHAN POWER AND STEEL LTD.| C.A. No. 1808/2020 and connected matters