SC Rejects Tata Steel Plea To Set It Free from Liabilities of Bhushan Steel: Report

Moneylife Digital Team 06 December 2022

The Supreme Court rejected an appeal filed by Tata Steel Ltd, seeking clearance from all liabilities related to the erstwhile Bhushan Steel Ltd, which it had acquired for Rs35,200 crore through the corporate insolvency resolution process in 2018, says a report. The company had challenged demand notices worth Rs346 crore issued by Uttar Pradesh (UP) government to Bhushan Steel before 2018.

In the report, Economic Times says, the apex court also noted that the Allahabad High Court (HC) had left the question of unjust enrichment open and no final adjudication had taken place on the matter.

Under the new management of Tata Steel, Bhushan Steel had moved the HC challenging various demand notices issued by the Uttar Pradesh (UP) government for over Rs346 crore towards commercial taxes, including entry tax and value-added tax (VAT) between 2007 and 2018.

The HC, which held that no amount was due and payable by Tata Steel, had left the question of unjust enrichment—raised by the state—open, saying this question cannot be decided in the petitions filed under Article 226 of the Constitution, which deals with the power of high courts to issue certain writs, the report says.

Tata Steel, however, argued that the apex court should decide the issue as it has to be a 'clean slate' for the new management.

Quoting the bench led by justice MR Shah, the newspaper says, "The special leave petition is dismissed. However, if any question or issue of unjust enrichment is raised, it will be open for Tata Steel to defend or oppose the same, and the defences available to the petitioner left open will be dealt in accordance with the law."

On 18 May 2018, Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, acquired a controlling stake of 72.65% in Bhushan Steel. The acquisition followed the approved resolution plan under the corporate insolvency resolution process (CIRP) of the Insolvency and Bankruptcy Code (IBC). Bhushan Steel was renamed as Tata Steel BSL Ltd.

In October this year, the apex court rejected an appeal of Bhushan Steel's erstwhile promoters, Neeraj Singal and Brij Bhushan Singal. The Singals were seeking to retain their 2% shareholding in the company after its takeover by Tata Steel.

The bench led by justice Shah says, "If the submission on behalf of the Singals, as canvassed before the National Company Law Appellate Tribunal (NCLAT) and before this court is accepted in that case, according to us, the resolution plan shall not be workable at all."

After the takeover, Bamnipal Steel wrote to the Singals asking them to sell their shares. However, there was no response. Tata Steel then approached the national company law tribunal (NCLT), which asked the erstwhile promoters to sell their 2.34% stake in Bhushan Steel to the Tatas.

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