Lenders, JSW Steel differ over Bhushan Power funds recovery

New Delhi: Banks want compensation for wrongful losses caused to Bhushan Power and Steel (BPSL) under its former promoter Sanjay Singhal, according to people familiar with the matter.

In a lawsuit filed with the National Company Law Tribunal (NCLT), banks claimed they are the rightful recipients of any recoveries realised from counterparties who benefited from wrongful transactions that resulted in losses to the company. However, JSW Steel argued before the NCLT that the monies recovered should be retained by BPSL.

These transactions were identified during an audit and pertain to a period prior to commencement of BPSL's insolvency proceedings in 2017.


BPSL's resolution professional had flagged the transactions in applications filed with the NCLT in 2019. However, the lawsuits were not seriously pursued until early 2024.

The losses resulted from transactions such as undervalued sale of land, write-offs of capital advances and misreporting of stock. Recoveries from such deals are pegged at Rs 3,000 crore, said people familiar with the claims filed at the NCLT.

The audit captured such transactions in four categories - preferential, undervalued, fraudulent and extortionate - and reported them to the committee of creditors during BPSL's insolvency proceedings.

Those familiar with the suspect transactions said they include the sale of a land parcel in Chennai and capital advances made to suppliers that were written off by the company.

The Supreme Court on May 2 struck down JSW Steel's 2019 acquisition of BPSL and ordered the company's liquidation citing various non-compliances. It subsequently asked for status quo to be maintained on its liquidation proceedings after JSW Steel approached the court seeking a pause in the liquidation, arguing it would adversely affect banks and workmen.

JSW Steel did not comment on the matter.

Mital & Mital advocates, who are representing the lenders, did not respond to ET's queries.

According to people familiar with the matter, JSW Steel had initially made an allowance for the benefits of the recoveries to go to the banks, once they were realised by BPSL. This was clarified to the banks in a letter from JSW Steel's management in October 2018, in which the benefits were referred to as "pass through monies". However, JSW Steel had set an expiry date for the banks to avail the benefits. The steelmaker has claimed that the expiry date has lapsed and that now BPSL is the rightful beneficiary of the sums realised through the recoveries, according to the people.

The banks had also claimed in an affidavit in the Supreme Court that they were entitled to compensation and interest for the delay by JSW Steel in executing the resolution plan for BPSL.