Bhushan Power & Steel Ltd. Vs Securities & Exchange Board of India (Securities Appellate Tribunal, Mumbai)
Summary: The Securities Appellate Tribunal, Mumbai allowed the appeal of Bhushan Power & Steel Ltd. and quashed the Adjudicating Officer’s order dated April 13, 2022 insofar as it related to the appellant. The order had imposed a penalty of Rs. 46 lakh jointly and severally upon the appellant and 22 other noticees under Section 15HA of the SEBI Act for alleged violation of the PFUTP Regulations. The allegation was that the appellant was connected with Unisys Softwares and Holding Industries Ltd. through fund transfers and acted as a conduit in an alleged fraudulent preferential allotment scheme. Before SEBI issued its show cause notice dated August 5, 2019, Punjab National Bank had already initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016; NCLT admitted the petition and granted a moratorium under Section 14 on July 26, 2017.
A resolution plan filed on February 8, 2018 was approved by NCLT on September 5, 2019 and the appeal against that approval was dismissed by NCLAT on February 17, 2020. SAT held that the proceedings initiated pursuant to SEBI’s show cause notice were wholly illegal and contrary particularly to Sections 14 and 31 of the IBC. Relying upon Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta, SAT reiterated the clean-slate principle that a successful resolution applicant cannot subsequently be confronted with undecided claims. SAT also followed its earlier decisions in Monnet Ispat and Energy Ltd. vs. SEBI, Alok Industries Ltd. vs. SEBI, Raj Oil Mills Ltd. vs. SEBI and ArcelorMittal Nippon Steel India Ltd. vs. SEBI. The Tribunal further examined Section 32A, which provides for cessation of the corporate debtor’s liability for prior offences after approval of a qualifying resolution plan involving change in management or control.
