In a landmark ruling on December 18, 2024, the Supreme Court quashed the Enforcement Directorate's (ED) notice against JSW Steel (𝘦𝘢𝘳𝘭𝘪𝘦𝘳 𝘔/𝘴 𝘑𝘚𝘞 𝘐𝘴𝘱𝘢𝘵 𝘚𝘱𝘦𝘤𝘪𝘢𝘭 𝘗𝘳𝘰𝘥𝘶𝘤𝘵𝘴 𝘓𝘪𝘮𝘪𝘵𝘦𝘥), the successful resolution applicant for Monnet Ispat and Energy Ltd. The court determined that the ED's demand for payment of penalties related to the Foreign Exchange Management Act (FEMA) was not maintainable against JSW Steel, which had acquired Monnet Ispat through a legally sanctioned resolution plan.
The ruling emphasized that under Section 32A of the Insolvency and Bankruptcy Code (IBC), successful resolution applicants are insulated from liabilities arising from actions taken by the corporate debtor prior to their acquisition. Once a resolution plan is approved, statutory dues existing before that approval cannot be pursued against new owners. This decision aligns with previous judgments, including the Ghanshyam Mishra case, which reinforced that all creditors must adhere to an approved resolution plan.
This judgment is expected to bolster investor confidence in acquiring distressed assets, as it clarifies that successful bidders will not face claims from statutory authorities for past liabilities. The ruling underscores the importance of maintaining the integrity of the resolution process, allowing companies like JSW Steel to focus on revitalising acquired businesses without the burden of historical legal issues.
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