'Art 142 Used To Do Injustice' : Supreme Court Recalls Judgment Which Rejected JSW's Resolution Plan For Bhushan Power & Steel

The Supreme Court on Thursday (July 31) made a prima facie observation that its May 2 judgment, which rejected the resolution plan of JSW Steel for Bhushan Power and Steel Ltd (BPSL) and directed the liquidation of BPSL, required a review as it was contrary to the law laid down in various precedents.

A bench of Chief Justice BR Gavai and Justice Satish Chandra Sharma therefore recalled the judgment and decided to hear the matter (appeal challenging the resolution plan) afresh. The bench kept open all the arguments of the parties for fresh hearing next Thursday.

The bench observed in its order as follows :

"Prima facie, we are of the view that the impugned judgement does not correctly consider the legal position as has been laid down by a catena of judgements. 

Apart from that, it is submitted that various incorrect factual aspects have been taken into consideration. It is also submitted by learned Solicitor General and Mr. Kaul that the arguments which were not advanced were also considered while delivering the judgment. Though this position is disputed by the learned senior counsel Dhruv Mehta, appearing on behalf of the respondent.

We therefore think that this is a fit case wherein the judgment under review needs to be recalled and the matter needs to be considered afresh. So needless to say that while we are allowing the review, we keep all the questions available to both parties open to be argued at the stage of hearing."

As soon as the matter was taken, the bench expressed its inclination to allow the review petition, as the judgment did not appear to be in consonance with the settled precedents.

"Prima facie we are inclined to allow the review. We will give a full fledged hearing but prima facie it appears that the view is not in consonance with earlier settled decisions. We will not go into any other documents, just the judgement," CJI BR Gavai said.

CJI added that Justice Satish Chandra Sharma (one of the judges who passed the impugned judgment) has also agreed for the review. "Yesterday I had a discussion with my learned brother (J Sharma) who was gracious enough to admit that it requires reconsideration."

CJI stressed that the ground realitiies, such as the investment of nearly Rs 20,000 crores made by JSW as well as the livelihood of about 25,000 workers, need to be taken into account.

"We also have to take into account the ground realities....25,000 people cannot be thrown on to the road. Article 142 has to be utilised to do complete justice not to do injustice to 25000 workers" the CJI commented.

CJI also pointed out that as per settled precedents, the commercial wisdom of the Committee of Creditors cannot be interfered with lightly, especially when it has been concurrently upheld both by the NCLT and the NCLAT.

Solicitor General of India Tushar Mehta for the Committee of Creditors supported the review and submitted that the BPSL was a company which went into serious financial crisis because of various defaults and now, it is a "healthy company" because of the acquisition by JSW Steel. However, the Supreme Court, in exercise of Article 142 powers, ordered the liquidation, for certain minor violations, SG said. SG added that the the timeline to submit the resolution plan, the breach of which was flagged in the judgment was a serious violation, is extendable. Even if there is a breach of the timeline, is it so gross a violation so as to repudiate a resolution plan approved by the Committee of Creditors, SG asked.

"Suppose for some justifiable reason which cannot be attributed to the parties, the timeline is breached. Would the breaking of the timeline be so fatal that a successfully implemented plan can be set aside and a direction be issued under 142 to liquidate a company which has been revived in these 5 years?" SG asked. He highlighted that the JSW had to take loans from other creditors to infuse the funds for the BPSL's revival.

Senior Advocate Neeraj Kishan Kaul, for JSW, submitted that the judgment sends "dangerous signals" because a valid resolution plan of about Rs 20,000 crores, approved by the CoC, NCLT and the NCLAT, has been thrown off after five years. He also questioned the locus stand of the promoter of the BPSL in challenging the resolution plan. If at all there is an violation, only a creditor can challenge it, and not a promoter, because of whose misdeeds the company went into crisis, Kaul argued.

"It will have a devastating effect on the IBC. And look at the fight of an SRA who invests almost 30,000 crores in equity and is now fighting this litigation. The plan has been implemented well. This is a fit case for your lords to recall the order and hear the matter afresh. There is clear, glaring, palpable error, statutory provisions and law have been ignored. Wrong facts have been taken into account which should not have been taken into account which were not argued or pleaded. Every ground on which the review is entertained is satisfied in the matter," Kaul submitted.

Senior Advocate Dhruv Mehta, for the promoter of the BPSL, opposed the arguments.

Background

On May 2, the Supreme Court rejected JSW Steel's ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL), holding it to be in violation of Sections 30(2) and 31(2) of the Insolvency and Bankruptcy Code. A bench of Justice Bela M Trivedi (since retired) and Justice Satish Chandra Sharma directed liquidation of BPSL, setting aside earlier approvals granted by the NCLT and NCLAT.

The Court found that the Resolution Professional failed to discharge duties under the IBC and the CIRP Regulations, and the Committee of Creditors (CoC) did not exercise proper commercial wisdom and failed to protect creditor interests. Further, the bench observed that JSW had wilfully not complied with the terms of the resolution plan for two years after its approval, though there were no legal impediments. The Court also held that JSW had made misrepresentations before the CoC and abused the process.

The Court held that the CoC ought not to have accepted the plan. The Court also criticised the NCLT and NCLAT for approving the plan and set aside their orders dated September 5, 2019, and February 17, 2022. Invoking Section 33(1) of the IBC read with Article 142 of the Constitution, the Court directed the initiation of liquidation proceedings against BPSL

On May 26, a bench of Justice BV Nagarathna and Justice Satish Chandra Sharma ordered status quo on liquidation proceedings before the NCLT, after JSW Steel indicated its intent to file a review petition, in order to avoid complications while the limitation period for filing review remained open. Following this, JSW, Punjab National Bank, and other creditors moved review petitions.

Subsequently, on July 29, a bench of Chief Justice of India BR Gavai and Justice Satish Chandra Sharma accepted JSW's request for an open court hearing of the review petition. The Court issued notice on the review petitions filed by Punjab National Bank, JSW, and certain other creditors.

Case no. – R.P.(C) No. 1432/2025

Case Title – Punjab National Bank and Anr. v. Kalyani Transco and Ors. 

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