Supreme Court Upholds JSW Steel's Resolution Plan For Bhushan Power & Steel, Says JSW Can't Be Penalised For Reviving Loss-Making Entity
The Supreme Court today upheld the resolution plan of JSW Steel Ltd for Bhushan Power and Steel Ltd (BPSL) and rejected the objections raised by the ex-promoters and certain creditors of BPSL.Allowing the appeals after JSW has revived the loss-making entity by infusing huge amounts of funds will lead to "diastrous results", the Court said.A bench comprising Chief Justice of India BR...
The Supreme Court today upheld the resolution plan of JSW Steel Ltd for Bhushan Power and Steel Ltd (BPSL) and rejected the objections raised by the ex-promoters and certain creditors of BPSL.
Allowing the appeals after JSW has revived the loss-making entity by infusing huge amounts of funds will lead to "diastrous results", the Court said.
A bench comprising Chief Justice of India BR Gavai, Justices SC Sharma and K Vinod Chandran had re-heard the appeals against the resolution plan after recalling the judgment delivered by a two-judge bench in May which invalidated the resolution plan and ordered the liquidation of BPSL.
The judgment authored by CJI Gavai held that the ex-promoters have the locus to challenge the NCLAT judgment, given the wide meaning to be given to the term "person aggrieved" in Section 62 of the Insolvency and Bankruptcy Code. However, on merits, the Court upheld the NCLAT judgment, which approved the resolution plan.
Delay in implementation cannot be the sole reason to invalidate the resolution plan, the Court held. The Court held that the delay was attributable to various other factors, including proceedings under the Prevention of Money Laundering Act. The conduct of the appellants was also criticised, saying that they were making attempts to stall the resolution process.
The Court also held that the commercial wisdom exercised by the Committee of Creditors has to be given primacy and should not be lightly interfered with.
JSW cannot be penalised for reviving a loss-making entity : SC
The Court noted that the Successful Resolution Applicant (SRA-JSW) has invested huge amounts to revive and modernise the Corporate Debtor (CD-BPSL). The SRA has converted a "loss-making entity" into a profitable venture, the Court noted. Thousands of employees have been earning their livelihood on account of the Corporate Debtor running as an on-going concern due to the Resolution Plan being implemented by the SRA – JSW.
If the resolution plan approved by both the NCLT/NCLAT is interfered with at a belated stage, it will open a "Pandora's box", which will affect the sanctity of the resolution process.
"As such, the very purpose for which the IBC was enacted—namely, to ensure that the Corporate Debtor continues as a going concern—has not only been achieved, but the Corporate Debtor has been transformed from a loss- making to a profit-making entity. If, after the implementation of the Resolution Plan, the SRA – JSW has converted a loss- making entity into the one making profits, can it be penalised for that? Suppose if instead of the Corporate Debtor being converted into a profit-making entity, the losses would have increased, can the Corporate Debtor claim refund of the amount paid? If we permit the claim not to be part of the Resolution Plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a Pandora's Box and the very purpose of the IBC providing sanctity to the finality of the Resolution Plan duly approved would stand vitiated."
The Court held that permitting the erstwhile promoters or the CoC to raise an argument at such a belated stage would amount to "doing violence to the very intention with which the IBC was enacted."
Notably, the Court also accepted the argument of the Solicitor General of India that the CoC's role will remain till the implementation of the resolution plan.
On July 31, the bench led by CJI Gavai, in exercise of review power, had recalled the May 2 judgment delivered by the bench of Justices Bela Trivedi and SC Sharma which rejected the JSW resolution plan.
Solicitor General of India Tushar Mehta for the Committee of Creditors 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. SG added that the the timeline to submit the resolution plan, the breach of which was flagged in the judgment as a serious violation, is extendable. Even if there is a breach of the timeline, it is not so gross a violation so as to repudiate a resolution plan approved by the Committee of Creditors.
Senior Advocate Neeraj Kishan Kaul, for JSW, submitted that the May 2 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.
Sr Advocate Dhruv Mehta, appearing for the erstwhile promoters of BPSL, mainly contended that JSW had faltered in executing the plan as promised. Mehta submitted that the promoters wanted the Insolvency process to happen afresh and did not favour the liquidation of BPSL. He stressed that once a plan is approved by the Adjudicating Authority, the CoC ceased to exists and does not have the power to revisit or modify it.
Sr Advocate NK Kaul for JSW Steel submitted (1) there was no delay on the part of the SRA as far as the implementation of the plan is concerned; (2) despite NCLAT's order setting aside the provisional attachment of properties, ED was persistent in prolonging the issue by filing criminal cases.
He stressed that only after the Supreme Court's order in December 2024, the promoter's assets were directed to be instituted with the SRA (JSW Steel). He added that during those proceedings, CoC on affidavit submitted that because of the cases filed ED, the implementation of the plans has been delayed.
Kaul also submitted that the ex-promoters do not have a locus in having a say in the plan. He also informed the Court that the present resolution plan is the second biggest plan proposed in the history of IBC in this country after the case of CoC of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors. In the Essar Steel case, the Resolution Plan involved 42,000 crores as upfront payment and an equity infusion of Rs 8000 crores.
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 the 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. On July 31, the May 2 judgment was recalled and the appeal was posted for re-hearing.
Case no. – KALYANI TRANSCO Vs MS BHUSHAN POWER AND STEEL LTD.| C.A. No. 1808/2020 and connected matters
Citation : 2025 LiveLaw (SC) 954
Click Here To Read/Download Judgment
Appearances: For Appellant(s) : Mr. Dhruv Mehta, Sr. Adv. Mr. Sandeep Bajaj, Adv. Mr. Soayib Qureshi, Adv. Mr. Anubhav Ray, Adv. Ms. Chetna Alagh, Adv. Ms. Anchal Kushwaha, Adv. Mr. Mayank Biyani, Adv. Ms. Ranjeeta Rohatgi, AOR Mr. Nikhil Sabri, Adv. Mr. Aman Qayoom Wani, Adv. Ms. Shrika Gautam, Adv. Mr. Arjun Asthana,Adv. Mr. Sidhartha Sharma,Adv. Ms. Shubhangi Gupta,Adv. Mr. Nachiket Chawla,Adv. Ms. Prachi Sharma,Adv. Mr. Arup Banerjee, AOR Mr. Diwakar Maheshwari,Adv. Ms. Pratiksha Mishra,Adv. Mr. Mayank Kshirsagar, AOR Mr. Sandeep Bajaj, Adv. Mr. Mayank Biyani, Adv., AOR Mr. Manu Beri, Adv. Mr. Varun Varma, Adv. Ms. Kudrat Mann, Adv. Mr. Upmanyu Tewari, AOR
For Respondent(s) : Mr. Tushar Mehta, Solicitor General Mr. L. Vishwanathan, Adv. Mr. Raunak Dhillon, Adv. Mr. Uday Khare, Adv. Ms. Aishwarya Gupta, Adv. Ms. Isha Malik, Adv. Mr. Nihaad Dewan, Adv. Mr. Anchit Jasuja, Adv. Ms. Bhawna Lakhina, Adv. Mr. Bhuvan Kapur, Adv. Mr. Aman Mehta, Adv. Mr. Neeraj Kishan Kaul, Sr. Adv. Mr. Gopal Jain, Sr. Adv. Ms. Nandini Gore, Adv. Mr. Rajendra Barot, Adv. Ms. Tahira Karanjawala, Adv. Mr. Vivek Shetty, Adv. Mr. Suharsh Sinha, Adv. Ms. Swati Bhardwaj, Adv. Mr. Akarsh Sharma, Adv. Ms. Manvi Rastogi, Adv. Mr. Pranav Garg, Adv. Ms. Sherna Doongaji, Adv. Mr. Akilesh Menezes, Adv. Mr. Harsh Sethi, Adv. Ms. Isha Patil, Adv. Mr. Deepak Joshi, Adv. Ms. Dhanya S. Krishnan, Adv. Mr. Varun Tyagi, Adv.
Mr. Tushar Mehta, Solicitor General Mr. K.M. Nataraj, A.S.G. Mr. Sudarshan Lamba, AOR Ms. Kanu Agrawal, Adv. Mr. Mohd. Akhil, Adv. Mr. Saurav Roy, Adv. Mr. Vinayak Sharma, Adv. Mr. Pratyush Shrivastava, Adv. Mr. S. S. Shroff, AOR Ms. Misha, Adv. Mr. Vaijayant Paliwal, Adv. Ms. Charu Bansal, Adv. Ms. Kirti Gupta, Adv. Mr. Soayib Qureshi, AOR Mr. Soumya Dutta, AOR Mr. Mukesh Kumar Maroria, AOR Dr. Vinod Kumar Tewari, AOR