Supreme Court Rejects JSW's Resolution Plan For Bhushan Steel As Illegal, Orders Liquidation; Says CoC Acted Without Commercial Wisdom

In a significant judgment, the Supreme Court on Friday (May 2) rejected the Resolution Plan submitted by JSW Steel for Bhushan Steel and Power Ltd.

Holding that the Resolution Plan of JSW was illegal and contrary to the provisions of the Insolvency and Bankruptcy Code(IBC), a bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma stated that the Committee of Creditors(CoC) should not have accepted it. The bench also faulted the National Company Law Tribunal for approving the Resolution Plan.

Since JSW's resolution plan was rejected, the Court ordered the liquidation of Bhushan Steel and Power Ltd.

Justice Bela Trivedi pronounced the key conclusions of the judgment as follows.

1. The Resolution Professional had utterly failed to discharge his statutory duties, contemplated under the IBC and CIRP Regulations, during the course of the entire Corporate Insolvency Resolution Process (CIRP) of the corporate debtor.

2. The CoC had failed to exercise its commercial wisdom while approving the Resolution Plan of JSW, which was in absolute contravention of the mandatory provisions of the IBC and CIRP regulations. The CoC also failed to protect the interests of the creditors by taking contradictory stands before the Supreme Court and accepting the payments from JSW without any demurrer and supporting JSW's ill-motivated plan against the interests of the creditors.

3. JSW, even after the approval of its plan by NCLAT, wilfully contravened and not complied with the terms of the Resolution Plan for a period of two years, which frustrated the very object of the IBC and consequently vitiated the CIRP proceedings of BSPL.

4. The resolution plan of JSW, as approved by the CoC, did not conform to the requirements in Section 30(2) of the IBC, the same being in flagrant violation of the express provisions of the IBC and CIRP regulations. The said Resolution Plan was liable to be rejected by the NCLT under Section 31(2) at the very first instance.

5. The impugned judgment passed by the NCLAT is perverse and corum-non-judis and is liable to be set aside.

Conclusions

The conclusions of the judgment are as follows :

The judgment and orders dated 05.09.2019 and 17.02.2022 passed by the NCLT and the NCLAT are quashed and set aside.

The Resolution Plan of JSW, as approved by the CoC, stands rejected, it being not in conformity with Section 30(2) IBC read with Section 31(2)  of the IBC.

In exercise of the powers under Section 33(1) IBC and Article 142 of the Constitution of India, the NCLT is directed to initiate liquidation proceedings against corporate debtor BPCL under Chapter III of IBC.

The payments made by JSW to financial creditors and operational creditors, as also the equity contributions if any infused under the garb of execution of the Resoution Plan,  will be subject to the outcome of the present set of appeals and shall be dealt with by the parties as per the statement given by Senior Advocate AM Singhvi, appearing for the CoC, recorded in the order dated 06.03.2020.  The statement, as recorded in the order, was : "Dr. A.M. Singhvi, learned senior counsel appearing for the Committee of Creditors states that in case he receives money, he will return the said amount within two months, if the appeal succeeds."

The Court held that JSW secured the bid by making misrepresentations before the CoC. Also, after the approval of the Resolution Plan, it did not act on it for two years, though there was no legal impediment. The Court said that it cannot condone the illegal activities and abuse of process done by JSW. 

The Court delivered the judgments allowing the appeals filed by operational creditor Kalyani Transco, Sanjay Singhal (promoter of BSPL), creditors Jaldhi Overseas Pvt Ltd and CJ Darcl Logistics.

Since the Court rejected JSW's Resolution Plan, it did not express anything on the claims of the State of Odisha with respect to electricty and tax dues, and accordingly disposed of the State's appeal.

The CIRP proceedings were triggered against BPSL at the instance of Punjab National Bank in 2017. JSW Steel's resolution plan for acquiring Bhushan Power & Steel Ltd (BPSL) involved a total payment of ₹19,700 crore. This comprised ₹19,350 crore allocated to financial creditors and ₹350 crore to operational creditors, against their claims of ₹733 crore

Case : Kalyani Transco vs M/s Bhushan Steel and Power Ltd and connected appeals | C.A. No. 1808/2020

Citation : 2025 LiveLaw (SC) 524

Click here to read the judgment

Appearances: 

For Sanjay Singhal / Promoter of BPSL - Sr. Adv. Dhruv Mehta, Adv. Soayib Qureshi

Kalyani Transco (Operational Creditor) - Adv. Sandeep Bajaj, Adv. Devansh Jain & Adv. Mayank Biyani

Erstwhile Resolution Professional - Sr. Adv. Shyam Divan,

CoC - Dr. Abhishek Manu Singhvi, Sr. Adv

JSW/SRA - Sr. Adv. Niraj Kishan Kaul