JSW Faltered In Executing Resolution Plan; Need Fresh CIRP, Not Liquidation Of BPSL : Ex-Promoter Tells Supreme Court

The Supreme Court today heard the appeals against the resolution plan of JSW Steel for Bhushan Power and Steel Ltd (BPSL).

The bench of CJI BR Gavai and Justices SC Sharma and K Vinod Chandran heard the matter. Last week, the bench, in exercise of review power, had recalled the May 5 judgment which had rejected JSW's resolution plan and decided to hear the matter afresh. Notably, the bench of Justices  Bela Trivedi and SC Sharma set aside the resolution plan on 5 main grounds and directed the liquidation of BPSL.  

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. 

As per the Resolution Plan, JSW was to infuse Rs. 8000 crores of equity as working capital. Rs. 19,750 Crores was the total amount offered in the Resolution Plan. Out of this, 350 crores were to be given to the operational creditors, while the financial creditors would get 19,350 crores upfront. 

Mehta stressed that, contrary to the said plan, JSW only infused 100 crores of equity and gave only Rs. 540 crores as an upfront payment to Financial Creditors; the payment to Operational Creditors was also delayed by 900 days. 

The Counsel also emphasised that it was incorrect to stall the execution of the resolution plan because the promoters' properties were provisionally attached by the Enforcement Directorate (ED) as the attachment order was stayed by the NCLAT. He added that the CoC had done its prior due diligence and the plan was supposed to be unconditional.  

On the issue of whether the promoters have a locus to challenge the plan, Mehta relied on S. 61 and S.62 of IBC,  as the promoters are directly affected by the plan in question, which was approved by the NCLT. 

The provisions deal with appeals against the orders of the NCLT/NCLAT (including orders approving resolution) filed by "any person aggrieved".

Solicitor General Tushar Mehta, appearing for the CoC, submitted that he would be emphasising two main aspects (1) What is the scope of the present appeal? (2) What is the scope of the present appeal at the behest of the present appellants (promoters of BPSL) and what would be their locus? 

The SG submitted that the CoC supported the review petition and the resolution plan passed, but had reservations on the promoter's role in deciding the terms of the plan. 

The SG contended that "the commercial wisdom (of the CoC) can never be interfered with. The earlier regimes, SARFAESI, and Debt Recovery, all failed because they were debtor-driven. Now this (IBC) is creditor-driven."

He stressed that promoters should not have a say in the terms of the Resolution Plan, considering that it is because of them that the BPSL faltered. 

"Who are these people? They have defalcated the company's money to the tune of thousands of crores, between 15000 to 20000 crores. They are facing severe criminal charges against them, and in which way they were entering- whether this was rightly given, whether the equity was infused- it's none of their business in law." 

Sr Advocate Balbir Singh, appearing for a Singaporean Shipping Company, briefly submitted that before the S.7 application for initiating CIRP against BPSL was allowed, some disputes arose between the company and BPSL. That resulted in international arbitral awards, which the Singapore Court upheld. On the date of the initiation of CIRP, the company incurred an award liability of S.152 crores. 

The company was subsequently allowed to be part of the CoC as an operational creditor who was to be given 50% of its claim amount. However, subsequently, the company's nature of claim was changed by the Resolution Professional and the SRA to be a contingent creditor and only get 10% of the claim amount. 

Singh contended that under Chapter 4 of the IBC Regulations, the SRA(Succesful Resolution Applicant) cannot change the nature of a creditor's claim; it can only allocate the sum to be given, and the CoC finally takes a decision upon it. 

ASG KM Natraj, appearing for the State of Odisha, submitted that the Odisha Government was approaching the Court only with respect to two appeals relating to the entry tax liability that are to be paid, as well as the pending electricity dues. 

The ASG submitted that the Resolution Professional was aware of the books of account and acknowledged these pending liabilities. 

The bench dismissed both appeals, for the first appeal on tax entry liabilities, it noted that the Government did not file its claim before the CoC within the prescribed time and in the second appeal on electricity dues, the  State Government accepted the RP's order of Rs. 13 Crores as claims and did not challenge it before the NCLAT. 

On the last hearing, the Court prima facie observed 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.

Sr Advocate NK Kaul was also present for JSW.

The hearing will continue tomorrow. 

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. 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.