Supreme Court Upholds JSW Steel's Resolution Plan for BPSL [Read Judgement]

JSW Steel's ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL) was denied by the Supreme Court on May 2, citing violations of Sections 30(2) and 31(2) of the Insolvency and Bankruptcy Code. The liquidation of BPSL was ordered by a bench consisting of Justice Bela M. Trivedi (who is now retired) and Justice Satish Chandra Sharma, overriding previous NCLT and NCLAT approvals.

According to the Court, the Committee of Creditors (CoC) did not act with appropriate business sense and did not defend the interests of creditors, and the Resolution Professional did not fulfill their obligations under the IBC and the CIRP Regulations. The bench further noted that, despite the absence of any legal obstacles, JSW had willfully failed to adhere to the resolution plan's terms for two years following its adoption. Additionally, the Court determined that JSW had misused the process and misrepresented itself before the CoC.

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The NCLT and NCLAT were also criticized by the Court for approving the scheme, and their orders from February 17, 2022, and September 5, 2019 were overturned. Citing Article 142 of the Constitution and Section 33(1) of the IBC, the Court ordered that BPSL be placed under liquidation.

Following a series of defaults that caused a severe financial crisis, BPSL is now a "healthy company" thanks to its acquisition by JSW Steel. For JSW, Senior Advocate Neeraj Kishan Kaul argued that the May 2 ruling sends "dangerous signals" as a legitimate resolution plan worth roughly Rs 20,000 crores that was accepted by the NCLT, CoC, and NCLAT has been thrown off after five years. In his challenge to the resolution plan, he also questioned the BPSL promoter's locus argument. If a violation occurs, it was maintained, only a creditor, not a promoter, whose wrongdoing caused the company to go into crisis, can contest it.

Speaking on behalf of the former BPSL promoters, Senior Advocate Dhruv Mehta primarily argued that JSW had failed to carry out the strategy as promised. According to Mehta, the promoters opposed BPSL's liquidation and preferred a new insolvency procedure. He emphasized that the CoC no longer exists and has no authority to review or alter a plan once it has been accepted by the adjudicating authority.

JSW Steel's senior advocate argued that (1) the SRA had not delayed the plan's execution and (2) the ED had persisted in dragging out the matter by pursuing criminal proceedings in spite of the NCLAT's ruling invalidating the temporary property attachment. He emphasized that the promoter's assets were only ordered to be initiated with the SRA (JSW Steel) following the Supreme Court's judgment in December 2024. He continued by saying that during those hearings, the CoC presented an affidavit stating that the plans' implementation had been delayed due to the ED cases.

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.

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JSW's plea for an open court hearing of the review case was granted by the two-judge panel consisting of Chief Justice of India BR Gavai and Justice Satish Chandra Sharma. Given the broad definition of "person aggrieved" in Section 62 of the Insolvency and Bankruptcy Code, the bench determined that the ex-promoters had the right to contest the NCLAT ruling. On the merits, however, the Court maintained the NCLAT ruling that authorized the resolution plan.

In order to revitalize and modernize the Corporate Debtor (CD-BPSL), the Successful Resolution Applicant (SRA-JSW) has made substantial investments. A "loss-making entity" has been turned into a successful one by the SRA, the Court observed. The Resolution Plan, which is being carried out by the SRA-JSW, has allowed thousands of workers to make a living because the Corporate Debtor is still operating as an ongoing concern.

The Court viewed that allowing the CoC or the former promoters to contend at this late stage would be "doing violence to the very intention with which the IBC was enacted." The Court agreed with the contention that the CoC's function would continue till the settlement plan was put into action.

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