Supreme Court orders status quo on Bhushan Steel liquidation amid JSW plea

JSW has until June 2 to file a review of the Supreme Court's May 2 judgment, which had rejected its ₹19,700 crore resolution plan and ordered the liquidation of the debt-laden company

The Supreme Court on Monday ordered a status quo on the liquidation proceedings of Bhushan Power and Steel Ltd (BPSL), temporarily halting action by the National Company Law Tribunal (NCLT) following a petition filed by JSW Steel.

 

This move offers JSW a window to seek review of the apex court’s May 2 judgment, which had rejected its ₹19,700 crore resolution plan and ordered liquidation of the debt-laden company.

 

The order came after Sanjay Singhal, former promoter of BPSL, approached the National Company Law Tribunal (NCLT) seeking liquidation based on the apex court’s earlier judgment.

 

The Supreme Court noted that the “status quo needs to be maintained in the interest of justice", meaning no further action on liquidation will proceed until the review petition, expected within 30 days under court rules, is resolved.

 

JSW has until June 2 to file the review. Solicitor General of India Tushar Mehta, appearing for the Committee of Creditors (CoC), proposed deferring the NCLT proceedings to June 10 as a middle ground. JSW and Corporate Debtor, BPSL were led by a team of Karanjawala & Co.

 

“JSW has the right to file a review. We are not expressing any opinion on the merits,” the top court said, as quoted by Live Law. 

 

Bhushan Power insolvency, resolution plan, and SC ruling

BPSL, one of the first major insolvency cases initiated under the Insolvency and Bankruptcy Code (IBC) in 2017, had defaulted on dues exceeding ₹45,000 crore. JSW Steel acquired BPSL through the IBC process in 2019. The NCLT had approved the resolution plan on September 5, 2019.

 

However, five years later, on May 2, the Supreme Court ordered the liquidation of Bhushan Power and Steel Ltd upon ruling JSW's resolution plan non-compliant with Sections 30(2) and 31(2) of the IBC. Sections 30(2) lists what a resolution plan must include, like covering process costs and payments to operational creditors, while Section 31(2) allows approval only if the plan meets Section 30’s conditions.  

In its ruling, the apex court faulted both the CoC and the NCLT for approving the BPSL resolution plan. The court also directed creditors to return the funds already disbursed under the now-invalidated plan, including equity contributions.

 

The stakes are high for JSW Steel. As of March 2024, the company held net assets worth ₹14,091 crore linked to BPSL. The Odisha-based plant contributes 4.5 million tonnes annually to JSW’s 34.2 MTPA domestic steelmaking capacity - India’s highest. JSW has signalled its intent to explore all legal avenues to protect its investment.

 

What next for BPSL and JSW Steel?

The NCLT is expected to take up the matter post the Supreme Court’s vacation, and the CoC will retain the authority to appoint a liquidator and oversee proceedings if the review fails. For now, JSW’s petition to defer liquidation and preserve its investment in BPSL remains in effect.