Supreme Court upholds JSW Steel's ₹19,700 crore resolution plan for BPSL

The Supreme Court upheld JSW Steel's ₹19,700 crore resolution plan for Bhushan Power and Steel, dismissing objections from former promoters and lenders and affirming CoC's primacy

In a departure from its previous verdict, the Supreme Court on Friday upheld JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL), dismissing objections raised by former promoters and some lenders. 

Recalling its earlier order, the apex court said that undoing the plan at this stage, after JSW had infused large sums into the company, would have “disastrous results”. 

A Bench led by Chief Justice of India B R Gavai, along with Justice Satish Chandra Sharma and Justice K Vinod Chandran, delivered the ruling after recalling the May 2 verdict, which had set aside the plan and ordered BPSL’s liquidation. 

A Bench of Justice Bela M Trivedi (now retired) and Justice S C Sharma had then held that JSW’s resolution plan for BSPL was “illegal” and “contrary” to the provisions of the Insolvency and Bankruptcy Code (IBC), 2016. They had made sharp observations about both the committee of creditors (CoC) of Bhushan Steel and the National Company Law Tribunal (NCLT), saying that they should not have accepted and approved, respectively, the resolution plan.

 

A CoC is a decision-making body of lenders formed during the insolvency process of a sick company under the IBC. 

In a filing to the exchanges, JSW Steel welcomed the decision, saying the verdict has reinforced the integrity and sanctity of the IBC. 

Experts said this judgment might be the first instance under the IBC where the court reversed its earlier ruling on the issue.

  “This is appropriate and justified. The delay in implementing the resolution plan was attributable not to JSW but to proceedings initiated by the Enforcement Directorate (ED),” said Raheel Patel, partner, Gandhi Law Associates. 

Shiv Sapra, partner, Kochhar & Co, said the recalling of a judgment, however, might fuel anxiety in future cases. 

“What guarantee is there that yet another powerful litigant or change of composition might not prompt a future review? The ‘finality’ may still feel vulnerable, even if in exceptional cases,” he said. 

Other experts, however, said rather than weakening the IBC framework, the ruling reaffirmed its core principle that the commercial wisdom of the committee of creditors must be respected. Once an insolvency plan is approved and implemented by the successful bidder, it attains sanctity and finality, said Suhael Buttan, partner, SKV Law Offices.

 

Commercial wisdom paramount 

Writing for the Bench, Justice Gavai in the judgment said the ex-promoters technically had the standing to appeal under Section 62 of the IBC (appeal against the National Company Law Appellate Tribunal order), but their objections failed on merit. He stressed that delay alone was not sufficient to invalidate a resolution plan, especially when much of it arose from the proceedings under the Prevention of Money Laundering Act. The court also criticised the appellants for “attempts to interfere with and derail the resolution process”. 

The commercial wisdom of the CoC has to be given primacy and should not be lightly interfered with, the Bench said, adding that reopening an approved plan would “open a Pandora’s box” and erode the sanctity of the IBC framework.

 

JSW’s revival of BPSL 

The court noted that JSW, the successful resolution applicant, had invested to revive and modernise BPSL, turning it into a profitable venture. 

“If, after implementation of the resolution plan, the SRA (successful resolution applicant — JSW) has converted a loss-making entity into a profit-making one, can it be penalised for that?” the judgment asked. 

It also recorded that thousands of employees continued to draw their livelihood as the company operated as a going concern.

  Concluding the matter, the Bench said: “The very purpose for which the IBC was enacted, namely, to ensure that the Corporate Debtor (BPSL) 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.” 

Permitting objections at this stage, it added, “would amount to doing violence to the very intention with which the IBC was enacted”.

 

Arguments before the court 

In the hearings, Solicitor General Tushar Mehta, appearing for the CoC, said BPSL was a debt-ridden company which had been turned into a “healthy” enterprise by JSW’s takeover. 

He added timelines on resolution plans could be extended, and minor breaches could not justify scrapping a plan approved by the CoC, NCLT, and  National Company Law Appellate Tribunal (NCLAT). 

Senior Advocate Neeraj Kishan Kaul, representing JSW, said the May 2 verdict sent “dangerous signals” by discarding a ₹19,700 crore plan nearly five years after approval. He questioned the locus standi of the promoters, given their role in BPSL’s financial collapse. 

On the other hand, Senior Advocate Dhruv Mehta, for the ex-promoters of BPSL, alleged JSW had not fulfilled its commitment and sought a fresh corporate insolvency resolution process. The court rejected this.

 

Rare recall 

On May 2, the court had ordered the liquidation of BPSL and observed that JSW, even after the approval of its plan by the NCLAT, did not comply with the terms of the resolution plan for two years, which frustrated the object of the IBC and consequently vitiated the insolvency process of BPSL. 

Thus the court set aside the orders of the NCLT and NCLAT of September 5, 2019, and February 17, 2022, respectively.

  In a rare move, the apex court on July 31 recalled its May 2 judgment, saying that it “does not correctly consider the legal position as has been laid down by a catena of judgements”. 

Case file

 

2017  Bhushan Power and Steel (BPSL) admitted for insolvency resolution 

  2019

* Sep: NCLT approves JSW Steel’s resolution plan for BPSL

* Oct: ED provisionally attaches BPSL assets worth ₹4,025 crore over alleged violations by former promoters

  2020

*  Feb: NCLAT allows JSW Steel to buy out BPSL

  2021 Mar: JSW Steel implements resolution plan for BPSL by making payments

  2024  Dec: SC directs ED to transfer attached assets to JSW Steel

  2025

*  May: SC scraps IBC buyout of BPSL by JSW Steel; calls resolution plan illegal, orders BPSL’s liquidation

*  Jul:  SC recalls its May 2 order, saying it ‘does not correctly consider legal position as has been laid down by a catena of judgements’ 

*  Sep: SC upholds JSW Steel’s resolution plan for BPSL, dismisses objections raised by former promoters and some lenders