BPSL liquidation: MCA, IBBI study SC order to assess IBC implications

The Ministry of Corporate Affairs (MCA) and the Insolvency and Bankruptcy Board of India (IBBI) are studying the Supreme Court order in the Bhushan Power and Steel (BPSL) matter to assess its implications for the Insolvency and Bankruptcy Code (IBC), a top government official told Business Standard. 

“We are examining the order and seeing what learnings can be taken from there in terms of IBC regulations and processes,” the government official said.

  In 2021, JSW Steel had been declared the successful resolution applicant for BPSL — one of the ‘Big 12’ non-performing assets referred to the IBC by the Reserve Bank of India —with a winning bid of ₹19,350 crore. However, on Friday, a two-judge Bench of the Supreme Court, comprising Justices Bela M Trivedi and Satish Chandra Sharma, rejected JSW Steel’s 2019 resolution plan, holding it “illegal” and “contrary” to IBC provisions. The apex court also ordered the liquidation of BPSL. Shares of JSW Steel dropped 5 per cent following the verdict.

  IBC experts said the ruling would have serious implications for the Code and could discourage applicants from submitting resolution plans due to fears that such plans might later be overturned.

  The Committee of Creditors (CoC), the court said, “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,” the court said.

  Sharp observations were also made about the resolution professional (RP) overseeing the process. The apex court found that the RP had “utterly failed” to discharge his statutory duties under the IBC and CIRP regulations.