SC withdraws Bhushan Power liquidation order, review hearing on Aug 7

Supreme Court agrees to review its earlier verdict declaring JSW's ₹19,700 crore resolution plan for BPSL illegal, citing investment, worker impact and legal inconsistencies

The Supreme Court on Thursday recalled its May 2 judgment that declared JSW Steel Ltd’s resolution plan for Bhushan Power & Steel Ltd (BPSL) “illegal” and ordered the latter’s liquidation, four years after the company was acquired under the Insolvency and Bankruptcy Code (IBC).

 

A bench of Chief Justice of India (CJI) B R Gavai and Justice Satish Chandra Sharma allowed the review of the May 2 judgment and decided to hear the appeal filed by the BPSL promoter challenging the resolution plan afresh. The bench has agreed to hear all arguments on August 7.

 

"Prima facie, we are of the view that the impugned judgment does not correctly consider the legal position as has been laid down by a catena of judgments,” the bench said.

   

“We, therefore, think that this is a fit case wherein the judgment under review needs to be recalled and the matter needs to be considered afresh. So, needless to say that while we are allowing the review, we keep all the questions available to both parties open to be argued at the stage of hearing,” the bench said.

 

When the hearing started, the top court expressed its inclination to allow the review petition, as the judgment did not appear to be in line with settled precedents. 

 

"Prima facie, we are inclined to allow the review. We will give a full-fledged hearing, but prima facie it appears that the view is not in consonance with earlier settled decisions. We will not go into any other documents, just the judgment," CJI Gavai said.

 

He also said that Justice Satish Chandra Sharma (one of the judges who passed the May 2 judgment) has also agreed to the review. "Yesterday I had a discussion with my learned brother (Justice Sharma), who was gracious enough to admit that it requires reconsideration," the CJI said.

 

CJI Gavai stressed that the ground realities, such as the investment of nearly ₹20,000 crore made by JSW as well as the livelihood of about 25,000 workers, need to be considered.

 

"We also have to take into account the ground realities... 25,000 people cannot be thrown onto the road. Article 142 (of the Indian Constitution) has to be utilised to do complete justice, not to do injustice to 25,000 workers," the CJI commented.

 

Article 142 allows the Supreme Court to pass any order necessary to ensure "complete justice" in any matter pending before it.

 

The CJI also pointed out that as per settled precedents, the commercial wisdom of the Committee of Creditors (CoC) cannot be interfered with lightly, especially when it has been concurrently upheld both by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). The CoC is a body of lenders of a debt-ridden company.

 

Solicitor General Tushar Mehta, appearing for the CoC, supported the review and said that BPSL was a company that went into a serious financial crisis because of various defaults, and now, it is a “healthy company” because of the acquisition by JSW Steel.

 

Senior Advocate Neeraj Kishan Kaul, who appeared for JSW, echoed the view and submitted that the judgment (of May 2) sends “dangerous signals” because a valid resolution plan of about ₹20,000 crore, approved by the CoC, NCLT, and the NCLAT, has been thrown off after five years. He also questioned the locus standi of the promoter of BPSL in challenging the resolution plan.

 

If at all there is any violation, only a creditor can challenge it, and not a promoter, because of whose misdeeds the company went into crisis, Kaul argued. 

 

Senior Advocate Dhruv Mehta, for the promoter of BPSL, opposed the arguments.

 

Experts said that JSW will continue to run the company in the meantime. “Until there are any contrary orders by the Supreme Court, JSW will continue to run the company. The recall effectively means that there is no contrary order at the moment and the position as on the date on which the SLP (special leave petition) was filed, will prevail,” said Parth Contractor, founder of Chambers of Parth Contractor.

 

“BPSL is presently managed by JSW Steel, not the resolution professional (RP), and will continue this way until the Supreme Court issues its final decision after the review hearing,” said Alay Razvi, managing partner of Accord Juris.

 

On May 2, the Supreme Court rejected JSW Steel's ₹19,700 crore resolution plan for BPSL, holding it to violate IBC sections.

 

Then, on May 26, a bench of Justice B V 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, to avoid complications while the limitation period for filing a review remained open. Following this, JSW, Punjab National Bank, and other lenders moved review petitions.

 

On July 29, a bench of CJI Gavai and Justice 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 other creditors. 

As it happened

• Bench allowed review of May 2 judgment and decided to hear the appeal
• Court said judgment did not appear to be in line with the settled precedents
• CJI said the ground realities, such as the investment and livelihood of 25000 workers, need to be considered
• He also pointed out that the commercial wisdom of the CoC could not be interfered with lightly