Supreme Court Cancels JSW Steel’s INR 19,700 Cr Resolution Plan for Bhushan Power & Steel

In a major development shaking India’s insolvency framework, the Supreme Court of India on May 2, 2025, struck down JSW Steel’s INR 19,700 crore resolution plan for Bhushan Power & Steel Ltd. (BPSL) and ordered the company’s liquidation. The two judge bench, led by Justice Bela M. Trivedi and Justice Satish Chandra Sharma, held the plan to be legally non compliant and procedurally flawed.

Case Background: What Led to the Deal?

• 2017: BPSL was admitted under the Corporate Insolvency Resolution Process (CIRP) after defaulting on over INR 47,000 crore.
• 2019: JSW Steel won the bidding round, offering INR 19,700 crore in total:
  • INR 19,350 crore for financial creditors
  • INR 350 crore for operational creditors
• NCLT Approval: Granted in September 2019
• NCLAT Confirmation: Upheld in February 2020
• Acquisition Completion: JSW Steel took over in March 2021

Why the Supreme Court Rejected the Plan

The judgment meticulously outlined the procedural and legal lapses that invalidated the plan:

1. Non Adherence to IBC Timelines

• The resolution plan was filed beyond the mandatory 330 day limit under Section 12 of the IBC.
• No valid extension was sought or granted.

2. Resolution Professional’s Oversight

• Failed to:
  • Submit Form H certification
  • File affidavits under Section 29A confirming bidder eligibility
  • Investigate avoidance transactions

3. Committee of Creditors’ (CoC) Lapses

• Initially objected to JSW’s delay, but later supported it without rationale.
• Acted without exercising proper commercial wisdom, as required by law.

4. Delay in Plan Implementation

• JSW delayed execution for over two years despite no legal bar.
• The Court held this as a misuse of the legal process for commercial gain.

5. Improper Funding Mechanism

• JSW used Optionally Convertible Debentures (OCDs) instead of equity; breaching plan terms and regulations.

Implications of the Verdict

For JSW Steel:

• Faces a reversal of acquisition
• May seek a refund of INR 19,350 crore paid to creditors
• Stock value fell by over 5% post verdict
• Legal team is evaluating a review or curative petition

For Banks & Creditors:

• Must potentially return the funds received
• Could suffer steep losses in liquidation, where recovery is uncertain
• Discussions underway with DFS and RBI for policy support

For India’s Insolvency Ecosystem:

• Reaffirms that:
  • IBC timelines are binding
  • Compliance cannot be compromised
• Sends a message: legal shortcuts will not be tolerated

Government’s Response

• The Department of Financial Services (DFS) has confirmed:
  • It is reviewing the verdict with legal experts
  • A formal response or legislative clarity may follow
• Policy shifts could focus on:
  • Better enforcement of timelines
  • Accountability for CoCs and RPs

What Happens to BPSL Now?

• Liquidation proceedings to begin under NCLT supervision
• A liquidator will:
  • Take control of BPSL’s assets
  • Attempt sale as a going concern
• Ongoing contracts, suppliers, and employees face uncertain futures
• ED (Enforcement Directorate) may re freeze assets tied to money laundering investigations

Final Takeaway

The Supreme Court’s verdict in the JSW BPSL case is not just a corporate setback, it’s a landmark moment for India’s legal and financial systems. By prioritizing legal sanctity over commercial expedience, the Court has reinforced a powerful message:

"Compliance with the law is non negotiable, even for the biggest bidders."

This judgment serves as a benchmark for all future resolution cases under IBC and signals a new era of accountability, procedural integrity, and strict enforcement.

"Sources: LiveLaw, Bar & Bench, Reuters, Moneycontrol, Financial Times, Supreme Court Judgment PDF"