Why SC quashed JSW’s Rs 19,700 cr insolvency resolution plan for Bhushan Power & Steel

By Admin

05 May, 2025

Why the Supreme Court Quashed JSW’s ₹19,700 Cr Insolvency Resolution Plan for Bhushan Power & Steel

The Indian Supreme Court recently delivered a landmark judgment that sent ripples across the corporate and legal sectors by quashing JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Limited (BPSL). This 100-page ruling not only highlighted serious procedural lapses and legal violations but also emphasized the critical importance of transparency, diligence, and adherence to the Insolvency and Bankruptcy Code (IBC). Here's a comprehensive look at what went wrong and why the deal was cancelled.

Background of the Case

The insolvency proceedings for BPSL began in July 2017, after the Reserve Bank of India identified the company among the infamous “dirty dozen”—12 major accounts that collectively accounted for 25% of India’s non-performing assets. Punjab National Bank initiated the insolvency resolution under the IBC. JSW Steel, Tata Steel, and Liberty House were among the bidders, and by February 2019, JSW’s plan was approved by the Committee of Creditors (CoC) and submitted to the National Company Law Tribunal (NCLT).

However, the process soon became entangled in legal disputes. A series of appeals followed, and government agencies like the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) began probing BPSL for money laundering and financial irregularities.

Key Issues Noted by the Supreme Court

1. Suppression of Material Facts

JSW failed to disclose a joint venture agreement it had signed with BPSL and Jai Balaji in 2008. This omission raised questions about whether JSW was a “related party” under IBC norms. The NCLAT brushed this aside, but the SC emphasized that suppressing such a vital fact violated statutory obligations.

2. Violation of Timelines

Time is a cornerstone of the IBC framework, which mandates that the Corporate Insolvency Resolution Process (CIRP) be completed within 180 days (extendable by another 90 days). JSW delayed payments for financial creditors by 540 days and operational creditors by 900 days—even though there was no stay on the NCLT or NCLAT orders that approved the resolution plan.

3. Dishonest Implementation

The SC was critical of JSW’s “dishonest and fraudulent” approach. It noted that the company only began complying with the resolution plan after steel prices soared—an indication that JSW acted out of opportunism rather than commitment. JSW infused just ₹100 crore initially and failed to produce proof of further promised equity contributions.

4. Non-compliance with IBC Provisions

JSW neither sought permission to extend the “effective date” for implementing the plan nor produced any material showing such extension was lawfully granted. The Supreme Court said any covert extension by certain CoC members was legally invalid and deeply problematic.

Faults of the CoC and Resolution Professional

The SC did not spare the Resolution Professional (RP) and the CoC either. It observed:

• The RP submitted JSW’s plan to the NCLT four months late—well beyond the 270-day maximum limit set under the IBC.
  
  

• The RP failed to ensure JSW’s eligibility and did not submit the required affidavit of compliance.
  
  

• Operational creditors, who should have been paid in priority over financial creditors (as per the law then), were sidelined.
  
  

• The CoC, along with the RP, ignored legal due diligence and colluded in ways that undermined the IBC framework.
  
  

Final Verdict and Consequences

The Supreme Court firmly stated that JSW could not benefit from a resolution plan that violated core principles of the IBC. The company’s claim that it had already implemented most of the plan was rejected. The Court ruled that fait accompli cannot be used to validate illegal actions.

With the plan quashed, BPSL—once a key player in India’s steel industry—is now headed for liquidation. This decision underscores the judiciary's intolerance for procedural manipulation, non-disclosure, and opportunistic behavior in insolvency proceedings.

What This Means for the Future

This verdict sets a powerful precedent. It reinforces that:

• Time-bound compliance is non-negotiable in insolvency matters.
  
  

• Transparency and due diligence are mandatory for all stakeholders.
  
  

• Misuse of legal processes will be penalized, no matter how big the corporate player.
  
  

Companies, resolution professionals, and financial institutions will now need to operate with heightened caution and integrity in IBC processes.