In a scathing judgement pronounced in Kalyani Transco v. Bhushan Power and Steel Ltd., The Supreme Court of India (SC) rejected the INR 19,700 crore resolution plan submitted by JSW Steel (“JSW”) for Bhushan Power and Steel Limited (“BPS”L) and ordered the liquidation of BPSL citing serious procedural lapses and non-compliance with the Insolvency and Bankruptcy Code (“IBC”). The judgement sent ripples across the Indian insolvency ecosystem for overturning a resolution plan approved five years ago by National Company Law Appellate Tribunal (“NCLAT”). A bench of Justice Bela Trivedi and Justice Satish Chandra Sharma stated that the Committee of Creditors (“CoC”) should not have accepted it. The bench also faulted the National Company Law Tribunal (“NCLT”) for approving the Resolution Plan.
A Brief Recap of the JSW-BPSL Saga
On 26 July 2017, the Corporate Insolvency Resolution Process (“CIRP”) was initiated against BPSL by Punjab National Bank before NCLT. The Resolution Professional (RP) admitted the claims of INR 47, 204.52 crores by financial creditors and INR 621.38 crores by operational creditors. Several resolution applicants, namely JSW, Tata Steel, and Liberty House, submitted their resolution plans. During the eighteenth CoC meeting, plans of all the applicants were evaluated based on CoC’s evaluation matrix. JSW scored the highest and subsequently got the approval. On 14 February 2019, the RP filed an application before NCLT for approval of JSW’s Resolution Plan.
In the meantime, the CBI registered an FIR against BPSL, its directors, and others for various criminal offenses and it was followed by the Directorate of Enforcement (“ED”) registering a money laundering case under PMLA. In spite of ongoing investigations, on September 5, 2019, the NCLT approved the resolution plan. After the NCLT approval, the ED passed an attachment order (PAO) of the property which was part of the resolution plan. The order was challenged by NCLAT which stayed the PAO. On 17th February 2020, NCLAT approved the NCLT’s order subject to certain modifications.
A Hollow Process: Institutional Failures from RP to CoC
What unfolded was not just procedural oversight, but a systemic failure that exposed how key actors — from RPs to tribunals — contributed to an eventual collapse of due process. The Court’s findings showed an unflinching mirror to the systematic deficiencies of the insolvency framework. The court noted that the RP has failed to discharge the basic statutory duties entrusted to them. The RP failed to submit form ‘H’ verifying eligibility for JSW under Section 29A of the Act. The absence is not a mere clerical error, but a foundational breach. Verifying the eligibility of the resolution applicant is fundamental to the integrity of the CIRP and failure to proper verification raised serious doubts about JSW’s eligibility.
The Resolution Plan was filed before NCLT one and half years after the date of admission against the mandatory provision of 180 days, extendable to 330—because it recognized that value deteriorates with time. Referring toArcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta & Ors., the court observed that the failure to adhere to the prescribed timeline without seeking an extension under Section 12(2) attracts liquidation under Section 33. However, this interpretation appears inconsistent with Essar Steel Judgement wherein the court held that timelines, while mandatory, may be extended in exceptional circumstances. Moreover, in Amtek Auto, the court allowed the resolution process to continue after acknowledging the delay.
The court also noted that the Resolution plan failed to prioritise operational creditors, as mandated under Regulation 38, over financial creditors. Regulation 38 of the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (“CIRP Regulations”) mandates that the amount payable under a resolution plan to the operational creditors shall be paid in priority over financial creditors. In the present case, JSW paid the operational creditors, a year after payments to financial creditors.
The court also came down heavily on the “commercial wisdom” of CoC and held that they did not verify the legality and feasibility of JSW’s resolution plan. The reversal of CoC’s position without any justification and belatedly accepting the JSW’s offer shows that CoC and JSW acted in collusion. The court underscored that neither tribunals nor courts should allow resolution applicants to evade the legal and statutory requirements in the garb of litigation.
When finality fails: Investor Confidence and Legal Certainty in Peril
Time-bound resolutions are the cornerstone of the IBC. However, if resolution plans are vulnerable to reversal or rejection years later, then the promise of the code is undermined. Parties now routinely appeal decisions, not necessarily to reverse them, but to gain leverage or extract better outcomes than those offered under resolution plans, starting from the NCLT to the Supreme Court until all avenues for appeal were exhausted. Previously, parties opted for litigation or appeal when the cost of appeal was less than the benefit or to extract a better deal than what they are getting in the resolution plan. But if the end result leads to cancellation of a plan approved long ago, thepayoff matrix might change. The risk of negation of such big resolution plans makes appealing a risky affair.
Another key feature of the IBC is the “Clean State theory” which ensures that once a resolution plan is approved by the CoC and subsequently by Adjudicating Authority then, all the resolved and unresolved claims, including past liabilities, should not be attached to the corporate debtor. Unless this happens, the applicant would always be in constant fear of post-resolution state action which happened in the present case where ED attached the assets of BPSL, claiming they were proceeds of crime. Moreover, the court clarified that the tribunal had no power of judicial review of action taken under the Prevention of Money Laundering Act (“PMLA”). Resolution must meet the finality not only from the stakeholders but also from the state. Otherwise, few bidders will have the appetite to take on distressed companies, and liquidation will become the default instead of an exception.
The Invocation of Article 142 to order BPSL’s Liquidation sends a chilling message to the global investors that even resolution plans implemented over 7-8 years may be overturned due to malpractices and procedural irregularities. With the world seeing India’s “ease of doing business” pitch, the judgement sent shockwaves, challenging the sanctity of resolution and risking the erosion of investor trust.
Conclusion and Way forward
The Supreme Court’s ruling in the JSW-BPSL case is a milestone not merely for its outcome, but for the clarity it brought to systemic issues in India’s insolvency framework. The order is a clear message: non-compliance with the IBC is simply not acceptable, and procedural expediencies, no matter how commercially attractive, will be eschewed. In doing so, the Court has restored a degree of statutory sanctity to a process that had become increasingly opaque, inconsistent, and pliable to vested interests. It is a much-needed reset — a reassertion of legal discipline over commercial discretion.
However, the Court’s veditct to undo a long apporved resolution plan and push BPSL into liquidation also raises troubling questions. It unnerves the finality of resolution plans and threatens to erode investor confidence, particularly when such plans have been implemented and capital has been invested. The decision will encourage future bidders to hesitate before getting involved in the insolvency procedure, concerned that their investments may be jeopardised down the line by regulatory oversights they never occasioned. In an already perceptional litigation-happy jurisdiction, This sets a precedent that may act as a double-edged sword.
The future is one in which the resolution ecosystem needs to change. Resolution professionals, CoCs, and adjudicating authorities need to be uncompromising in their adherence to timeframes and statutory provisions — not as rituals, but as pillars of strength for the process. There can be no tolerance for failures in due diligence, transparency, or regulation. At the same time, bodies such as the Insolvency and Bankruptcy Board of India (“IBBI”) need to take a more assertive role in checking adherence and taking timely corrective steps so that such huge failures are nipped in the bud before they reach the Supreme Court.
It is equally important to reassess the degree of judicial intervention in commercial judgments of the CoC. Although the present case implicated egregious procedural improprieties, deviation by the Court from the established doctrine of deference to the commercial acumen of the CoC could precipitate unseemly judicial interrogation — something that needs to be treated with care.
This blog is written by Varun Pratap Singh, 5th Year Law Student at Maharashtra National Law University, Chhatrapati Sambhajinagar.
