Introduction
On May 2, 2025, the Supreme Court of India laid down a landmark judgment in the case of Kalyani Transco vs. Bhushan Power and Steel Ltd. and Ors., ordering the liquidation of Bhushan Power and Steel Limited (“BPSL”). The apex court rejected the resolution plan proposed by JSW Steel that had been approved by the Committee of Creditors (“CoC”) as well as cleared by the National Company Law Appellate Tribunal (“NCLAT”).
Not only did the order rescind a ₹19,350 crore transaction but also once more revived the age-old battle between sanctity of commercial prudence of financial creditors and sweep of judicial review by courts under insolvency resolutions. Relying on procedural errors, delay and failure to comply with regulations, the Court exercised its powers under Article 142 of the Constitution to direct liquidation despite the overwhelming support in favour of the plan. This article analyses the factual context, legal justification, and ramifications of the ruling, situating it within context through the model of critical analysis of Commercial Wisdom vs Judicial Review.
Background of the Case
The Supreme Court’s decision to reject JSW Steel’s resolution plan and order liquidation three years post-implementation is not simply an instance of belated judicial correction— but a withering criticism of institutional failure along the insolvency value chain. The primary failure lay with the Resolution Professional (“RP”), who failed to satisfy fundamental statutory responsibilities under the Insolvency and Bankruptcy Code (“IBC”). The RP failed to conduct necessary verification of eligibility under Section 29A, disregarded the absence of necessary affidavit, failed to seek necessary extensions beyond the mandated 180-day and 270-day periods under Section 12, and failed to inquire into potential avoidance transactions as necessary. Procedurally, the application for plan approval was submitted way beyond the confines of the law, and yet the Committee of Creditors (“CoC”) rather than insisting on compliance went along blindly to sanction a plan whose form and substance fundamentally violated mandates of the IBC. The inclusion of Optionally Convertible Debentures (“OCDs”) within the payment structure diluted the provisions of financial recovery and sidestepped the equitable treatment standards under Section 30(2), especially for operational creditors. Further, JSW Steel concealed its earlier connection with BPSL promoters in disregard of the very essence of Section 29A that bans controversial applicants.
The larger picture that comes out of this case is ominous. It indicates corruption in the system and that determining authorities, creditor committees, and insolvency professionals work in circles, raising concerns of institutional laxity or worse, collusion. Invocation of “commercial wisdom” by the CoC, a doctrine to shield well-informed business judgment, served as a fig leaf to conceal procedural indolence and commercial opportunism. JSW not only delayed payment for more than two years of ₹19,350 crore but did so by benefitting from the world price rise in steel, exploiting the process by hiding behind institutional inertia. The NCLT and NCLAT, institutions charged with the responsibility of upholding legal fidelity, did not even invoke the simplest statutory and regulatory values.
The invocation of Article 142 by the Supreme Court to reverse the resolution plan and its suggestion of punishment under Section 74(3) of the IBC is not only remedial, but a clarion call to reassert accountability, transparency, and rule of law in India’s insolvency process.
Supreme Court’s Rationale
The reasoning of the Supreme Court in rejecting the resolution plan of JSW Steel rested upon an informed analysis of various statutory defaults and procedural frailties cumulatively making the entire corporate insolvency resolution process (“CIRP”) for Bhushan Power and Steel Ltd (“BPSL”) unviable. The flagrant points of difference included the misuse of Section 61 of the IBC. The successful appeal petitioner JSW had filed under this section — a section provided for affected parties to appeal against approval of resolutions, and not for parties whose schemes were already approved. The Court ruled that the NCLAT erred in accepting such an appeal, particularly when it overstepped matters of public law, such as the freezing of BPSL’s assets by the Enforcement Directorate. The RP did not apply the Code mandate of due diligence and failed to take note of JSW’s previous relationship with BPSL, an omission that squarely assaulted the legality and honesty of the resolution process.
Moreover, the failure to comply with Regulation 38 of the CIRP Regulations, whereby operational creditors need to be paid before financial creditors, further invoked judicial scrutiny. Payment was postponed over several years, with operational creditors paid significantly later, in a perverse and illegal pecking order. This delay, in spite of a provision under the plan to be framed within 30 days of NCLT approval, was something that made the Committee of Creditors (CoC) functus officio and robbed it of any power to accept or change timelines after approval. Most importantly, the CoC, who had themselves initially protested against the plan design, later paid without protest. This stark inconsistency, the Court held to be collusive behaviour on the part of JSW, the RP, and the CoC. These systemic faults, both procedural and ethical in nature, led the Court to invoke Chapter III of the IBC to legitimise liquidation, making the whole exercise tainted by “flagrant violations” and devoid of legal legitimacy.
Commercial Wisdom vs Judicial Review: A Doctrinal Tension
Commercial wisdom doctrine became the philosophical basis of India’s Insolvency and Bankruptcy Code, 2016, and crystallized for the first time in K. Sashidhar v. Indian Overseas Bank (2019). In that decision the Supreme Court arrived at a clear line: once a resolution plan is approved with the statutorily required threshold, neither the NCLT nor the NCLAT can “substitute its judgment for the commercial wisdom of the CoC.”
One year later, in Essar Steel v. Satish Kumar Gupta, the Court reiterated this deference, stressing that judicial review is limited to a narrow procedural check—whether the plan conforms with the Code, treats creditors equitably, and is respectful of priority norms—and leaves the economic merits of the plan to lenders. The idea behind it makes sense: economic creditors are the eventual risk-takers and thereby the ones to price out viability and recovery most suitably.
But as cases later show, this deference is qualified. In Swiss Ribbons ,the Court reminded them all that the IBC operates on public-interest grounds, giving judges scope for intervention where there had been corruption by illegality, discrimination, or fraud in the process. The 2025 JSW Steel v. BPSL judgment is the logical result of the same. Faced with long-standing statutory deadlines, lack of a Section 29A affidavit, reverse payment priority, and an objecting and acquiescing CoC in turns, the Court observed that all cautionary steps aimed at legitimizing judicial restraint had been breached. As Justice Bela Trivedi put it so tersely, “commercial wisdom does not mean statutory immunity from judicial oversight when the law is breached.” The case thus remakes the doctrinal landscape: courts will be deferential to creditor discretion only as long as that discretion is being exercised within the four corners of the statute and in good faith; where there are violations which are “flagrant,” judicial review shifts from nominal gate-keeping to full-scale corrective action, even to the extreme limit of liquidation.
What Lies Ahead: Liquidation, Liability, and Lost Value
The Supreme Court ruling to reverse the resolution plan and order liquidation proceedings against Bhushan Power & Steel Ltd. (BPSL) has important operational and systemic implications, as Trilegal correctly observes. Asking JSW to return ₹19,700 crore within two months not only disturbs the capital structure of BPSL but also betrays commercial finality — a principle at the core of the IBC’s credibility. The obligation to reverse BPSL into its pre-resolution form may revive resolved claims, some of which have already been released or waived as part of the previous resolution, thereby causing significant uncertainty and loss of enterprise value. Furthermore, irrevocable commitments of capital, production linkages, and employee integrations done in the meantime by JSW Steel will go to waste. The judgment thus threatens the potential rollback of progress in economic recovery and frightens domestic and foreign investors alike who hope for post-resolution stability in Indian insolvency law.
Furthermore, from the perspective of institutional governance the judgment casts a hard but harsh light on the inaction of the RP and complacency of the CoC. Their inability to follow statutory deadlines, accurately assess eligibility under Section 29A, and provide even-handed treatment of operational creditors is symptomatic of a breakdown of procedural integrity in the system. But most analysts have contended that the remedy of the Court — liquidation — was perhaps self-defeating. Other options like imposing penalties, asking the IBBI to file disciplinary proceedings, or invoking a new round of bidding would have brought accountability without causing the liquidation of a once viable company. A court-directed inquiry into the conduct of the RP and the rationale of CoC would also have provided precedent-setting deterrence while maintaining the operational continuity and infused capital. The Court’s doctrinally correct, strict enforcement of the rule of law might have missed the opportunity to find a balance between legal compliance and economic pragmatism.
Conclusion
The JSW-BPSL decision makes it a categorical message that due process is not a procedural nicety, but a constitutional mandate. But in attempting to uphold procedural sanctity, the judiciary must also balance the collateral economic costs of intervention. A commercial ecosystem demands rules to be strictly enforced — yet proportionately and with foresight. Future reforms must ensure institutional accountability while preserving the core objective of the IBC—resolution, not liquidation.
This blog is written by Vidhi Sharma.
