The NCLT is directed to initiate the Liquidation proceedings against the Corporate Debtor-BPSL under Chapter III of the IBC and in accordance with law”.
With these words, a Bench consisting of J. Bela S Trivedi and J. Satish Chandra Sharma of the Supreme Court of India threw an already approved resolution process as per the Insolvency and Bankruptcy Code (IBC) under the bus on 2nd May 2025. It was not just an unprecedented judgment; but one that struck at the foundations of a branch of our legal system affecting a gamut of legal framework pertaining to liquidation of corporate entities in India. With this landmark judgment, the apex court set aside a resolution plan of Bhushan Power and Steel Ltd. (BPSL) that was under implementation based on a proposal that was put forth by JSW Steel Ltd (JSW). This judgment, in the case of Kalyani Transco v. Bhushan Power and Steel Ltd. & Ors., has ordered the liquidation of BPSL even while a Resolution Plan is under implementation. This order of the court carries with it several serious consequences for our jurisprudence, more particularly to the broader insolvency landscape in India. The ruling, which came nearly six years after the resolution plan was duly approved by the National Company Law Tribunal (NCLT) and four years after JSW acquired BPSL, has sent shockwaves through the Insolvency and Bankruptcy Code (IBC) ecosystem. In the process, the apex court stymied the court proceedings initiated under the IBC to expedite winding up of Bhushan Steel! Let us spend a few minutes to understand the consequences of this judgment, as this case is bound to have far-reaching repercussions, not only to the participants in the litigation but also to the IBC ecosystem itself.
Background of the case: BPSL was part of the Bhushan group with big plans for the company and bigger dreams for the industry. After all, it was riding India’s unprecedented infrastructure boom, not too long back. By 2013, BPSL had become one of India’s largest steel companies and a force to reckon with. Unfortunately for the company and not surprisingly to others, it had ended up in a debt trap with too much of borrowed capital. By 2017, it owed over Rs 47,000 crores to various banks for expansion of its steel capacity in line with their ambitions. As event turned out, the company could not simply able to sustain this level of indebtedness. Imports of equipment, delays in deliveries without commensurate revenues inevitably resulted in unbridled cost escalations and mounting losses so much so that it started sinking and its balance sheet bleeding. When the Reserve Bank of India (RBI) published a list in 2017 of the most toxic corporate defaulters, BPSL ignominiously found itself heading the list of 12 euphemistically called the “dirty dozen” with a gargantuan Rs. 3.40 lakh crores! Shortly afterwards as expected, the insolvency resolution of BSPL also commenced under the IBC – the biggest one to be pushed to the IBC in 2017. During those initial days the new Act (read IBC) the liquidation processes were also evolving. Those days the defaulters also could not count on the judicial system to find a viable solution to carry their burden (often, indefinitely). More often than not, in India, when company fails, we find that it has a past – a gory and an ugly one. In this case, it came in the form of the Enforcement Directorate (ED). The company was accused by ED of siphoning out more than Rs. 4,000 crores! Later, as things turned out, the ED’s involvement proved to be decisive. That aspect also had to be dealt with by the courts while deciding the liquidation proceedings of BPSL. In line with the provisions of the IBC, the creditors initiated insolvency proceedings against it. Enter JSW. The giant steel maker found an unmissable opportunity in BPSL. The former brought in an amount of Rs.19,700/- and acquired 41% of BPSL. This was to serve as part payment to the creditors as per the resolution plan of the then defunct BPCL. The banks dutifully wrote off the rest. The new acquirer also promised to bring in another sum of Rs. 8,550/- crores in equity. This scheme of things was also approved by the NCLT in 2021. The banks of BPCL got some money at least and other creditors had the supreme satisfaction of waging a short but a relentless war for spoils! After years of struggle, the company, now known as JSW Steel recommenced its operations. With this as the background story let us quickly look at the timelines in this case:
Timelines of the Resolution Process:
| YEAR | EVENT |
| 2017 | BPSL was admitted to Corporate Insolvency Resolution Process (CIRP). Punjab National Bank initiates CIRP proceedings. Interim Resolution Professional (IRP) invites claims from stakeholders. |
| 2018 | Committee of Creditors (CoC) approves JSW Steel’s Resolution Plan. |
| 2019 | National Company Law Tribunal (NCLT) approves JSW Steel’s plan even as the Enforcement Directorate provisionally attaches BPSL assets. |
| 2020 | NCLAT allows JSW Steel to acquire BPSL. |
| 2021 | JSW Steel commences implementation of the Resolution Plan. |
| 2024 | Supreme Court directs ED to handover attached assets to JSW. |
| 2025 | Supreme Court quashes JSW Steel’s Resolution Plan and directs its liquidation |
Life After the Resolution Process: The Enforcement Directorate that had attached BPSL’s assets in a money laundering case against old promoters got a chance to present their case at this stage in the apex court. Earlier, both NCLT and NCLAT, when approached by ED were of the opinion that JSW was not liable for past crimes! Not so, according to the Enforcement Directorate. The latter held the view that fraud is a fraud whoever had committed it, and it does not get washed away by efflux of time or change of ownership. Simply because there is a new owner, the slate cannot be wiped clean. So, they argued in the Supreme Court. The apex court after hearing the parties gave its well-reasoned judgment through a stinging verdict that has shaken the foundations of the IBC structure itself. After considering all the arguments, the Court gave a its verdict citing the following transgressions by various parties and players in this case. The following were the Court’s observations except for some paraphrasing:
- The resolution process overshot the IBC’s prescribed time limit of 270 days to complete the process. In fact, JSW itself had submitted its proposal beyond the deadline which, as expected, dragged on for two more years! The Court minced no words when they said that JSW engaged in a pattern of deliberate delay and misuse of legal process to avoid timely implementation of the Resolution Plan. Strong words. Even after receiving the formal approval from the NCLT, JSW delayed the full implementation for over two years – a rebuke that the ultimate beneficiary just cannot shrug off based on facts on record.
- According to the Court “The Resolution Professional had utterly failed to discharge his statutory duties as contemplated under the IBC and the CIRP Regulations during the course of entire CIRP of the Corporate Debtor- BPSL”.
- In the final scheme of things, according to the court the Operational Creditors (suppliers of goods and services) were conveniently sidelined. CIRP Regulations mandates that Operational Creditors are to get priority over financial creditors whereas the operational creditors were paid in March 2022, a year after payments were made to financial creditors. This raises the moot question of whether this was an issue of simple noncompliance with the approved plan or invalidity of the plan itself!
- The Supreme Court felt that the Committee of Creditors approved changes in the resolution plan without adequate rationale or public disclosures giving rise to the feeling that ‘commercial wisdom’ as expected of them by the IBC was not of any consequence! The CoC also had failed to protect the interest of the creditors by taking contradictory stands before the Court while accepting the payments from JSW without demur and supporting JSW to implement its ill-motivated plan against the interest of the creditors.
- The impugned processes followed under IBC ignored the issue of asset attachments made by the Enforcement Directorate thereby undermining the essence of finality of CIRP.
- The Supreme Court felt that granting a ‘fresh start’ “to JSW without resolving the pending legal proceedings created a legal loophole. Merely because the Code is silent with regard to the phase of implementation of the Resolution Plan by the successful Resolution Applicant, neither the Tribunal nor the Courts should give excessive leeway to the successful Resolution Applicant to act in flagrant violation of the terms of the Resolution Plan or in a lackadaisical manner. In the instant case, SJSW did not implement the Resolution Plan for about two long years after its approval by the NCLAT, though there was no legal impediment in implementing the same”.
- The Supreme Court was also of the view that both NCLT and NCLAT overstepped their powers by approving changes and dismissing objections from investigating agencies. According to the Court “The Resolution Plan of JSW as approved by the CoC did not confirm the requirements referred to in sub- section (2) of Section 30, the same being in flagrant violation and contravention of the expressed provisions of the IBC and the CIRP Regulations. The said Resolution Plan, therefore, was liable to be rejected by the NCLT under sub-section (2) of Section 31, at the very first instance. The impugned judgment passed by the NCLAT in allowing the Company Appeal of JSW and issuing the directions without any authority of law and without jurisdiction, is perverse, coram non judice (not before the court) and liable to be set aside”.
- The Court came down heavily on JSW, the Resolution Applicant thus: “This litigation is an eye-opener, also as regards the manner in which the implementation of plans are handled by the successful resolution applicant and the lenders involved in the process. Once a resolution plan is approved under the Insolvency and Bankruptcy Code, 2016 the successful resolution applicant undertakes a profound responsibility to implement the plan in both letter and spirit. This obligation is not merely an empty formality but an enduring commitment to restore the Corporate Debtor to viability and ensure a meaningful turnaround. The role of the successful Resolution Applicant is thus far more than a transactional duty towards the creditors or stakeholders; it embodies a pivotal responsibility to the distressed entity itself, which must be approached with utmost dedication and an earnest sense of duty. Regardless of the challenges that may arise, the successful Resolution Applicant cannot treat its obligations as optional or conditional, nor can it abdicate its responsibility in the face of unforeseen obstacles”.
- Implementing the resolution plan fully and to rejuvenate the debtor company, is integral to the success of the Insolvency and Bankruptcy Code, 2016 framework and the spirit of economic revival it seeks to foster. The approach, therefore, must not be frugal or narrowly profit-driven, limited to viewing the transaction through a purely commercial lens. Instead, it must recognise that rescuing a distressed company is a responsibility of significant social and economic value, demanding a holistic and responsible strategy. This involves a dedication to long-term outcomes, where the successful resolution applicant adopts measures that genuinely support the debtor’s rehabilitation, rather than making minimal or half-hearted attempts at implementation. The courts and Tribunals have consistently underscored that the successful resolution applicant’s role transcends commercial interest and embodies a commitment to the larger purpose of corporate revival. Consequently, it must make thoughtful and sustained efforts demonstrating adaptability and resilience even when faced with obstacles or operational impediments. Simply put, the successful resolution applicant cannot step back or dismiss its obligations by attributing delays or setbacks to the conduct of other stakeholders, as this would undermine the very purpose of insolvency resolution.
- The apex court had this to say about the conduct of JSW. It is very pertinent to note that the upfront payments and commitment with regard to infusion of equity into the company was one of the main criteria on which JSW had scored the highest in the evaluation matrix determined by the CoC. Thus, after obtaining the approval of its Resolution Plan from CoC by presenting a rosy picture, misguiding the CoC, and defeating the rights of other Resolution Applicants, JSW did not respect and honour the said commitments, and on the contrary tried its level best to delay the implementation of the Resolution Plan without any cogent reason or justification. This is nothing but a misuse of process of law and a fraud committed by JSW with the CoC and other stakeholders. This was a slap on the face of the successful Resolution Applicant.
Experience with the IBC: Virtually everyone involved in this litigation are running for cover after this judicial verdict. Everyone is busy finding someone else to pin the blame on. In the end, there has been a serious systemic failure. IBC came to be enacted because of interminable delays in the judicial system. The new Act with time bound resolution process built in, was what was needed to salvage the insolvency proceedings. This judgment when it came out has split the experts right in the middle – those who feel equity and justice should be paramount in judiciary while the other camp feeling that economic parameters should not be lost sight of, in the pursuit of legal righteousness. The Supreme Court had also an occasion to dwell on the concept behind setting up the IBC when it had observed thus in Swiss Ribbons vs Union of India when it observed: “…. the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors.” Swiss Ribbons vs Union of India. In the end, IBC no doubt, was successful in finding a resolution to the vexed and complex issue of BPSL. But it had done so, by sacrificing the foundational principles of IBC – transparency, fairness and finality. In that sense it was a case of “operation successful; patient dead”. The Supreme Court in its wisdom fastened the blame for such transgressions on the people and institutions involved. This, in my opinion is not judicial overreach as alleged by some people, by any standard. Moreover, the punishment meted out to various agencies involved is also not disproportionate. Yes. The decision of the Court is inconvenient to a lot of players who had a free rein in the past. We are a country that frame and follow laws. Just because the judgment would result in costly litigation, even the Supreme Court cannot travel beyond what has already been laid down by law. By the way, even if the matter gets referred to a larger Bench none of the infirmities is likely to get rectified unless the Court itself invokes its inherent powers as provided by the Constitution. However, this judgment serves as a timely reminder to all the participants to follow the law and not pursue a litigation. Let us learn to do just that.
Law and the Society: This case has thrown up some important perspectives of the whole body of law of the land. The judgment of the Supreme Court has sparked a debate rooted in contrasting principles – the pursuit of justice and equity versus the potential economic repercussions of such judicial decisions. Some experts assert that the law must uphold principles of fairness, transparency and legitimate claimants’ rights irrespective of economic consequences. Justice demands that violations of law or misuse of resources be rectified, ensuring that all stakeholders are treated equitably. This view is both legal and ethical. Upholding fairness ensures integrity of the legal system. Favouring equity restores faith that laws are applied uniformly and that claims are settled based on merit and law, not arbitrarily or selectively. Favouring justice embodies a message that corporate misconduct or violations will not be overlooked, which is essential for deterring malpractices. It also reinforces the moral authority of courts to uphold constitutional and statutory principles. Above all, it emphasises that legitimate creditors and claimants must receive their rightful dues, reinforcing social justice and corporate accountability. People holding these views argue that justice and equity should always prevail regardless of the consequences. There is another school of thought on the very subject. They warn that rigid adherence to legal and moral claims without regard for economic fallout might impair investor confidence, disrupt the functioning of industries and the society in general suffer significant economic losses. This case involves a major steel manufacturer whose collapse could threaten thousands of jobs, affect downstream industries and cause ripple effects across the economy. Overemphasis on justice at the cost of economic stability might discourage investment especially if courts are perceived to rule unpredictably or prioritise claims over operational ground realities affecting market confidence and investor sentiments. A pragmatic approach recognises that too strict an interpretation of rights might undermine broader economic interests, especially in sectors vital for infrastructural development and employment generation. The debate thus encapsulates a fundamental societal conflict – upholding the rule of law, fairness, and corporate accountability versus safeguarding economic stability, employment and investor confidence. Both perspectives are rooted in valid concerns—one emphasising moral and legal righteousness and the other appreciating the complex realities of economic macro-management. An optimal judicial approach rooted in judicial wisdom and not necessarily on only on judicial decision would seek a balance ensuring justice without causing disproportionate economic disruptions.
What next?: We have not heard the last word in this case. A Review Petition has been filed by JSW that is likely to be rejected. A plea for a larger Bench to consider the issues involved may not get accepted considering the issues raised, the Bench having strictly gone by the letter of the law of the land. Today JSW wants the profits that they have earned when they ran the company based on the court order. The Enforcement Directorate has to collect what they can in this milieu. The government has indicated that it is not interested in interfering in this case, based on newspaper reports. What we now need, however, is not another judicial decision, but some judicial wisdom!
