Supreme Court Rejects JSW Steel's Resolution Plan for Bhushan Steel, Orders Liquidation
In a landmark judgment that could have far-reaching implications for India's bankruptcy framework, the Supreme Court on Friday rejected JSW Steel's resolution plan for Bhushan Steel and Power Limited (BSPL) and ordered the company's liquidation under the Insolvency and Bankruptcy Code (IBC). The verdict represents a significant setback for JSW Steel and raises important questions about compliance with insolvency regulations.
Court Finds Multiple Violations of IBC Provisions
The Supreme Court bench, comprising Justices Bela M Trivedi and Satish Chandra Sharma, delivered a comprehensive 105-page judgment that highlighted "flagrant violations" of the IBC by multiple stakeholders involved in the resolution process. The court's decision effectively overturns previous approvals granted by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
Justice Trivedi, who authored the judgment, offered a scathing critique of all key participants in the insolvency proceedings, including the resolution professional, the Committee of Creditors (CoC), and JSW Steel itself.
Specific Failures Identified by the Court
Resolution Professional's Shortcomings
The court found that the resolution professional had "utterly failed to discharge his statutory duties" as required under the IBC and CIRP (Corporate Insolvency Resolution Process) regulations throughout the proceedings. This failure represented a fundamental breach of the professional oversight that should have safeguarded the integrity of the resolution process.
Committee of Creditors' Lapses
In a particularly significant observation, the bench determined that the CoC had failed to exercise its commercial wisdom properly when approving JSW's resolution plan. According to the judgment, the plan was "in absolute contravention of the mandatory provisions of the IBC and CIRP regulations."
The court further noted that the CoC had taken contradictory positions before the court and had accepted payments from JSW "without any demurer," effectively supporting the implementation of what the court termed an "ill-motivated plan" that worked against creditors' interests.
JSW Steel's Non-Compliance
Perhaps most critically, the judgment highlighted that JSW Steel had secured approval for its resolution plan under "the garb of complying with amendments" to CIRP regulations. More damaging was the court's finding that even after obtaining NCLAT approval, JSW "wilfully contravened and didn't comply with the terms of the approved resolution plan for about two years," an action that the court determined had "frustrated the very object and purpose of the IBC."
Previous Judicial Orders Deemed "Perverse"
The Supreme Court did not mince words in characterizing the earlier judicial decisions in this matter. It declared the NCLT order of September 5, 2019, and the NCLAT judgment of February 17, 2022, as "perverse," lacking jurisdiction, and consequently set them aside.
The judgment stated: "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 and liable to be set aside."
Liquidation Ordered Under Constitutional Powers
In its final determination, the court exercised its powers under Section 33(1) of the IBC and Article 142 of the Constitution to direct the NCLT to initiate liquidation proceedings against BSPL. This rare invocation of the court's constitutional powers underscores the gravity with which it viewed the violations in this case.
JSW Steel's Response
Following the judgment, JSW Steel issued a regulatory filing to the National Stock Exchange and BSE Limited, acknowledging the Supreme Court's decision. The company stated: "We learnt that the Supreme Court pronounced judgment today, i.e., May 2, 2025, rejecting the resolution plan submitted by the company and approved by NCLAT on certain grounds."
The filing further noted that the company was awaiting a formal copy of the order to "understand the grounds for rejection in detail and its implications" before deciding on its next steps.
Market Implications
This ruling has significant implications for ongoing and future insolvency proceedings in India. It establishes a strong precedent regarding adherence to IBC provisions and emphasizes that approvals at lower tribunals do not guarantee protection if fundamental violations of the law are found.
For investors and stakeholders in JSW Steel, the judgment creates uncertainty regarding the company's financial exposure from its prior payments made under the previously approved resolution plan. The court has indicated that these payments, along with any equity contributions, will need to be addressed according to previous statements made by representatives of the CoC.
Broader Impact on India's Insolvency Framework
This judgment reinforces the Supreme Court's role as the ultimate guardian of the IBC's integrity and sends a clear message that procedural compliance cannot be sacrificed in the pursuit of corporate resolutions. It also highlights the responsibilities of resolution professionals and creditor committees to ensure that approved plans strictly conform to legal requirements.
The case ultimately demonstrates that even large corporate entities cannot circumvent the mandatory provisions of India's bankruptcy laws, a principle that strengthens the overall governance framework for corporate insolvencies in the country.
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