Mint Interpreter: The Supreme Court's Bushan Power Ruling Shocks India's Break Ecosystem
The receiving end of the ruling is JSW Steel Co., Ltd. The company has won BPSL by winning among India's largest steel manufacturer ₹In 2021, Rs 19,000 crore of capital was injected into capital and gained control of its assets, but it has now been found that its plans have been cancelled.
The Supreme Court judge led by Justices Bela Trivedi and Satish Sharma effectively demanded liquidation of the BPSL, which marked the huge end of the longest bankruptcy case under India's bankruptcy and bankruptcy laws.
Mint breaks the key aspects of the judgment, the reasons behind it, the immediate impact and the ruling that could redefine India's bankruptcy solution.
What does the Supreme Court rule?
Supreme Court invalidates JSW steel ₹The Rs 19,355 crore settlement plan violates the key provisions of the Bankruptcy and Insolvency Act.
The ruling was based on several requests against the JSW Steel Plan, including those submitted by former promoter Sanjay Singal, operating creditors Kalyani Transco and Odisha State.
The Supreme Court found that JSW Steel had delayed its implementation, failed to pay creditors and tried to bypass its obligations. It also criticized the creditors committee for approving the plan.
Using IBC Article 142, the Court directed the National Corporate Law Tribunal (NCLT) to initiate a new liquidation process, effectively ending the opportunity for BPSL to revive under the existing solution plan.
“JSW made a dishonest and fraudulent attempt to abuse the court process without making advance payments for about two and a half years, thus enriching itself unfairly, and then considering the rising steel prices in the market, JSW sought to comply with the imminent stage and comply with the provisions of COCT, and made provisions in COCS, and made provisions in COCS, and made “COC” in COC, and ruled the COC in COC,” the trial.
What is the specific reason behind the decision?
The Supreme Court cited several serious mistakes to prove its decision to cancel the resolution plan against Bhushan Power and Steel:
- A clear violation of the statutory schedule, as the resolution plan far exceeds the 270-day limit and is not sought in a timely expansion under IBC Article 12(2).
- The court also found that JSW Steel unfairly enriches itself by delaying payments from creditors while benefiting from favorable market conditions such as rising steel prices.
- JSW Steel's resolution plan violates IBC's rules and fails to prioritize operating creditors, which the court considers as fundamental violation of bankruptcy rules.
- The court also noted that there could be collusion between JSW Steel, Bhushan Power’s resolution professionals and the creditors committee, which emphasized process manipulation of financial advantages and failure to comply with the planning obligations until conditions become favorable.
“This blatant violation of the terms of the settlement plan, frustrating the purpose and purpose of the code,” the court said.
Read also | A series of court orders changed the bankruptcy rules. Now, the government is revising the law
Why is the judgment a surprise?
Bankruptcy experts say the Supreme Court's ruling is unprecedented because it effectively sent a company (a revival through a court-approved plan five years ago). They said the ruling not only undermined the settlement process, but also raised concerns about the future of India's bankruptcy proceedings.
“After five years (five), the reverse resolution plan introduced unprecedented elements of retrospective disruption,” said Ritesh Kumar Adatiya, director of NPV bankruptcy Professionals. “It not only questioned the sanctity of approved plans, but also put business decisions at risk. Relaxation of such transactions brings monetary costs, reputational losses and systematic inefficiency.”
Adatia also stressed that the ruling could shake confidence in the bankruptcy process, thus making stakeholders more cautious. “The ruling weakens the confidence of key stakeholders… The COC may hesitate to make a decision, and solution applicants may become more risk averse. The process may now become cautious and prolonged, beating the goal of a time-limited solution.”
Other legal experts have also put forward similar opinions:
“Investors who rely on the IBC termination principle and clean slate theory to avoid post-trade liabilities may face legal risks even after successful implementation. This may make participation in the non-performing asset market and make investors more cautious when making plans for resolutions.” – Yogendra Aldak, partner of attorney Lakshmikumaran and Sridharan
“Intervention over so many years of intervention has filled another IBC regulation with uncertainty… lenders may be wary of decisions, and SRAS (successful solution applicants) may hesitate to submit plans.” – Sushmita Gandhi, Partner, Industry
Shashank Agarwal, an advocate for the Delhi High Court, said the IBC needed reforms to effectively monitor the implementation of solutions, indicating that there are gaps in the current system in monitoring and ensuring timely implementation of approval plans.
However, some attorneys suggest that while the ruling may be harsh, it conveys an important message to stakeholders.
Amir Bavani, founder of AB Legal, said: “The Supreme Court has sent a clear message that the COC cannot continue to change its position. Resolution applicants must stick to the timetable and cannot extend the implementation of the plan once approved by the ruling authority.”
Read also | IBBI cracks whip on twelve bankrupt professionals
Can the Supreme Court review its ruling?
According to lawyers, creditors and the JSW Steel Commission can seek review of the judgment because the Supreme Court reserves the power to review its own decisions under Article 137 of the Constitution.
But, lawyers say, worrying about far-reaching consequences itself cannot be reviewed immediately. “Unless it can be proven that the ruling would cause systemic damage or lead to serious injustice, it is not necessary to review immediately,” said Tushar Kumar, a lawyer at the Supreme Court.
Why did the ruling deal a huge blow to JSW steel?
The judgment is a major setback for JSW Steel, which owns 83.3% of Bhushan Power and Steel. Obtained around ₹BPSL’s 2.5 million tons per year (MTPA) Jharsuguda plant is the core of JSW Steel Plant, accounting for about 13% of its capacity and 10-11% of its consolidated EBITDA.
The ruling puts JSW Steel's revenue, operational control and expansion plans at risk, potentially affecting cash flows and debt services. JSW Steel has achieved expected growth from the expansion of BPSL, but uncertainty now threatens its goal of reaching 45 MTPA steel manufacturing capacity by 2030.
What factors lead to the Supreme Court’s ruling?
Bhushan Power, founded in the late 1970s by Sanjay Singal, grew from a small steel processing department to one of the major secondary producers in India. It specializes in the manufacture of cold steel belts, pipes, pipes, human resources coils and alloy steel products. In the 2000s and early 2010s, BPSL made an active expansion, especially in Odisha, and was supported by large-scale borrowings from public sector banks.
However, its overly ambitious growth plans, coupled with delays in execution and a recession in the steel sector, have caused serious financial pressure. By 2017, BPSL had defaulted on more than loans ₹Rs 470 crore, prompting the RBI to classify it as the “dirty twelve”, which is a list of accounts for the top 12 companies that do not perform.
That year, BPSL was admitted to the bankruptcy process under IBC. JSW Steel becomes the bidder for Bhushan Power, who successfully bid in 2019 ₹1970 billion resolution plan.
JSW Steel's resolution plan against Bhushan Power was first approved by NCLT. However, Singal, as well as several operating creditors including Jaldhi Overseas, Medi Carrier and Kalyani Transco, challenged the solution to the National Corporate Law Appellate Court (NCLAT) (NCLAT) (NCLAT) (NCLAT) (NCLAT) and alleged that transnational claims denial and lack of cross-cross copy.
Odisha state also seeks to recover ₹1.39 million in admission tax, although it was rejected over time. In addition, CJ DARCL Logistics also questioned the claims collation process of the resolution professionals.
In February 2020, NCLAT maintained the resolution plan and rejected all objections. This led to the relocation of the Supreme Court by the opposition parties, including Singal and Kalyani Transco, in March 2020. On Friday, the Supreme Court was in their favor and stopped JSW Steel's plans.
In this case, what is the role of the law enforcement bureau?
The Enforcement Bureau also ignited attachment to BPSL assets due to money laundering investigations on former salesmen of the company. ED initially attached these assets under Section 5 of the Money Laundering Act (PMLA), accusing the former salesman of BPSL who had transferred bank loans to personal interests.
The COC challenged ED's actions, believing it violated the IBC provisions of the applicant for protection resolution. NCLAT also rejected ED claims in its ruling.
ED later withdrew its objection, citing Section 32A of IBC, which provides immunity to applicants for resolutions that have previously been liable for management. In December 2024, ED chose not to challenge JSW Steel's takeover of BPSL.
Following the directions of the Supreme Court of December 11, 2024, ED returns assets of value ₹JSW Steel's Rs 40,250 crore cleared the way for the implementation of the solution plan.
Read also | Does the creditors committee in bankruptcy cases require a supervisory body?
