Supreme Court Recalls its Liquidation Order for Bhushan Power, JSW Resolution Plan to be Considered Afresh: In a significant development, the Supreme Court of India on Thursday recalled its controversial May 2 judgment that had rejected JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL) and ordered its liquidation. The Court’s decision marks a turning point in the protracted insolvency saga surrounding the troubled steel company, with fresh scrutiny set to be given to the resolution plan.
The Bench, headed by Chief Justice of India (CJI) BR Gavai and Justice Satish Chandra Sharma, expressed concerns that the earlier judgment had not properly considered the legal framework, leading to a reconsideration of both the facts and legal interpretations involved.
“Prima facie, we are of the view that the impugned judgment does not correctly consider the legal position as has been laid down in a series of judgments. Moreover, various factual aspects have been overlooked, and arguments that were not raised in court were considered,” the Court remarked, underscoring its decision to review the May 2 ruling.
The matter will now be taken up for detailed hearings on August 7, during which the Court will delve deeper into the review petitions challenging the original judgment.
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A Saga of Financial and Legal Hurdles
The story of BPSL, once a significant player in India’s steel industry, has been marred by a prolonged battle in insolvency courts. JSW Steel, one of the largest steel manufacturers in India, had emerged as the highest bidder for BPSL in 2019, offering to pay over ₹19,000 crore to BPSL’s financial creditors under the Insolvency and Bankruptcy Code (IBC). This was seen as a much-needed lifeline for a company that had been mired in financial difficulties, owing substantial amounts to its creditors.
JSW Steel’s resolution plan for BPSL was approved by the National Company Law Tribunal (NCLT) in 2019 and upheld by the National Company Law Appellate Tribunal (NCLAT) despite challenges from regulatory bodies, including the Enforcement Directorate (ED). However, the situation took a dramatic turn on May 2, when the Supreme Court ruled that the resolution plan violated the IBC and rejected it, directing BPSL’s liquidation.
The Supreme Court’s ruling was based on concerns that JSW Steel had not fulfilled post-approval obligations essential for the resolution process. The Court pointed out that the resolution process should be time-bound, and any delay could undermine the objectives of the IBC, which is designed to expedite the resolution of insolvency cases and maximize asset value. In this case, BPSL had continued to face operational difficulties, and the Court raised questions over the delay in implementation.
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Further complicating the matter were allegations from the Enforcement Directorate, which had accused BPSL’s former promoters of defrauding banks and diverting funds for personal use. The ED had challenged the resolution plan, attaching assets of BPSL under the Prevention of Money Laundering Act (PMLA). This led to additional legal battles, including the freezing of assets worth ₹4,025 crore.
Despite these challenges, JSW Steel had continued to run BPSL since 2021, employing 25,000 people and investing ₹30,000 crore in the company. Senior Advocate Neeraj Kishan Kaul, representing JSW Steel, argued that the company had brought BPSL back to health, cleared all dues, and increased the company’s turnover, thus making it an operational success. Kaul emphasized that the earlier judgment had raised doubts without addressing the substantial contributions made by JSW to the company’s revival.
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Legal Debate and Concerns
During Thursday’s hearing, Solicitor General Tushar Mehta, representing the Committee of Creditors (CoC), took issue with the Supreme Court’s earlier findings, suggesting that no substantial legal questions had been raised and that the judgment was based on unfounded doubts. “Section 29A of the IBC, which disqualifies a resolution applicant, was not even pressed in this case,” Mehta pointed out, referring to a provision that could have disqualified JSW Steel if it had been applicable. Mehta further argued that the judgment’s findings on this matter were misplaced, given that Section 29A was not in contention during the hearings.
CJI Gavai expressed agreement with the gravity of the situation, acknowledging the need to consider the larger picture. “Twenty-five thousand people cannot be thrown on the road,” he noted, highlighting the employment and economic implications of the liquidation order.
Senior Advocate Kaul also questioned the use of Article 142, a provision that allows the Court to pass orders to do complete justice in any case, to overturn the approval of the resolution plan. Kaul argued that the Court’s reliance on arguments that had not been raised during the hearings was a cause for concern.
Another significant point raised during the hearing was the delayed implementation of the resolution plan, attributed in part to the ED’s actions, including the attachment of assets. Kaul informed the Court that the provisional attachment of assets had caused prolonged litigation and further delays in the resolution process.
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ED’s Changing Stance
In a twist to the saga, the Enforcement Directorate had, in December 2024, decided not to pursue its appeal against JSW Steel’s takeover of BPSL. The ED also returned the attached assets worth ₹4,025 crore to JSW Steel, enabling the company to take full control of BPSL as per the resolution plan approved under the IBC. This change in the ED’s stance was made possible by Section 32A of the IBC, which grants immunity to the corporate debtor and its assets from prosecution and attachment after a resolution plan is approved.
Despite the complexities of the case, the shift in the Supreme Court’s approach signals a more pragmatic consideration of the broader economic impact, including the employment and financial stability that JSW Steel’s involvement has brought to BPSL. As the matter moves forward for a detailed hearing in August, the fate of 25,000 employees and the future of Bhushan Power remain in the balance.
What Lies Ahead?
The Supreme Court’s decision to review its earlier ruling offers hope for the stakeholders involved, particularly for JSW Steel and the 25,000 workers at BPSL. With the larger economic and legal implications at stake, the upcoming hearings will be crucial in determining the fate of Bhushan Power and Steel Ltd, as well as setting important precedents for future corporate insolvencies in India.
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