The Supreme Court has cancelled JSW Steel’s resolution plan for Bhushan Power and Steel, calling it illegal. It ordered the company’s liquidation for failing to comply with IBC norms.
New Delhi: On Friday, the Supreme Court of India cancelled JSW Steel’s resolution plan worth ₹19,700 crore for Bhushan Power and Steel Ltd (BPSL), calling the plan “illegal.” The Court also ordered that BPSL should now go into liquidation.
The bench of Justices Bela M. Trivedi and Satish Chandra Sharma gave the judgment, stating that the Committee of Creditors (CoC) made a mistake by approving the resolution plan submitted by JSW Steel.
According to the judges, the approval violated the rules and objectives of the Insolvency and Bankruptcy Code (IBC). The Court said that the CoC “erred in approving JSW Steel’s plan” and that it was “in violation of the Insolvency and Bankruptcy Code (IBC).”
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JSW Steel was declared as the successful resolution applicant for BPSL in 2019. At that time, the company had promised to pay more than ₹19,000 crore to the financial creditors of BPSL.
The National Company Law Tribunal (NCLT) had approved the resolution plan in September 2019, and later, the National Company Law Appellate Tribunal (NCLAT) had also upheld it.
Even though several legal challenges were raised, including objections from the Enforcement Directorate (ED), the plan stayed approved.
The case eventually reached the Supreme Court, especially because JSW Steel had not taken control of BPSL or implemented the plan in the years following its approval.
The Court was concerned about this delay, which defeated the core purpose of the IBC law. According to the Court, the delay affected key goals such as completing insolvency resolution within a fixed timeline and getting the best value for the company’s assets.
The judges noted that,
JSW Steel “failed to fulfill essential post-approval obligations, undermining the very objectives of the IBC, which includes time-bound resolution of insolvency and maximization of asset value.”
Back in December 2024, the ED had already decided not to continue with its appeal in the Supreme Court against JSW Steel’s takeover of Bhushan Power and Steel. Following this, the ED also gave back the assets of BPSL that it had earlier attached.
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These properties were worth ₹4,025 crore. The return of the assets was done so that JSW Steel could complete the takeover under the insolvency resolution process as per IBC.
This action came after the Supreme Court passed an order on December 11, 2024, telling the ED to return the properties of Bhushan Power.
This order came after the ED confirmed that it would not be challenging JSW Steel’s plan any longer.
The Court had said,
“directing ED to hand over the attached properties of Bhushan Power, after the central agency decided not to pursue its case against Bhushan.”
Earlier, the ED had taken control of BPSL’s assets under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA). The reason for this was that the former owners of BPSL were accused of cheating banks and misusing the money for personal use.
While the corporate insolvency resolution process (CIRP) was going on, the Committee of Creditors (CoC) had raised objections against the ED’s attachment of assets. They said it was going against the IBC law, which gives certain protections during the resolution process.
On the other hand, the ED had also opposed the resolution plan of JSW Steel. The agency argued that the properties which were attached under the PMLA were “tainted” and could not be handed over.
But the turning point came when the ED changed its stand and withdrew its challenge. This happened due to Section 32A of the IBC. This new section was added to the IBC in December 2019.
It provides that once a company’s resolution plan is approved, its assets and the company itself are protected from being punished or attached in the future. This section helps new buyers of insolvent companies by giving them a clean start.
According to Section 32A, if the new owners had no role in the previous fraud, then they cannot be punished, and the assets also cannot be attached. Based on this rule, the ED gave up its objections and returned the properties.
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At first, the ED had claimed that this special protection under Section 32A should not apply in this case. Their reason was that they had attached the properties before Section 32A came into force. But later, they changed their opinion and withdrew the case.
The ED’s earlier view was,
“this immunity should not apply to the Bhushan Power case, as the asset attachment by the ED preceded the introduction of Section 32A.”
But later, the ED changed its mind and “withdrew its challenge citing Section 32A of IBC.”
Now, the Supreme Court’s decision to declare the entire resolution plan as illegal and order the liquidation of BPSL is a major development.
It shows that even if a resolution plan is approved by the NCLT and NCLAT, it must still follow all rules of the IBC. Delays in implementation and violation of legal duties can still lead to cancellation.
A detailed copy of the judgment is still awaited.
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