In a dramatic turn of events, the Supreme Court of India has quashed JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power & Steel Ltd (BPSL), ordering the company’s liquidation. This ruling, delivered on May 2, 2025, has stirred deep concerns across India’s corporate and financial sectors.
⚖️ What Happened?
JSW Steel had emerged as the successful bidder for BPSL back in 2018 under the Insolvency and Bankruptcy Code (IBC). The plan was approved by the National Company Law Tribunal (NCLT) and later upheld by the National Company Law Appellate Tribunal (NCLAT). However, the Supreme Court found several procedural and legal lapses that led to the plan’s cancellation.
💡 A Missed Opportunity for Constructive Resolution?
While the Supreme Court’s intent to uphold the sanctity of the IBC is understandable, many experts believe the court could have opted for a more pragmatic approach. Instead of ordering liquidation, the court could have:
- Imposed a Strict Timeline: JSW could have been given a final 30–60 day window to fulfill all payment obligations.
- Levied Penalties: Financial penalties for delays could have been imposed to ensure accountability.
- Acknowledged Value Addition: Since taking over BPSL’s operations, JSW has significantly improved the plant’s performance and set it on a path of revival. This contribution could have been factored into the final decision.
Such a balanced approach would have preserved the economic value created, ensured creditor recoveries, and maintained investor confidence in India’s insolvency framework.
📉 Why This Matters
This ruling could have serious implications:
- Investor Sentiment: The reversal of an approved resolution may discourage future bidders from engaging with distressed assets.
- Banking Sector Impact: Lenders like SBI and PNB, expecting partial recoveries, now face uncertainty.
- JSW’s Expansion Plans: The company may lose 2.75 MTPA capacity in Odisha, potentially impacting its FY25 earnings by ₹4,000–4,500 crore.
🏛️ A Blow to NCLT’s Track Record?
Since its inception, the NCLT has resolved numerous high-profile insolvency cases, playing a crucial role in cleaning up India’s corporate debt. However, the Supreme Court’s strong criticism in this case raises questions about procedural discipline and oversight within the insolvency ecosystem.
🔍 What’s Next?
This verdict is a wake-up call for all stakeholders in the IBC process:
- For Regulators: A need to tighten timelines and ensure better scrutiny of resolution plans.
- For Investors: Greater clarity and legal safeguards are essential to maintain confidence.
- For the Economy: A balanced approach is needed to uphold legal integrity without stifling economic recovery.
🔁 JSW Steel: Awaiting Clarity, Exploring Legal Options
JSW Steel has stated that it is reviewing the Supreme Court’s judgment and will determine its next steps after a detailed legal assessment
Possible actions include:
- Filing a review petition or curative petition in the Supreme Court, especially under Article 137, if there are grounds to argue that the judgment contains errors apparent on the face of the record.
- Negotiating with the government or lenders to explore a fresh resolution plan or settlement outside the IBC framework, possibly under Section 12A (withdrawal of CIRP with creditor consent).
- Seeking interim relief to protect its investments and operational interests in the BPSL plant, where it has already made significant value additions.
🏛️ NCLT: Preparing for Liquidation, But Awaiting Government Input
The Supreme Court has directed the NCLT to initiate liquidation proceedings for BPSL. However, the tribunal may:
- Pause or delay liquidation if the government or lenders propose an alternative resolution mechanism.
- Appoint a liquidator and begin asset valuation and sale processes if no intervention occurs.
- Allow stakeholders to file fresh applications under IBC Sections 7 or 10 if a new resolution is proposed.
🏢 Government of India: Reviewing the Judgment, Considering Policy Response
The Department of Financial Services (DFS) has confirmed that the government is actively reviewing the Supreme Court’s order and consulting with lenders and legal experts
Key considerations include:
- Protecting public sector banks’ interests, as they stand to lose significant recoveries if liquidation proceeds.
- Maintaining investor confidence in the IBC process, which has been a cornerstone of India’s economic reforms.
- Possibly proposing legislative amendments or issuing clarifications to prevent similar outcomes in future high-stake insolvency cases.
✍️ Final Thoughts
While the Supreme Court’s ruling aims to reinforce legal discipline, its harshness may have unintended ripple effects. A more constructive path—such as enforcing compliance with penalties and timelines—could have protected both legal principles and economic value. As India continues to refine its insolvency framework, this case will serve as a critical reference point for future reforms.