SC upholds JSW Steel’s acquisition of Bhushan Power and Steel

The Supreme Court on 26 September upheld the acquisition of Bhushan Power and Steel Limited (BPSL) by JSW Steel Limited, bringing closure to a protracted legal dispute that had delayed the implementation of the resolution plan for over five years.

A three-judge bench led by Chief Justice BR Gavai dismissed a batch of appeals filed by the erstwhile promoters of BPSL and several operational creditors, affirming the National Company Law Appellate Tribunal’s (NCLAT) approval of the resolution plan submitted by JSW Steel.

The court firmly rejected arguments challenging the legitimacy of the Committee of Creditors (CoC), the delay in plan implementation, and the treatment of operational creditors, emphasizing the sanctity of the insolvency process and the commercial wisdom of creditors.

Key takeaways from the judgment

• CoC’s role continues post-approval: The court ruled that the CoC does not become functus officio after a resolution plan is approved by the NCLT. It can continue to oversee implementation until the plan is fully executed or liquidation is ordered.
• No reopening of claims: The bench reinforced that once a resolution plan is approved, no new claims—such as for distribution of EBITDA (earnings before interest, taxes, depreciation, and amortization)—can be introduced. The court cited its 2019 ruling in the Essar Steel case, warning against “hydra heads popping up” after a plan is finalized.
• Delay attributable to external factors: The court found that delays in implementing the plan were due to external factors, including enforcement actions by the ED and ongoing litigation, and not due to any fault of JSW or the CoC.
• CCDs treated as equity: The court accepted that Compulsorily Convertible Debentures (CCDs) issued by JSW qualify as equity infusion, fulfilling the financial commitments under the resolution plan.
• Commercial wisdom paramount: The judgment reiterated that the commercial decision of the CoC is not open to judicial review, unless it violates specific provisions of the IBC.

Background

BPSL was among the 12 large defaulters identified by the RBI in 2017. JSW’s resolution plan was approved by the CoC in October 2018 and by the NCLT in September 2019. However, the process was stalled by multiple legal challenges, including provisional attachment of assets by the Enforcement Directorate (ED) and appeals by erstwhile promoters and operational creditors. The NCLAT had modified certain conditions imposed by the NCLT in February 2020, leading to the current appeals before the Supreme Court.

Court’s Reasoning

The bench observed that the erstwhile promoters had consistently attempted to delay the insolvency process. It also noted that the CoC and JSW had acted in tandem to navigate legal hurdles, including securing clarity on the handover of unencumbered assets from the ED. On the issue of EBITDA, the court noted that neither the request for resolution plan (RfRP) nor the final plan contained any provision for its distribution. Allowing such claims at this stage, the court said, would undermine the finality of the resolution process.

Impact

The ruling provides much-needed certainty to the insolvency ecosystem, assuring successful resolution applicants that they will not be faced with unforeseen claims after a plan is approved. It also reinforces the timeline-bound nature of the IBC and limits the scope for judicial interference in commercial decisions taken by creditors.

With the legal challenges now settled, JSW Steel—which has already infused ₹19,350 crore into BPSL—can focus on fully revitalizing the company, which has been turned into a profit-making entity under its management.

The judgment concludes one of the most high-profile and complex cases under the IBC, setting a precedent for future resolution processes involving similar legal and procedural challenges.

Also See: JSW Steel challenges Supreme Court ruling on Bhushan Power, files review petition