In a significant turn of events, Bhushan Power and Steel Ltd. (BPSL) encountered a major legal setback under the Insolvency and Bankruptcy Code, 2016 (IBC). The resolution plan, initially approved by the Committee of Creditors, the National Company Law Tribunal (NCLT), and upheld by the National Company Law Appellate Tribunal (NCLAT), was overturned by the Supreme Court, citing serious procedural flaws.
On May 2, 2025, a two-judge bench in the case of Kalyani Transco vs. Bhushan Power and Steel Ltd. & Ors. set aside the JSW Steel resolution plan. Utilizing Article 142, the Court directed the immediate liquidation of BPSL, emphasizing violations of the IBC's procedural sanctity. This decision effectively nullified prior endorsements from both NCLT and NCLAT.
The ruling has sparked debates on judicial overreach, with critics arguing that liquidation should not have been ordered without allowing for corrections. Concerns are raised about the impact on market confidence in the IBC's predictability and its alignment with the objective of timely resolution and value maximization of distressed assets. Furthermore, the use of Article 142 in such a broad manner raises questions about future legal certainty.
The decision has significant implications for India's steel sector, with BPSL's 4.5 million tonne capacity currently locked. This could potentially disrupt domestic steel supply, affecting both investors and creditors. The judgment may prompt a re-evaluation of higher judiciary's role in insolvency matters, potentially leading to reforms aimed at balancing judicial authority with economic objectives.
The Supreme Court scrutinized whether JSW Steel’s resolution plan adhered to IBC procedures, particularly concerning bidder eligibility and financial structure.
2. Why did the Supreme Court invoke Article 142?The Court leveraged Article 142 to bypass standard appellate procedures and order liquidation, asserting that it was essential to achieve "complete justice."
3. What irregularities were identified?Key irregularities included delayed timelines, lack of bidder evaluation transparency, and the use of OCDs contrary to IBC standards.
4. Why is this verdict considered controversial?The direct liquidation order, without permitting rectification or review, has led to concerns about judicial overreach and predictability in the IBC framework.
5. What role does Article 137 play in this context?Article 137 allows the Supreme Court to review its judgments. However, in this instance, the Court chose to finalize the decision, precluding any review or reconsideration.
6. What are the potential consequences for investors and creditors?This liquidation may delay recoveries, diminish asset value, lock industrial capacity, and undermine creditor confidence in IBC outcomes.
7. What broader significance does the judgment hold?The ruling could trigger a reassessment of how higher judiciary engages in insolvency cases, potentially driving legal reforms to align judicial powers with economic goals.
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