JSW Steel acquired Bhushan Power & Steel Ltd (BPSL) as part of an insolvency resolution plan approved by lenders under the Insolvency and Bankruptcy Code (IBC) for approximately ₹19,700 crore. This payment settled BPSL’s outstanding debts, allowing JSW to gain control of its assets. However, the recent Supreme Court ruling has invalidated this resolution plan.
The Supreme Court struck down the resolution plan due to the absence of prior approval from the Competition Commission of India (CCI) before presenting the plan to the Committee of Creditors (CoC). This approval is a legal requirement, and bypassing this step was deemed a violation of the legal process, rendering the plan invalid despite its execution.
For JSW Steel, this ruling constitutes a significant setback. The company had already disbursed ₹19,350 crore to clear BPSL’s debts and integrated BPSL’s Odisha Jajpur plant into its operations. This plant accounted for approximately 13% of JSW’s total output and contributed 10–11% to its earnings before interest, taxes, depreciation, and amortization (Ebitda). The invalidation of this acquisition could result in a reduction of FY26 earnings by ₹4,000–₹4,500 crore, jeopardizing its target to reach a capacity of 50 million tonnes by 2030.
Banks that received payments from JSW are now required to return these funds, affecting both public and private sector lenders. Given that BPSL may proceed to liquidation, banks are likely to recover much less than anticipated under the previous resolution plan. This situation could weaken their balance sheets, particularly for public sector banks, and might influence decisions made by the Reserve Bank of India (RBI) regarding monetary policy.
JSW and the lenders have the option to file a review petition in the Supreme Court within 30 days under Article 137 of the Constitution. While a complete reversal of the ruling is uncommon, there is potential for partial relief, such as clarifying whether JSW can reclaim the funds. A new bench is anticipated to hear this matter in June.
The government is currently assessing legal and policy strategies. There is a possibility of issuing an ordinance to safeguard approved resolution plans from being reopened after implementation. Drawing from recent amendments, the government may also establish statutory protections to enhance stability and minimize legal uncertainties in future insolvency scenarios.
This Supreme Court judgement raises critical questions about the finality of resolution plans under the IBC. If such plans can be annulled after full execution, it poses risks of discouraging potential bidders and lenders from engaging in future insolvency cases. Professionals might adopt a more cautious approach, leading to delays in resolutions. The application of Article 142 to annul a completed resolution plan is viewed as unconventional and could undermine confidence in the IBC framework.
Q1. What was the Supreme Court's main reason for striking down the JSW-BPSL resolution plan?
Answer: The Supreme Court invalidated the resolution plan due to the lack of prior approval from the Competition Commission of India, which is a mandatory legal requirement.
Q2. How does the ruling affect JSW Steel financially?
Answer: The ruling could reduce JSW's FY26 earnings by ₹4,000–₹4,500 crore and threaten its capacity expansion goals, as it already invested heavily in BPSL.
Q3. What must banks do following the Supreme Court ruling?
Answer: Banks that received payments from JSW must return these funds, which could significantly impact their financial stability, especially for public sector lenders.
Q4. Can JSW Steel challenge the Supreme Court's ruling?
Answer: Yes, JSW can file a review petition within 30 days, seeking clarity on whether it can reclaim funds, although full reversals are rare.
Q5. What steps might the government take in response to this ruling?
Answer: The government is considering issuing an ordinance to protect approved resolution plans and may create statutory protections to reduce legal uncertainties in insolvency cases.
Question 1: What is the basis of the Supreme Court's ruling against the JSW-BPSL acquisition?
A) Lack of financial viability
B) Absence of CCI approval
C) Violation of environmental standards
D) Incomplete documentation
Correct Answer: B
Question 2: What percentage of JSW's output did the Odisha Jajpur plant contribute?
A) 5%
B) 10%
C) 13%
D) 20%
Correct Answer: C
Question 3: Which article allows JSW to file a review petition?
A) Article 21
B) Article 137
C) Article 142
D) Article 19
Correct Answer: B
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