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Supreme Court of India set aside JSW Steel’s Resolution Plan for Bhushan Steel and Power Limited; National Company Law Tribunal directed to initiate liquidation proceedings

The Supreme Court of India’s (“Supreme Court”) decision in the case of Kalyani Transco vs M/s Bhushan Steel and Power Limited[1] and connected appeals raises some serious legal issues. We understand from the public domain that parties are considering filing review and curative petitions. Without expressing any views on the judgement, set out below is a summary of the key findings and directions of the Supreme Court. While the implications and implementation of this judgement is yet to fully unfold, the findings summarised below can offer a quick check-point for stakeholders participating in any Corporate Insolvency Resolution Process (“CIRP”).

The Supreme Court set aside the judgment of the National Company Law Appellate Tribunal (“NCLAT”) that upheld the Resolution Plan (“the Plan”) submitted by JSW Steel Limited (“JSW”) for insolvency resolution of Bhushan Steel and Power Limited (“BPSL”).

Procedural infirmities led the Supreme Court to direct the National Company Law Tribunal (“NCLT”) to initiate liquidation proceedings against BPSL; triggering the requirement for JSW to hand- back BPSL and for the creditors to refund the resolution plan recoveries to JSW by COC.

Brief facts

CIRP against BPSL commenced on July 26, 2017, based on an application filed by the Punjab National Bank. Resolution plans were submitted by JSW Steel, Tata Steel, and Liberty House. JSW’s Plan was approved by the Committee of Creditors (“CoC”) and approved by the NCLT on September 5, 2019, subject to various conditions.

Enforcement Directorate (“ED”) provisionally attached BPSL’s assets under the Prevention of Money Laundering Act, 2002 (“PMLA”) on October 10, 2019.

Various parties including, JSW (as the Successful Resolution Applicant (“SRA”)) and some operational creditors appealed against the NCLT approval order. JSW was aggrieved by the conditions imposed by the NCLT while approving the Plan and the operational creditors were aggrieved by the treatment of their claims. JSW also appealed against the attachment of the assets, in light of Section 32A[2] (Liability for prior offences) of the Insolvency and Bankruptcy Code, 2016 (“IBC”).

The NCLAT, as an interim relief, had stayed the Plan in so far it related to creditors payment. Eventually, the NCLAT, vide its decision dated February 17, 2020 (“Impugned Judgment”), allowed JSW’s appeal, upheld the Plan with some modifications and dismissed other appeals challenging the Plan.

Key findings in the Impugned Judgment

• Provisional attachment of assets by the ED under the provisions of PMLA: NCLAT held that ED lacked powers to attach the assets of BPSL after the approval of the Plan since the assets of a corporate debtor are protected under Section 32A of the IBC.
• It is pertinent to note that in a separate proceeding before the Supreme Court, arising out of a challenge by the CoC to the provisional attachment of assets of BPSL[3], the Supreme Court directed the ED to hand over the attached assets to BPSL. The said order was passed by the Supreme Court in light of the peculiar fact that ED had attached the assets after the NCLT had approved the Plan. However, the Supreme Court left open the question regarding the interpretation of Section 32A of the IBC regarding the powers of the ED to attach the property of a corporate debtor which is undergoing insolvency resolution process.
• Statutory dues and waivers: The NCLT, while approving the Plan, had directed that the statutory concessions had to be separately sought by JSW from competent authorities. The NCLAT modified this direction to clarify that all statutory dues, penalties, and charges would stand settled per the approved Plan.
• Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”): The NCLT had directed distribution of EBITDA/profits generated by BPSL during CIRP among the creditors. However, the NCLAT modified this direction and held that the monitoring committee and the Resolution Professional (“RP”) can make distributions of EBITDA as per the ‘Request For Proposal’.
• Treatment of the undecided claims: The NCLT granted the parties, whose claims remained undecided in the Plan, liberty to agitate the same before the appropriate forums. However, the NCLAT, relying on the clean slate theory held that no undecided claims could be raised against the SRA.

Against the Impugned Judgment, multiple appeals were filed before the Supreme Court. These appeals were filed by various operational creditors (M/s Kalyani Transco, Medi Carrier Pvt. Ltd., CJ Darcl Logistics Ltd. and Jaldhi Overseas Pte Limited); Government authorities (Government of Odisha); and Mr Sanjay Singal (erstwhile promoter of BPSL/personal guarantor).

Notably, during the pendency of the civil appeals before the Supreme Court, the Plan continued to be implemented and JSW also made payments as per the terms therein. JSW made part payments to the financial creditors in March 2021 and part payments to operational creditors in March 2022.

Issue

• Appeal maintainability under Section 62 of IBC: Whether operational creditors, ex-promoters, and government authorities had the locus standi to appeal to the Supreme Court under Section 62 of IBC, based on the concept of ‘person aggrieved’ as clarified in Glas Trust Company LLC vs. Byju Raveendran and Ors.[4].
• JSW’s appeal under Section 61 of IBC: Whether JSW, as the successful resolution applicant, could challenge NCLT’s conditions on its approved plan under Section 61(1) & 61(3) of IBC, considering the limited appeal grounds in IBC and as outlined in Sashidhar vs. Indian Overseas Bank and Ors.[5]
• Plan compliance with IBC: Whether the Plan met mandatory requirements of Section 30(2) of the IBC and Regulation 38(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 (“CIRP Regulations”) and the CIRP timelines, especially concerning fair treatment and payment priority to operational creditors.
• Eligibility verification under Section 29A of IBC: Whether the RP properly verified JSW’s eligibility as per Section 29A of IBC and Regulation 39(4) of the CIRP Regulations, including affidavit and Form H submission.
• Jurisdiction over PMLA attachments: Whether NCLT/NCLAT had jurisdiction to interfere with ED’s provisional attachments under PMLA, in light of Embassy Property Developments Private Limited vs State of Karnataka and Ors.^[6] and Section 60(5)(c) of IBC.
• Delay in plan implementation and conduct of SRA/CoC: Consequences of JSW’s delay in implementing the resolution plan and CoC’s inconsistent conduct with respect to the extension of timelines for implementation of the plan in light of State Bank of India vs. Consortium of Murari Lal Jalan and Florian Fritsch and Anr.^[7].
• Compliance by the Stakeholders: Whether the RP and COC fulfilled their obligations as stipulated under the provisions of IBC.

Findings and analysis of the Supreme Court

• Compliance of Section 29A of IBC: Only a person who does not suffer from the disqualifications set out in Section 29A of the IBC is legally eligible to be a successful resolution applicant. The IBC mandates the RP to confirm SRA’s eligibility under Section 29A of the IBC to the Adjudicating Authority.
  In the present case, the Supreme Court held that the prescribed compliance certificate in Form ‘H’ (Schedule of the CIRP Regulations) was not duly filed. Further, there was no certification that the contents of JSW’s eligibility affidavit were in order. There was merely a reference to an annexure to the Plan that only disclosed JSW’s identity, but did not confirm its eligibility.
  The Supreme Court also noted that JSW failed to disclose its joint venture agreement with BPSL relevant for a related party issue under Section 29A of IBC.
  Without conclusively giving any substantive views on the issue of JSW’s eligibility under Section 29A, the Supreme Court found the process followed and filings made by the RP in this regard to be deficient.
• NCLAT’s jurisdiction over PMLA matters (Section 32A of the IBC): Section 32A of IBC provides that the liability of a corporate debtor for an offence committed prior to the commencement of the CIRP will cease, and the corporate debtor will not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority.
  In the present case, the ED passed a provisional attachment order (“PAO”) under PMLA regarding BPSL’s assets after the NCLT had approved the Plan. JSW challenged the PAO before the NCLAT. The NCLAT held that the ED lacked the power to attach assets post-plan approval due to Section 32A of IBC and that criminal investigations against BPSL would abate after approval of the Plan.
  The Supreme Court held that the NCLAT acted without any authority of law and without jurisdiction by reviewing the ED’s decision under PMLA. Relying on the decision in Embassy Property Developments Private Limited vs. State of Karnataka and Ors.[8], the Supreme Court held that decisions of statutory authorities in the realm of public law like PMLA are outside the scope of NCLT/NCLAT’s jurisdiction.
  Pertinently, the Plan in the present case was approved on September 5, 2019, and Section 32A came into effect from December 28, 2019. The NCLAT, in the Impugned Judgment, held that Section 32A of IBC will apply to the present case. However, the Supreme Court limited the present issue to ‘jurisdiction’ and neither analysed the applicability of Section 32A of IBC retrospectively nor discussed merits re: the facts of the case.

• Factual grounds to set aside the Plan: The Supreme Court, thereafter, discussed and analysed various other aspects regarding approval of the Plan by the NCLT and the NCLAT. Some of the important issues which the Court considered to set aside the Plan are as follows:
  • Compliance with Mandatory Timelines (Section 12): The Supreme Court noted the non-compliance with the mandatory timeline under Section 12 of the IBC. The maximum period for completion of the entire CIRP proceedings is 270 (two hundred and seventy) days (including a 90 (ninety) day extension). The CIRP against BPSL commenced on July 26, 2017. The application for approval of the Plan was filed before the NCLT on February 14, 2019. This was after the expiry of the prescribed timeline of 270 (two hundred and seventy) days. Further, no application was filed seeking necessary extension of the CIRP period under Section 12(2) of the IBC.
  • The Plan’s compliances with Section 30(2) if the IBC and Regulation 38 of the CIRP Regulations: The Supreme Court noted that under Regulation 38(1) of the CIRP Regulations, as it stood before amendment on November 27, 2019, the amount due to operational creditors had to be given priority in payment over the financial creditors. The Plan did not comply with this mandatory requirement as the dues of the financial creditors were given priority.
  • Implementation of the Plan: The Plan required an upfront equity infusion of INR 8,550 crore (Indian Rupees eight thousand five hundred and fifty crore) by JSW, which JSW claimed to have fulfilled through equity shares of INR 100 crore (Indian Rupees one hundred crore) and compulsorily convertible debentures of INR 8,450 crore (Indian Rupees eight thousand four hundred and fifty). However, the Supreme Court held that there was no supporting material or affidavit to substantiate this claim and held that the equity commitment, a key factor in JSW securing the highest score, was not complied with.
    The Plan required upfront payments to financial creditors within 30 (thirty) days of NCLT approval (September 5, 2019). These payments were delayed by 540 (five hundred and forty) days and payments to operational creditors by 900 (nine hundred) days.
    The Supreme Court emphasised that the Plan was unconditional and binding, and failure to implement it within the required time, that too in absence of any stay thereof, constituted breach of the terms therein.
    The Supreme Court further held that the commercial wisdom was exercised contrary to the mandatory provisions under the IBC.
  • Maintainability of SRA’s appeal before the NCLAT (Section 61 of the IBC): Section 61 of the IBC provides that ‘any person aggrieved’ by the order of the NCLT may prefer an appeal to the NCLAT on the grounds mentioned in Section 61(3) of the IBC.
    As stated above, JSW approached the NCLAT challenging certain conditions imposed by the NCLT while approving the Plan. The Court observed that since JSW’s Plan was approved, JSW could not be said to be the ‘person aggrieved’ for filing an appeal under Section 61 of the IBC, and if it was against the order of NCLT approving the Plan, the grounds specified in Section 61(3) must exist. Since none of the grounds applied to JSW challenging the approval of its own plan, its appeal before the NCLAT was not maintainable.

Conclusion

The Supreme Court has emphasised the importance of strictly following the timelines and compliances under the IBC and its regulations by the RPs and the CoCs. While not writing down the non- justiciability of ‘commercial wisdom’ of the COC, however, the Supreme Court does prescribe certain guard- rails on its exercise.

The courts have repeatedly held that many of the timelines under the IBC are directory and not mandatory, especially where delay does not affect the overall purpose of the IBC. In the present case, the Supreme Court has mainly relied on procedural lapses and delays to order liquidation. However, these issues may have been addressed by penalising or reprimanding the parties responsible. Liquidation goes against the basic purpose of the IBC, which is to try and keep the company running as a going concern and to resolve its debts in a manner that maximises value for all stakeholders.

The Supreme Court has also highlighted that the credibility of a SRA’s commitment to fully and promptly implement the plan is critical and must be a key consideration for the CoC. The COC is expected to exercise due vigilance in ensuring implementation of an approved resolution plan in strict accordance with its terms. Approving deviations in a plan by the COC, after its approval, in the guise of commercial wisdom is legally untenable.

Moreover, by setting aside a resolution plan that had been approved 6 (six) years ago, the Supreme Court has shown that non-compliance by RPs or failure by CoCs to follow mandatory rules can invalidate the entire resolution process. This may lead to the plan being cancelled and liquidation being ordered, even after partial payments. These directions have been passed by the Supreme Court, exercising its extra-ordinary jurisdiction under Article 142 of the Constitution of India.

This Prism has been prepared by:

Divyam Agarwal Partner

Divyanshu Pandey Partner

Soumitra Majumdar Partner

Pranav Tanwar Senior Associate

Arjun Narang Associate

For more details, please contact [email protected].

[1] Civil Appeal No. 1808 of 2020 decided on May 2, 2025

[2] Inserted in IBC with effect from December 28, 2019; “32A. Liability for prior offences, etc.–(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not– (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court….”

[3] Civil Appeal Nos. 14503-14504 of 2024

[4] 2024 SCC OnLine SC 3032

[5]  (2019) 12 SCC 150

[6] (2020) 13 SCC 308

[7] (2024) SCC OnLine 3187

[8] (2020) 13 SCC 308