SC restores JSW Steel’s resolution plan for BPSL
The Supreme Court restored JSW Steel's ₹19,700 crore plan for Bhushan Power & Steel, reversing a liquidation order and ensuring clarity in India's bankruptcy code.
The Supreme Court on Friday restored JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power & Steel Ltd (BPSL), reversing its own May verdict that directed liquidation of the debt-laden company in a move that removes all uncertainty over the deal, and reiterates the validity of India’s Insolvency and Bankruptcy Code.
In its judgment, the court reaffirmed the sanctity of committee of creditors (CoC) decisions and sought to bring much-needed clarity to one of the most contentious chapters in India’s bankruptcy regime.
A bench led by Chief Justice of India Bhushan R Gavai held that JSW Steel’s plan, approved by over 97% of lenders in 2018 and cleared by both the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), could not be invalidated merely because its implementation was delayed by circumstances beyond the bidder’s control.
“The Hon’ble Supreme Court has delivered a landmark judgement concerning one of the largest corporate resolutions in the history of the Insolvency and Bankruptcy Code, 2016 (IBC Code) and has preserved the integrity and sanctity of the IBC Code by upholding the finality of implemented resolution plans by successful resolution applicants,” JSW Steel said in a stock exchange filing.
Dismissing challenges by the company’s erstwhile promoters and lenders, the bench, also comprising justices Satish Chandra Sharma and K Vinod Chandran, acknowledged that Enforcement Directorate (ED) attachments of BPSL’s assets between 2018 and 2024 created an insurmountable legal obstacle that justified postponement of payments and infusion of equity. “Our experience shows it may not always be possible to implement a resolution plan within the prescribed period. Extension clauses, when approved by 66% of CoC members, are neither open-ended nor indeterminate,” it held.
The ruling ends uncertainty for JSW Steel, which has already integrated BPSL into its operations, expanded capacity at its Jharsuguda plant, and retained thousands of jobs. It also spares the banking system a fresh round of losses, with creditors set to retain the ₹19,350 crore already distributed.
The ruling further underlined that resolution applicants cannot be penalised for turning around a loss-making entity into a profitable one, just as they would not be entitled to refunds if losses mounted. “The purpose of the IBC Insolvency and Bankruptcy Code) -- to keep the debtor as a going concern, has not only been achieved but the corporate debtor has been transformed into a profit-making entity,” the court noted in its 136-page judgment.
Rejecting the argument of former promoters that the Committee of Creditors (CoC) no longer has authority once a plan is approved, the court held that the CoC’s role extends until full implementation or liquidation. It pointed out that under the current IBBI (Insolvency and Bankruptcy Board of India) regulations, CoCs must constitute a monitoring committee to oversee execution.
“If the contention that the CoC ceases after approval is accepted, it would lead to an anomalous situation wherein creditors are left high and dry if the plan fails midway,” noted the bench, stressing that creditors’ interest continues until dues are actually realised.
Senior advocates Neeraj Kishan Kaul and Gopal Jain represented JSW, along with the legal team from Karanjawala & Co, comprising Nandini Gore and Tahira Karanjawala, among others.
The promoters’ argument that JSW failed to infuse the committed ₹8,550 crore upfront was also rejected. The court accepted the CoC’s stand that issuance of compulsorily convertible debentures (CCDs) worth ₹8,450 crore by JSW’s group company met the equity infusion requirement. Citing precedent, the bench clarified that such instruments qualify as equity.
The court also turned down the lenders’ demand for a share in over ₹6,000 crore BPSL’s interest and earnings before interest, taxes, depreciation, and amortization (EBITDA) accrued during the pendency of litigation. The court made it clear that unless expressly provided in the request for resolution plan (RfRP) or the plan itself, creditors cannot reopen claims after approval. “Permitting such claims at a belated stage would open a Pandora’s Box and do violence to the very intention with which the IBC was enacted,” held the court, accepting JSW’s contention that its bid was made on an “as-is, where-is” basis.
This finding is likely to have wider consequences, as it addresses a recurring demand by lenders to treat corporate insolvency resolution process (CIRP) profits as public funds. The top court clarified that unless specifically provided for in the plan, such profits cannot be retrospectively claimed.
Emphasising that appeals against approved plans are available only on limited grounds under Section 61 of IBC, the court said the promoters’ challenge did not meet the threshold. “Permitting claims not part of the RfRP or plan at a belated stage would frustrate the very purpose of the IBC,” the bench concluded, dismissing the appeals.
The judgment also curtailed the standing of former promoters like Sanjay Singal, who had sought to challenge the plan. The bench ruled that although defaulting promoters can be treated as “aggrieved persons” for the purpose of assailing a resolution plan, their conduct would be a relevant factor in assessing their bona fides.
For IBC, the ruling restores a sense of stability after the turbulence created by the May verdict. By reviving a plan that had already been substantially implemented, the top court has signalled that resolution applicants can rely on the finality of judicial approvals.
For JSW, the decision cements control over an asset central to its growth strategy. For creditors, it ensures preservation of recoveries already made. And for the insolvency ecosystem, it reinforces the principle that resolution, not liquidation, remains the preferred route.
Shruti Kanodia, managing partner at Sagus Legal, welcomed the judgment, saying the verdict restores stability while reinforcing the underlying principles behind the enactment of IBC. “For the creditors and the resolution professionals, this judgement clarifies that issues such as EBITDA distribution should be clearly dealt with in the RFP itself, indicating the primacy of the RFP as the governing document in light of which resolution plans are to be interpreted,” Kanodia told HT.
The bench had reserved judgment on August 11 after rehearing JSW Steel’s review plea. The review arose from the Supreme Court’s 2 May ruling, which had quashed JSW Steel’s resolution plan and ordered BPSL’s liquidation. That decision stunned the financial sector, forcing banks to return ₹19,350 crore already paid by JSW and placing nearly ₹34,000 crore of bank debt at risk.
Invoking its extraordinary powers under Article 142 of the Constitution, a two-judge bench in May had found fault with the plan. But on 31 July, another bench recalled the previous order, acknowledging misapplication of IBC principles, reliance on factual inaccuracies and consideration of arguments that had not been raised during earlier hearings. This paved the way for a fresh hearing and Friday’s verdict, widely seen as JSW Steel’s last opportunity to hold on to BPSL.
BPSL was among the 12 large corporate defaulters identified by the Reserve Bank of India in 2017 after it defaulted on loans worth more than ₹47,000 crore. Following a tightly contested bidding process, JSW Steel emerged in 2018 as the top bidder with its ₹19,700 crore offer, edging past Tata Steel. The plan was cleared by lenders, approved by the National Company Law Tribunal (NCLT) in 2019, and upheld by the National Company Law Appellate Tribunal (NCLAT) in 2020.
However, a series of litigations by dissenting creditors, objections from former promoters, and enforcement proceedings repeatedly delayed the resolution. JSW was finally able to take charge only in March 2021, nearly 900 days after its plan was first approved. Since then, the company claims it has nearly doubled BPSL’s production capacity, from 2.3 million tonnes per annum in 2017 to 4.5 mtpa in 2025.
