Supreme Court Rejects JSW’s Resolution Plan for Bhushan Power & Steel Ltd, Orders Liquidation: Kalyani Transco vs. Bhushan Power & Steel Ltd (2025)

Introduction

Date of the Judgment: May 02, 2025

Judges: Bela M. Trivedi, J., Satish Chandra Sharma, J.

Can a resolution plan be approved if it violates the mandatory provisions of the Insolvency and Bankruptcy Code (IBC)? The Supreme Court of India addressed this critical question in the case of Kalyani Transco vs. M/s. Bhushan Power and Steel Limited & Ors. The court overturned the National Company Law Appellate Tribunal (NCLAT) decision, rejecting JSW Steel’s resolution plan for Bhushan Power & Steel Ltd (BPSL) and ordering liquidation due to significant violations of the IBC and Corporate Insolvency Resolution Process (CIRP) regulations. The judgment was delivered by a two-judge bench comprising Justice Bela M. Trivedi and Justice Satish Chandra Sharma.

Case Background

The case revolves around the Corporate Insolvency Resolution Process (CIRP) initiated against Bhushan Power and Steel Limited (BPSL). Punjab National Bank triggered the CIRP by filing a Company Petition before the National Company Law Tribunal (NCLT), which was admitted on July 26, 2017. An Interim Resolution Professional (IRP) was appointed, who invited claims from stakeholders, leading to the admission of claims worth ₹4,72,04,51,78,073.88 from Financial Creditors and ₹6,21,37,61,735 from Operational Creditors.

JSW, Tata Steel, and Liberty House submitted resolution plans. After multiple negotiations, JSW’s plan was found to have the highest score. However, during the process, the Central Bureau of Investigation (CBI) registered a First Information Report (FIR) against BPSL, its directors, and others for various offenses, leading to the Directorate of Enforcement (ED) registering a case under the Prevention of Money Laundering Act, 2002 (PMLA).

The NCLT approved JSW’s resolution plan on September 5, 2019, subject to certain conditions. Subsequently, the ED provisionally attached BPSL’s assets under PMLA. JSW challenged this attachment before the NCLAT, which initially stayed the attachment order. The Committee of Creditors (CoC) also challenged the attachment in the Supreme Court, which stayed the ED’s order on December 18, 2019.

Various appeals were filed before the NCLAT, which, on February 17, 2020, approved the NCLT’s order with some modifications. This led to the current appeals before the Supreme Court.

Timeline

Course of Proceedings

The NCLT approved the Resolution Plan of JSW with certain conditions and dismissed the applications filed by the erstwhile Directors. JSW challenged some of the conditions imposed by NCLT by filing an appeal before NCLAT. After the approval of the plan by the NCLT, the Directorate of Enforcement (ED) passed an order provisionally attaching the assets of the CD-BPSL under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA). The CoC also challenged the PAO in the Supreme Court, wherein the Court stayed the PAO. Several Company Appeals were also filed by various parties before the NCLAT challenging the order passed by NCLT.

Legal Framework

The judgment refers to several key sections and regulations of the Insolvency and Bankruptcy Code, 2016 (IBC) and other related laws:

• Section 12 of IBC: Deals with the time-limit for completion of the insolvency resolution process.
• Section 29A of IBC: Specifies who is not eligible to be a resolution applicant.
• Section 30(1) of IBC: Requires a resolution applicant to submit a resolution plan along with an affidavit stating eligibility under Section 29A.
• Section 30(2) of IBC: States the requirements that a resolution plan must meet, including payment of insolvency resolution process costs and debts of operational creditors.
• Section 31(1) of IBC: Empowers the Adjudicating Authority to approve a resolution plan.
• Section 61 of IBC: Pertains to appeals and the appellate authority.
• Section 62 of IBC: Addresses appeals to the Supreme Court.
• Regulation 38 of CIRP Regulations, 2016: Specifies the mandatory contents of a resolution plan.
• Regulation 39(1) of the Regulations, 2016: Requires that a Resolution Applicant has to submit a Resolution Plan along with an affidavit stating that he is eligible under Section 29A to submit the Resolution Plan.
• Regulation 39(4) of the Regulations, 2016: States that when the Resolution Plan as approved by the CoC, is submitted by the Resolution Professional, it has to be submitted by him along with a compliance certificate in Form No. H of the Schedule.

Arguments

Arguments by the Appellants (Kalyani Transco, Ex-Promoters, State of Odisha):

• Gross violations of mandatory provisions of IBC.
• Financial Creditors were wrongly prioritized over Operational Creditors.
• The Resolution Plan was indeterminate and unpredictable, leading to delays.
• JSW failed to comply with upfront payment assurances.
• Secured statutory dues of Operational Creditors were treated as unsecured.
• Retention of EBITDA by SRA was incorrect.
• No scope for negotiation between CoC and SRA after plan approval.
• Re-classification of Jaldhi Overseas claim was impermissible.
• NCLT’s direction on EBITDA was wrongly set aside.
• State of Odisha’s claim was drastically reduced without justification.

Arguments by the Respondents (JSW, CoC):

• Comprehensive resolution process resulted in significant payments to Financial and Operational Creditors.
• The Effective Date was extended with the required majority.
• JSW brought in the entire Equity commitment.
• Ex-promoters filed appeals to derail the resolution.
• Implementation issues are beyond the scope of appeals.
• The Resolution Plan did not contemplate distribution of EBITDA.
• No delay in implementing the Resolution Plan.
• Amendment regarding payment priority cannot be applied retroactively.
• State of Odisha failed to file its claim for Entry tax dues properly.
• Jaldhi Overseas was correctly categorized as a contingent creditor.

Issues Framed by the Supreme Court

1. Whether the NCLAT had any powers of Judicial Review over the decision taken by the Statutory Authority under the PMLA?
2. Whether there were gross violations of mandatory provisions of IBC in the entire process of insolvency resolution proceedings at the instance of Resolution Professional, the CoC and SRA -JSW who were in collusion with each other?
3. Whether the Resolution Plan contravened Sections 30(2) and 30(3) of the IBC and therefore was incapable of being enforced or implemented?

Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”

Authorities

The Supreme Court relied upon the following authorities:

• Glas Trust Company LLC Vs. Byju Raveendran and Others [2024 SCC OnLine SC 3032] – Supreme Court of India: Relied upon to define who could be said to be an “aggrieved person” for filing an Appeal before the Supreme Court and before the NCLAT.
• K. Sashidhar Vs. Indian Overseas Bank and Others [(2019) 12 SCC 150] – Supreme Court of India: Considered the jurisdiction of NCLAT as an Appellate Authority under Section 61.
• Embassy Property Developments Private Limited vs. State of Karnataka & Ors. [(2020) 13 SCC 308] – Supreme Court of India: Held that a decision taken by the Government or a statutory authority in relation to a matter which is in the realm of Public Law, cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Section 60(5)(C) IBC.
• State Tax Officer vs. Rainbow Papers Limited [(2023) 9 SCC 545] – Supreme Court of India: Regarding treating the secured statutory dues of the Operational Creditors as unsecured dues.
• Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educomp Solutions Limited and Another [(2022) 2 SCC 401] – Supreme Court of India: On the scope for negotiation between the CoC and the SRA after the approval of the Resolution Plan.
• Swiss Ribbons (P) Ltd. Vs. Union of India [(2019) 4 SCC 17] – Supreme Court of India: On the role of the Resolution Professional.
• Independent Sugar Corporation Ltd. Vs. Girish Sriram Juneja and Others [2025 SCC Online SC 181] – Supreme Court of India: In view of Section 30(2) and 30(3) of the IBC.
• Narender Kumar Maheshwari vs. Union of India [1990 Supp. SCC 440] – Supreme Court of India: CCDs are regarded as Equity instruments.
• Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Others [(2020) 8 SCC 531] – Supreme Court of India: The EBITDA generated during the CIRP period would not go the creditors.
• Ghanshyam Mishra and Sons (P) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657] – Supreme Court of India: Once the Resolution Plan is approved by the NCLT, the plan stands frozen and all such claims which are not a part of Resolution Plan as on that date stand extinguished.
• Ruchi Soya Industries Ltd. vs. Union of India [(2022) 6 SCC 343] – Supreme Court of India: Once the Resolution Plan is approved by the NCLT, the plan stands frozen and all such claims which are not a part of Resolution Plan as on that date stand extinguished.
• Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others [(2019) 2 SCC 1] – Supreme Court of India: Interpreted Section 12 as it stood prior to the amendment.
• ESSAR Steel India Ltd. Committee of Creditors Vs. Satish Kumar Gupta [2020(8) SCC 531] – Supreme Court of India: Dealt with the two provisos subsequently inserted in Section 12 by the Act 26 of 2019 .
• State Bank of India and Others Vs. Consortium of Murari Lal Jalan and Florian Fritsch and Another [(2024) SCC OnLine 3187] – Supreme Court of India: Made observations with regard to the delaying tactics adopted by the Successful Resolution Applicant in implementing the Plan.

Judgment

How each authority was viewed by the Court?

• Glas Trust Company LLC Vs. Byju Raveendran and Others [2024 SCC OnLine SC 3032]:* The court relied on this authority to determine who qualifies as an “aggrieved person” for filing appeals.
• K. Sashidhar Vs. Indian Overseas Bank and Others [(2019) 12 SCC 150]:* The court referred to this case to consider the jurisdiction of NCLAT as an Appellate Authority under Section 61 of the IBC.
• Embassy Property Developments Private Limited vs. State of Karnataka & Ors. [(2020) 13 SCC 308]:* The court cited this authority to emphasize that matters falling within the realm of Public Law cannot be brought under Section 60(5)(C) of the IBC.
• Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others [(2019) 2 SCC 1]:* The court used this case to interpret Section 12 of the IBC as it stood prior to its amendment.
• The court held that the observations made and the findings recorded by the NCLAT in the impugned judgment with regard to the PAO dated 10.10.2019 passed by the Directorate of Enforcement under the PMLA, being without any authority of law and without jurisdiction, were *coram non judice*.

What weighed in the mind of the Court?:

The Supreme Court’s decision to reject JSW’s resolution plan and order liquidation for Bhushan Power & Steel Ltd (BPSL) was primarily influenced by several critical factors. The Court found that the Resolution Professional, the Committee of Creditors (CoC), and JSW had engaged in actions that undermined the integrity of the insolvency resolution process. The Court emphasized that the Resolution Professional had failed to discharge his statutory duties, the CoC had not exercised its commercial wisdom in approving the Resolution Plan, and JSW had misrepresented facts and delayed implementation.

The Court also highlighted the importance of adhering to the timelines prescribed under the IBC. The Resolution Professional’s failure to seek an extension of time under Section 12 of the IBC and the subsequent delay in filing the application for approval of the Resolution Plan were viewed as significant lapses. The Court noted that the CoC had failed to protect the interests of the creditors by taking contradictory stands before the Court and supporting JSW’s ill-motivated plan.

Furthermore, the Court emphasized that the Resolution Plan should have complied with the mandatory requirements of the IBC and CIRP Regulations. The fact that the Resolution Plan did not provide for the payment of debts to the Operational Creditors in priority and that JSW had misrepresented facts regarding its eligibility under Section 29A of the IBC weighed heavily in the Court’s decision.

In summary, the Court’s decision was driven by the need to ensure adherence to the statutory framework of the IBC, protect the interests of all stakeholders, and prevent the misuse of the insolvency resolution process.

Fact:Law Ratio

Logical Reasoning

Issue: Was the Resolution Plan in compliance with the mandatory requirements of the IBC?

Conclusion

The Supreme Court’s judgment in Kalyani Transco vs. M/s. Bhushan Power and Steel Limited & Ors. underscores the critical importance of adhering to the mandatory provisions of the Insolvency and Bankruptcy Code (IBC) and the Corporate Insolvency Resolution Process (CIRP) regulations. The Court’s decision to reject JSW Steel’s resolution plan for Bhushan Power & Steel Ltd (BPSL) and order liquidation reflects its commitment to upholding the integrity of the insolvency resolution process and protecting the interests of all stakeholders. The judgment serves as a stern warning against any attempts to circumvent or manipulate the IBC for personal gain.

The judgment also highlights the responsibilities of various parties involved in the CIRP, including the Resolution Professional, the Committee of Creditors (CoC), and the Resolution Applicant. The Court emphasized that the Resolution Professional must discharge his statutory duties diligently, the CoC must exercise its commercial wisdom prudently, and the Resolution Applicant must act in good faith and comply with the terms of the Resolution Plan.

Overall, the Supreme Court’s decision in this case reinforces the principles of fairness, transparency, and accountability in the insolvency resolution process. It serves as a reminder that the IBC is not merely a tool for debt recovery but a comprehensive framework for resolving financial distress and promoting economic stability.