Supreme Court Sets Aside JSW Steel’s Resolution Plan for BPSL

In a significant judgment on the conduct of insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), the Hon’ble Supreme Court of India in the case of Kalyani Transco vs. M/s Bhushan Steel and Power Ltd. and connected appeals (2025 SCC OnLine SC 1010), dated May 2, 2025, set aside the resolution plan of JSW Steel for Bhushan Power and Steel Ltd. (BPSL), holding that it was approved in contravention of the statutory scheme of the Code and that no party, including successful resolution applicants, can be permitted to misuse the process of law or act in disregard of binding commitments.

The insolvency proceedings against BPSL were initiated by Punjab National Bank and admitted by the National Company Law Tribunal (NCLT) on July 26, 2017. A Committee of Creditors (CoC) was constituted, and a resolution professional (RP) was confirmed. Multiple resolution plans were received, and the consolidated plan of JSW Steel was approved by the CoC in October 2018. However, the RP filed the application for approval of the resolution plan before the NCLT on February 14, 2019. Meanwhile, investigations were initiated by the Central Bureau of Investigation and the Enforcement Directorate (ED) against BPSL and its directors, leading to attachment of assets under the Prevention of Money Laundering Act, 2002 (PMLA).

On 5 September 2019, the NCLT approved the resolution plan with several conditions. JSW Steel challenged these conditions before the National Company Law Appellate Tribunal (NCLAT), which allowed JSW’s appeal and modified the conditions. Other stakeholders including Kalyani Transco (the appellant), the State of Odisha, and former promoters challenged the NCLAT’s judgment before the Supreme Court, which heard a batch of appeals on the matter.

The Court noted that the corporate insolvency resolution process (CIRP) was admitted on July 26, 2017, and that the statutory period for completion of the resolution process expired on April 22, 2018. The resolution plan was filed for approval only on February 14, 2019, nearly ten months after the expiry of the permissible time period. No valid extension was obtained, and the delay was held to be in breach of the mandatory timelines under the Code. The Court concluded that the application for approval of the plan ought not to have been entertained by the NCLT.

The Court further held that the RP failed to discharge his statutory duties under Chapter III of the Code by not filing applications for avoidance of preferential, undervalued, extortionate or fraudulent transactions, despite BPSL being among the RBI’s list of high-risk defaulters. The Resolution Professional also failed to verify the eligibility of JSW Steel under Section 29A of the IBC, did not certify that the resolution plan conformed to the requirements under Section 30(2) of the Code, and omitted to submit the compliance certificate in Form H as mandated under Regulation 39(4) of the CIRP Regulations. The resolution plan itself contravened Regulation 38(1) by not giving priority to operational creditors as required under the then-prevailing legal framework.

The Court was also critical of the conduct of the CoC, observing that it failed to apply its commercial wisdom in accordance with the law. The CoC’s change in stance from initially criticising JSW for non-implementation of the resolution plan to later accepting a belated payment without objection was viewed as lacking bona fides and raised serious doubts about its decision-making process. The Court held that commercial wisdom must reflect a legally compliant and reasoned decision, not mere acquiescence to procedural defaults.

The conduct of JSW Steel was also found to be dishonest and lacking in good faith. After obtaining approval, JSW delayed implementation of the plan for over two years despite no legal impediment or stay order. The Court held that JSW misused the judicial process to delay its obligations under the plan, benefiting from improved market conditions while creditors remained unpaid. The Court observed that the resolution plan was meant to be unconditional and binding under Section 31, and such non-compliance defeated the purpose of the Code.

The Court reiterated that the silence of the IBC regarding implementation timelines does not entitle the resolution applicant to act in disregard of binding obligations. It stressed that any contravention of an approved plan is punishable under Section 74(3) and that failure to submit or approve a compliant resolution plan within the prescribed period requires liquidation under Section 33. The Court rejected any defence based on fait accompli, holding that illegality cannot be justified by passage of time or procedural delay.

The judgment reinforces the centrality of statutory discipline and fair process in insolvency resolution.