On 2 May 2025, the Supreme Court delivered its judgment in respect of the corporate insolvency resolution process of Bhushan Power and Steel Limited (“BSPL”). In a very significant ruling, the apex court rejected the resolution plan of JSW Steel Ltd. (“JSW”) for BSPL and directed the liquidation of the corporate debtor, almost five years after the plan had been approved by the Committee of Creditors and the NCLT and the Resolution Plan had been implemented.

Facts and Background
The corporate insolvency resolution process (“CIRP”) against BPSL was initiated by Punjab National Bank, pursuant to the Reserve Bank of India’s directive dated 13 June 2017 mandating initiation of insolvency proceedings against twelve major defaulting accounts, colloquially referred to as the "dirty dozen." The application was admitted by the NCLT on 26 July 2017.
Claims admitted under the CIRP amounted to over INR 47,000 crores by financial creditors and over INR 621 crores by operational creditors. Resolution plans were submitted by Liberty House, Tata Steel, and JSW, with JSW scoring the highest as per the Committee of Creditors’ (“CoC”) evaluation matrix.

Following negotiations with a core committee of lenders, JSW submitted a consolidated resolution plan followed by an amendment letter. The resolution plan, as amended (“Resolution Plan”), was approved by the requisite majority of the CoC through e-voting. The NCLT vide order dated 5 September 2019, approved the Resolution Plan subject to certain conditions. JSW filed an appeal with the NCLAT in respect of the conditions stipulated by the NCLT.

On 2 February 2020, the NCLAT upheld the approval of the Resolution Plan with certain modifications to the NCLT’s conditions. Aggrieved by the NCLAT’s order, certain persons including the erstwhile promoters of BPSL, certain operational creditors, and the Government of Odisha preferred appeals before the Supreme Court.

The Supreme Court admitted the appeals on 6 March 2020 and while doing so, it recorded a statement from Senior Advocate Dr. Abhishek Manu Singhvi appearing on behalf of the CoC, undertaking to refund any amounts received within two months in the event the appeals were allowed.

JSW made payments to financial creditors on 26 March 2021 and to operational creditors in March 2022.

Key reasons why the Court rejected the Resolution Plan

Some of the key reasons why the Court rejected the Resolution Plan and ordered the liquidation of BPSL include:

• Non-Compliance with Section 29A:
  The Court noted that the RP had not submitted the mandatory Compliance Certificate in Form ‘H’ verifying JSW’s eligibility under Section 29A of the IBC. The Court emphasized that the eligibility of the resolution applicant goes to the root of the matter, and the failure to properly verify and certify the affidavit raised serious doubts about JSW’s eligibility.

It is notable that while non-compliance with the procedure for certification of eligibility was held to be a significant lapse on the part of the RP, there were no findings on JSW’s ineligibility.

• Non-Compliance with mandatory provisions: The Court found gross violations of the IBC’s mandatory provisions and regulations at every stage of the CIRP as well as non-compliance by JSW with the provisions of the Resolution Plan. Some of the more significant IBC non-compliances highlighted by the Court include:

• • CIRP timelines under Section 12: In this case the Resolution Plan was filed with the NCLT for approval one and half years after the date of admission. Referring to Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta & Ors. 1 , the Court stressed the mandatory nature of the timelines in Section 12 and held that the failure to adhere to this timeline, without seeking an extension under Section 12(2), warranted the initiation of liquidation proceedings under Section 33. This stance contrasts with the Court’s approach in the Essar Steel case 2 , where it recognized that while the timeline is mandatory, extensions could be granted in exceptional circumstances. Similarly, in the Amtek Auto case 3 , the Supreme Court acknowledged delays in the resolution process but refrained from directing liquidation, instead allowing the resolution process to continue.

Although the Court referred to its judgment in the Essar Steel case, it however concluded that the NCLT committed a grave error in law in approving the plan, given the Section 12 violation.As per the latest IBBI Quarterly Newsletter (October – December 2024), the 1119 CIRPs, which have yielded resolution plans by the end of December, 2024 took, on an average, 585 days (after excluding the time excluded by the Adjudicating Authority) from the date of admission to the date of approval by the Adjudicating Authority. As such it appears that the Supreme Court has applied much stricter standards with respect to compliance with timelines in this particular case.

• • Non-Compliance with Section 30(2) and Regulation 38 of the CIRP Regulations, 2016:

The Court observed that the Resolution Plan violated the IBC and the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (“CIRP Regulations”) by failing to treat operational creditors in accordance with statutory mandates. Specifically, it failed to prioritize operational creditors over financial creditors, contrary to the requirement under Regulation 38 of the CIRP Regulations and Section 30(2) of the IBC (as it then stood).

It is noteworthy that one of the conditions imposed by the NCLT while approving the Resolution Plan is that the payment to the operational creditors should be made in compliance with Section 30(2) of the IBC as amended by the IBC Amendment Act, 2019. The amended provision read with Regulation 38 of the CIRP Regulations included a similar requirement regarding payment to the operational creditors to be made in priority to the financial creditors.

While the NCLAT modified several of the conditions imposed by NCLT, this was not altered. In light of this, the resolution plan that was required to be implemented by JSW, post the modifications made by NCLT and NCLAT, had compliance with Section 30(2) as a stipulation.

The Supreme Court, while holding that the Resolution Plan was not in compliance with Section 30(2), did not make any reference to this condition imposed by the NCLT. JSW while implementing the plan, paid the operational creditors only in March 2022, a year after payments to the financial creditors. This raises the question whether this was an issue of non-compliance with the approved plan or invalidity of the plan itself.

• Conduct of CoC and exercise of Commercial Wisdom:

The Court held that the CoC did not verify the feasibility, viability, or legal compliance of JSW’s Resolution Plan. The Court highlighted serious procedural lapses in how the CoC conducted its meetings—particularly during the 18th and 19th sessions. JSW was allowed to revise its resolution plan after the evaluation process, and though it received the highest score, it was never formally declared the H1 bidder. The revised consolidated plan by JSW was submitted, with negotiations taking place between a core committee, comprising a small group of lenders, and JSW, and despite opposition from financial and operational creditors, the process was pushed forward.

Further, the CoC changed its stance multiple times, initially demanding immediate implementation by JSW, but later facilitating unauthorized extensions without formal documentation or justification. The Court also criticized the CoC for accepting payments from JSW without demur or asking for any interest payment, despite earlier grievances about the delay.

The Court emphasized that the commercial wisdom of the CoC is not merely rhetorical or discretionary but must be a well-considered decision aligned with the statutory objectives of the IBC.

Such commercial wisdom is valid only if exercised in compliance with mandatory requirements under the Code and the associated regulations. The CoC, while approving a resolution plan, must ensure compliance with essential provisions such as the timelines under Section 12; the eligibility of the resolution applicant under Section 29A; the requirements under Section 30(2) of the IBC; etc. If a resolution plan fails to meet these mandatory criteria but is nonetheless approved by the CoC, such approval cannot be said to be a valid exercise of commercial wisdom.

In K. Sashidhar v. Indian Overseas Bank 4 and the Essar Steel judgment, the Supreme Court had recognised a wide margin of deference to the commercial wisdom of the CoC, holding that if a decision made by the CoC is purely commercial or business-oriented, it falls outside the scope of justiciability. In contrast, in this case, the Court found that the CoC had acted improperly by accepting and supporting a resolution plan riddled with non-compliance and by facilitating procedural irregularities and delays. While the Court framed its intervention as being limited to statutory violations, its criticism of the CoC for accepting delayed payments without interest and for not ensuring feasibility or viability arguably treads close to evaluating commercial substance, not just legal compliance.

• Delayed Payments – Misuse of Process of Law:

The Court found that JSW engaged in a pattern of deliberate delay and misuse of legal processes to avoid timely implementation of the Resolution Plan. Even after receiving approval from the NCLT, JSW postponed full implementation for over two years—paying financial creditors only in March 2021 and operational creditors not until March 2022. These delays were not justified and were found to be willful and strategic, designed to frustrate the objectives of the IBC and undermine the integrity of the resolution framework. The Court held that when JSW finally made the payments towards implementing the plan, it sought to create a fait accomplisituation. The Court held that allowing such a plea would amount to endorsing and legitimising statutory violations and strategic abuse of legal process.

Our Observations

• Compliance with objective of IBC vs. strict adherence with provisions

In the landmark case of Swiss Ribbons v. Union of India 5 , the Supreme Court stated that:

“.. the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors.”

The Supreme Court’s decision to direct liquidation of BPSL, despite a resolution plan being approved and implemented, contrasts with the IBC’s objective as set out in Swiss Ribbons. There were undoubtedly lapses and non-compliance of provisions of the IBC but the question remains whether the issues could have been dealt with through imposing penalties or awarding interest to the creditors who were subjected to delayed payments rather than a nullification of the entire eight-year insolvency process and reversal of the implementation of the Resolution Plan.

• Implementation challenge
  The Court’s order directed that the payments made by JSW to financial creditors, operational creditors and by way of equity infusion be dealt with as per the statement made by Sr. Advocate Dr. Abhishek Manu Singhvi (counsel for the CoC) before the Supreme Court at the time of admitting the appeals. This entails that INR 19,350 crores paid to the financial creditors, INR 350 crores paid to the operational creditors and INR 8,550 crores infused by JSW into BPSL (by way of equity shares and convertible instruments) will have to be paid back to JSW within two months. The Court relied on a broad statement made by the counsel for the CoC five years ago, which only dealt with a possible refund of payments received by financial creditors, and applied it across the board to other stakeholders. However, the judgment provides no detailed roadmap for how this is to be achieved. It remains to be seen how the implementation of the Court’s directions will unfold.
• Way forward
  The recent Supreme Court judgment signals a stricter, rule-bound interpretation of the IBC—one that emphasizes compliance and procedural integrity. As a welcome consequence, this is likely to reinforce statutory discipline in the resolution process. However, it may additionally introduce uncertainty, especially considering that insolvency resolution process is fraught with litigations and often, resolution plans are implemented before litigation concludes. Going forward, resolution professionals, resolution applicants, the CoC and all other stakeholders will need to be doubly vigilant in respect of compliance with IBC provisions and ensure strict adherence to timelines and other requirements, as non-compliance could have more significant consequences than in the pre-BPSL judgment era.

News reports suggest that JSW and the CoC are likely to seek a review of the decision of the Supreme Court. At the same time, the ex-promoters of BPSL are also reported to have filed an application with the NCLT seeking enforcement of the Supreme Court’s order directing BPSL’s  liquidation. With developments still unfolding, the legal and commercial implications of the Supreme Court’s decision continue to evolve, and it remains to be seen how the matter will ultimately impact the stakeholders as well as the broader framework of IBC jurisprudence.

[1] (2019) 2 SCC 1

[2]ESSAR Steel India Ltd. Committee of Creditors Vs. Satish Kumar Gupta2020(8) SCC 531

[3]Committee of Creditors of Amtek Auto Limited through Corporation Bank vs.Dinkar T. Venkatsubramanian and Ors. (2022)4SCC 754

[4](2019)12SCC 150

[5](2019)4SCC 17

For further information, please contact Rituparno Bhattacharya – Partner and Arunav Guha Roy – Partner at TT&A.

Disclaimer: This article only highlights key issues and is not intended to be comprehensive. The contents of this article do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this article should be considered an advertisement or solicitation of TT&A’s professional services.