‘Bhushan Steel’ Judgement: Commercial wisdom sidelined in favour of narrow procedural view

On 2 May 2025, the Supreme Court delivered a far-reaching Judgement in the matter of Kalyani Transco v Bhushan Power and Steel Ltd. The Court was hearing appeals by a bunch of operational creditors who had challenged the Corporate Insolvency and Resolution Process (CIRP) of Bhushan Power and Steel Limited (BPSL). In 2019, the National Company Law Tribunal (NCLT) had approved JSW Steel’s acquisition of BPSL as part of the proceedings under the Insolvency and Bankruptcy Code (IBC), for ₹19,700 crore. The acquisition was formally completed in March 2021. 

By directing the liquidation of BPSL, the Court reversed one of the most elaborate resolution processes in India’s insolvency history. The Judgement has caused quite a stir in the country’s corporate and legal circles. By undoing, on rigid procedural grounds, a long-drawn resolution process that seemed to have the buy-in of the Committee of Creditors (CoC), the verdict has introduced an element of uncertainty among investors. It is also likely to have spooked foreign parties, who may be viewing India’s insolvency regime as commercially unattractive and less reliable than systems in other parts of the world. 

On 26 May, the Court ordered a status quo on BPSL’s liquidation to allow JSW Steel to file a review petition. With the presiding judge now retired, the review petition, which was filed in late-June, will come up before a new bench, raising hopes of reconsideration. 

Grounds for ordering liquidation 

JSW’s Resolution Plan was initially approved by the CoC and received NCLT approval in September 2019. The matter reached the Supreme Court around 2020, after multiple rounds of bidding and protracted litigation. 

The Court’s findings primarily revolved around the failure of the Resolution Professional (RP) to adhere to procedural mandates, including the non-filing of Form H and failing to ensure mandatory disclosures under Section 29A, which sets eligibility criteria for resolution applications. 

The RP was faulted for allowing inordinate delays without seeking timely extensions and for not filing the compliance certificate when placing the Resolution Plan before the NCLT. The CoC, too, was pulled up for inconsistency.  The Court, in paragraph 74 of its Judgement, suggested that the CoC amended the Resolution Plan and accepted JSW’s delayed payments too easily after having earlier questioned its conduct. 

The Judgement also holds the Resolution Plan to be non-compliant, including its post-approval modifications through an Addendum Letter. It faults JSW for trying to delay implementation on the ground of pending litigation, despite the absence of any stay by the Court. 

The Court rejected the argument that implementation was already underway or had become fait accompli, stating that statutory violations cannot be overlooked on that account. What is striking is the Court’s single-minded emphasis on the 330 day outer limit for resolution. It ignores the commercial complexity of resolving large entities with multiple stakeholders, including erstwhile promoters who may have an interest in creating obstacles in the process. 

Objectives of the Insolvency Code

Before 2016, India lacked a unified insolvency and bankruptcy framework. Corporate insolvencies were dealt with under outdated laws that didn’t speak to each other. The system prioritised revival over resolution, often allowing defaulting promoters to retain control while companies lingered indefinitely in the “restructuring” stage. This resulted in prolonged delays and rising NPAs. 

The IBC was meant to comprehensively replace the fragmented framework. It introduced strict timelines and shifted control from the promoters to the CoC. The post of the RP was created to oversee management. This model was intended to ensure objectivity and reduce conflicts of interest. The Code introduced a transparent and competitive bidding process with the goal of better value realisation.

For companies, the Code provided a structured process for identifying financial stress, inviting resolution applicants and implementing a plan approved by the CoC. The CoC, which primarily consists of financial creditors, had the ultimate say in deciding whether a plan is acceptable. The commercial wisdom of the CoC, once expressed through a formal vote, was meant to be final and binding.  

As the name itself suggests, CIRP is not about liquidation, it is about revival and resolution. The intention is to save the company as a going concern. Liquidation is the last resort under the Code. In Rajakumar v V. Nagarajan (2021), a three-judge Bench of the Supreme Court acknowledged that liquidation is to be undertaken only after all efforts at revival have failed. 

Where do the findings fall short? 

Before we get into specific aspects of the Judgement, let’s address a more general point about delay. Considering the appeals were filed as early as 2020, the Court could have stayed the CIRP process back then itself. The appeals remained pending for five years. 

On 11 December 2024, the Court had even disposed of civil appeals concerning the Enforcement Directorate’s jurisdiction to attach the assets of BPSL during CIRP. Noting the peculiar facts of the case, the Court had asked the ED to hand over BPSL’s provisionally attached properties to JSW. This order was passed by the same Bench that ordered the company’s liquidation. Now, let’s turn the lens to the grounds on which the Court based its Judgement and explore the problems with each.  

Non-compliance by RP

The Court held that the RP failed to submit the mandatory Form H certificate under Regulation 39(4) of the CIRP Regulations, which ensures that the Resolution Plan complies with the IBC and its rules. Additionally, the Court noted that the RP had not properly verified JSW’s eligibility under Section 29A of the IBC, which is designed to bar tainted or disqualified entities from participating in the resolution process.

Though the Court didn’t mention any specific disqualification applicable to JSW, it viewed the lack of declarations and due diligence as material non-compliance. The Judgement places significant responsibility on the RP for these procedural failures but stops short of showing how these lapses prejudiced the process. 

Given the complexity and scale of the resolution handled by a professional without institutional backing, the Court’s decision to scrap the entire CIRP on these grounds, years after the plan was approved and partly implemented, seems excessive. A more balanced approach could have involved penalising the RP or allowing corrective filings. 

Lack of full CoC approval for final plan

In paragraph 67, the Court highlighted procedural lapses in the CoC’s 18th and 19th meetings. Despite JSW scoring highest, no H1/H2 ranking was declared. The Court noted that the consolidated plan, finalised after selective negotiations with a core committee comprising a small group of lenders, was circulated and approved without full CoC deliberation or RP vetting. 

The Court observed that some creditors had raised concerns over how only JSW was permitted to amend its plan. They had also brought up non-compliance with amended Regulation 38 on priority payments to operational creditors and the RP’s failure to issue a compliance certificate. Further, there were some unresolved issues around ‘avoidance transactions’ and fraudulent trading. The Court found that these procedural lapses undermined the legitimacy of the entire CIRP. That Court also concluded that the CoC-approved plan differed from the one eventually implemented.    

One wonders why the Court chose to adopt a hyper-technical approach when all stakeholders, including the resolution applicant, the CoC and the RP were in consensus about the modification. The NCLT and the NCLAT had also approved the alterations. Further, other constituents of the CoC, who were not part of the core committee of lenders, had not found it necessary to oppose the revisions. In fact, they voted in favour with an almost absolute majority. The mere fact that negotiations were conducted with a select group of lenders cannot justify setting aside the entire process, particularly at such a belated stage. 

Delays in implementation

The delays in implementation of the Resolution Plan, which were attributed by JSW and the CoC to pending litigation and regulatory complications, were held to be unjustified by the Court. 

Admittedly, the erstwhile promoters, unsuccessful resolution applicants and a few operational creditors objected to delays in the process. But, after 2021, it seems that none of the key stakeholders had raised objections as payments had been made to both secured and unsecured creditors by then. The Court seems to have overlooked the practical difficulty faced by JSW in investing thousands of crores into a highly litigated transaction, especially in the absence of any protective relief from judicial bodies. Despite these challenges, JSW made substantial investments and disbursed payments, as acknowledged by the Court at paragraph 39. 

Even with delays, resolution remained a more viable and value-maximising alternative to liquidation. The strict statutory timeline of 270 days is often impractical in large, contested insolvency matters, especially when aggressive litigation is deployed by vested interests to frustrate the process. 

 Part implementation of plan not fait accompli 

At paragraphs 78 and 79, the Court dismissed the argument that the resolution was already fait accompli, observing that this line cannot be taken to “cover up illegal acts” and the “spectrum of lacunas and flaws in the Resolution Plan of JSW.” 

This strict view may have far-reaching consequences for future resolutions. Courts cannot apply a one-size-fits-all approach to all CIRP cases. If the Court itself took five-and-a-half years to decide the issue arising from a plan that was approved by the CoC, NCLT and NCLAT with only minor modifications, then expecting strict adherence to timelines in a complex, heavily litigated matter is unrealistic. Commercial wisdom and ground realities were sidelined in favour of a narrow and overly technical reading of the Code. 

Finality of CoC’s commercial wisdom

In K. Sashidhar v. Indian Overseas Bank (2019), the Supreme Court observed that the CoC’s commercial wisdom is one of the foundational tenets of the IBC. The Court has consistently ruled that the CoC’s decision to approve or reject a Resolution Plan cannot be interfered with unless it violates substantive law. 

Notwithstanding the above position, the Court closely scrutinised the CoC’s actions and its alleged inconsistency in questioning JSW’s conduct and accepting implementation steps. None of the findings or reasons given by the Court suggest the compromise of any substantive law. They only double down on procedural infractions, timeline overruns and documentation issues, which could have been cured at any stage. The message appears to be that CoC decisions must not only comply with law but also maintain procedural purity throughout. 

Filling gaps in the insolvency law 

The Court’s unwinding of the entire resolution based on technicalities sends an alarming signal to stakeholders of the insolvency ecosystem, especially CoCs and resolution applicants. It shakes confidence in the finality and sanctity of long-settled commercial decisions. There are numerous judgments of the Supreme Court that affirm the principle that procedural lapses cannot override substantive justice. That spirit is conspicuously absent here.

The Judgement has exposed the gaps in the IBC and its interpretation. Unless the verdict is overturned on review, it may fall on the legislature and the executive to make amendments to the Code and the Rules to enable procedural flexibility. There’s a need to clarify the status of negotiated amendments after the Resolution Plan has been approved. For Resolution Plans which have been partially implemented, there’s a need for some kind of protection in the statute. 

A reform may also be due in the position of the RP, who requires some sort of institutional backing. This is not only to prevent overwork but also to account for the fact that RPs often have to take decisions on matters in which they may not have grounding. It’s also important to ring-fence the post. If there is no aspersion on the RP’s integrity, they should have immunity in respect of decisions taken. 

The IBC also needs to account for more flexibility to file amendments and curative applications in the case of curable procedural infirmities. Now that the courts have been holding that Section 32A of the IBC shields resolution applicants from the company’s past liabilities even in respect of enforcement actions from the ED and the CBI, the same must be clarified through circulars and communication of the Insolvency and Bankruptcy Board of India.

The Judgement remaining in circulation can have an adverse impact on India’s ambitions of becoming a global insolvency hub. In matters relating to corporate insolvency, it’s doubly important to balance procedural law and equity; compliance and commercial reality. There’s a modicum of hope that a fresh bench (the presiding judge having retired) will seriously entertain a review. It must, for this is the kind of case that could decide the future path of IBC law in India. 

Srinivas Kotni is the founder and managing partner of Lexport (www.lexport.in), a Delhi- and Bengaluru-based trade, tax, intellectual property, corporate and commercial law firm.