JSW Steel Moves Supreme Court Seeking Review of Bhushan Power Deal Rejection

JSW Steel has filed a review petition in the Supreme Court against its May 2, 2024 ruling that rejected the company’s ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL) and ordered the liquidation of the debt-laden firm. This move follows nearly two months after the apex court’s decision that overturned JSW’s acquisition of BPSL, which had been completed in 2020 under the Insolvency and Bankruptcy Code (IBC). The company confirmed its petition submission on June 25 via a stock exchange filing.

The May 2 ruling by the Supreme Court raised critical concerns over the finality and enforceability of already-implemented resolution plans under the IBC framework. Despite JSW having operational control over BPSL for the past four years, the court not only cancelled the resolution plan but also directed its liquidation, marking one of the largest corporate liquidations in Indian history. The ruling criticized both JSW Steel and the Committee of Creditors (CoC), which had approved the resolution plan.

A bench comprising Justice Bela Trivedi and Justice Satish Chandra Sharma strongly criticized JSW Steel for its inordinate delay in implementing the resolution plan. The court held that JSW had wilfully not complied with the terms of the plan for nearly two years after receiving approval from the National Company Law Appellate Tribunal (NCLAT), even though there was no legal barrier preventing implementation. According to the court, this delay undermined the core purpose of the IBC and rendered the Corporate Insolvency Resolution (CIR) proceedings ineffective.

The order emphasized that the conduct of JSW Steel amounted to a flagrant violation of the IBC, particularly when the resolution plan was already approved and there were no external legal impediments. The Supreme Court stated that JSW’s delay frustrated the objective of providing a timely and effective resolution for distressed companies and impacted the rights of other resolution applicants. The judgment also stated that the CoC had failed to apply its commercial wisdom effectively and had been misled by JSW’s overly optimistic projections.

In addition to JSW’s petition, several lenders to BPSL have reportedly filed separate review petitions, showing widespread concern among stakeholders. The SC order noted that after receiving approval from the CoC, JSW misrepresented facts, misled the lenders, and did not uphold the commitments made in its plan. It also alleged that JSW made every effort to stall implementation without offering any valid justification.

This case has brought to the forefront critical questions about the sanctity of IBC resolutions and the reliability of the process for future bidders. Legal experts suggest the court’s stance could have a chilling effect on investor confidence in the IBC framework if not resolved properly.

JSW Steel, in its review petition, is expected to argue that the delay was not intentional and that the transaction had been fully executed under legal supervision. The company is seeking reconsideration of the court’s decision, citing the operational takeover and significant financial investment already made in BPSL.

The outcome of this review petition will likely have a major bearing on the interpretation and future implementation of resolution plans under India’s insolvency regime.