Supreme Court Annuls JSW Steel’s Acquisition of Bhushan Power Under IBC
- ByAdmin --
- 12 Jun 2025 --
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The Supreme Court of India recently annulled the acquisition of Bhushan Power and Steel Ltd. (BPSL) by JSW Steel under the Insolvency and Bankruptcy Code (IBC), 2016. This landmark judgment has profound implications for corporate insolvency processes in India, raising critical questions about the intersection of resolution plans, judicial review, and the sanctity of commercial decisions.
Background of the Case
- Bhushan Power and Steel Insolvency: BPSL was admitted into insolvency proceedings in 2017 under Section 7 of the IBC, with financial creditors alleging substantial non-payment of dues.
- Resolution Process: JSW Steel emerged as the highest bidder, with its resolution plan approved by the Committee of Creditors (CoC) and subsequently by the National Company Law Tribunal (NCLT).
- Controversy: The resolution plan faced challenges concerning undervaluation allegations, procedural irregularities, and questions about compliance with Section 30(2) of the IBC.
Key Legal Issues
- Judicial Review of CoC Decisions:
- The Supreme Court emphasized that CoC decisions are not immune to judicial review. While commercial wisdom holds precedence, adherence to the law and fairness in the resolution process cannot be compromised.
- The court reiterated its stance from Essar Steel v. Satish Kumar Gupta (2019), affirming that CoC decisions must align with the principles enshrined in Section 31 of the IBC.
- The Supreme Court emphasized that CoC decisions are not immune to judicial review. While commercial wisdom holds precedence, adherence to the law and fairness in the resolution process cannot be compromised.
- Role of NCLT and NCLAT:
- NCLT and NCLAT must ensure that resolution plans comply with statutory requirements, including Sections 29A and 30(2) of the IBC.
- The court criticized the tribunals for approving the JSW Steel resolution plan despite alleged irregularities.
- NCLT and NCLAT must ensure that resolution plans comply with statutory requirements, including Sections 29A and 30(2) of the IBC.
- Allegations of Fraud and Undervaluation:
- Section 65 of the IBC prohibits fraudulent or malicious initiation of proceedings. Allegations that the assets of BPSL were undervalued were pivotal in the court's decision to annul the acquisition.
Supreme Court’s Judgment
- The court annulled the JSW Steel resolution plan and directed the CoC to revisit the bidding process.
- It highlighted procedural lapses and reiterated the importance of ensuring transparency and fairness in insolvency resolutions.
- The judgment stressed that while the IBC is a time-bound mechanism, it must not compromise on principles of equity and legality.
Implications of the Judgment
- Impact on Insolvency Resolution Process:
- The decision underscores the need for greater scrutiny of resolution plans to ensure compliance with statutory requirements.
- It highlights the balance between expediting resolutions and maintaining procedural integrity.
- The decision underscores the need for greater scrutiny of resolution plans to ensure compliance with statutory requirements.
- Commercial Confidence:
- The annulment could impact investor confidence in acquiring distressed assets under the IBC framework.
- Prospective bidders may seek greater clarity on the scope of judicial intervention and the stability of approved resolution plans.
- The annulment could impact investor confidence in acquiring distressed assets under the IBC framework.
- Role of CoC and Judicial Bodies:
- The judgment reinforces the responsibility of the CoC to act in good faith and within the framework of the law.
- It also delineates the supervisory role of NCLT and NCLAT in ensuring procedural compliance.
- The judgment reinforces the responsibility of the CoC to act in good faith and within the framework of the law.
Key Provisions Referenced
- Section 7, IBC: Initiation of corporate insolvency resolution process by financial creditors.
- Section 29A, IBC: Eligibility criteria for resolution applicants.
- Section 30(2), IBC: Requirements for approval of resolution plans by CoC.
- Section 31, IBC: Approval of resolution plans by adjudicating authority.
- Section 65, IBC: Penalty for fraudulent or malicious initiation of proceedings.
Conclusion
The Supreme Court’s annulment of JSW Steel’s acquisition of Bhushan Power is a critical development in India’s insolvency landscape. It underscores the judiciary's role in ensuring that commercial resolutions adhere to the principles of transparency, fairness, and legality. Moving forward, stakeholders must navigate the delicate balance between expeditious resolutions and procedural rigor, safeguarding the IBC’s objective of maximizing value for all stakeholders.
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