The Supreme Court has struck down the resolution plan proposed by JSW Steel Ltd for Bhushan Steel and Power Ltd, deeming it illegal and in violation of the Insolvency and Bankruptcy Code.
The bench, consisting of Justices Bela M. Trivedi and Satish Chandra Sharma, directed that BSPL be liquidated under the IBC, citing significant lapses in the insolvency process.
Court Criticizes Key Stakeholders For Violating IBC
The court sharply criticized the role of key participants in the resolution process, including the resolution professional, the Committee of Creditors (CoC), and the National Company Law Tribunal (NCLT). According to the bench, these parties collectively facilitated a “flagrant violation” of the IBC, undermining the core principles of fairness and transparency that the code intends to enforce.
CoC’s Faulty Judgment
Justice Trivedi, while delivering the judgment, pointed out that the resolution professional failed to fulfill their statutory duties as required under the IBC and associated regulations. The court highlighted the professional’s neglect in ensuring compliance with the law throughout the corporate insolvency resolution process, which raised serious concerns about the integrity of the entire resolution mechanism.
Additionally, the court found that the CoC approved JSW’s resolution plan without exercising proper “commercial wisdom.” The approved plan failed to adhere to IBC’s mandatory provisions, particularly with respect to protecting the interests of creditors. Despite these deficiencies, the CoC accepted payments from JSW Steel, a decision the court deemed unjustified.
NCLT & NCLAT Orders Overturned
The Supreme Court also took issue with the previous decisions made by the NCLT and NCLAT. The bench declared that the orders passed by the NCLT on September 5, 2019, and the NCLAT’s judgment from February 17, 2022, were “perverse” and lacked jurisdiction. Consequently, both orders were set aside, effectively invalidating JSW’s resolution plan.
JSW Steel Responds
In its response, JSW Steel Ltd acknowledged the court’s decision, informing the stock exchanges that it had learned of the judgment passed by the Supreme Court on May 2, rejecting its resolution plan. The company noted that it had yet to receive a formal copy of the order but would thoroughly review the ruling with its legal advisors to determine the next steps. JSW pledged to keep the stock exchanges updated on any further developments in compliance with applicable regulations.
Future Outlook For BSPL & IBC Process
With the liquidation of BSPL now confirmed, the ruling serves as a significant reminder of the Supreme Court’s firm stance on upholding the sanctity of the IBC. It underscores the importance of due diligence, proper oversight, and adherence to legal standards in corporate insolvency cases. The judgment is likely to have broader implications for future insolvency proceedings, reinforcing the need for compliance at every stage to ensure fair and just outcomes for creditors and other stakeholders.
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