Procedure's Pyrrhic Victory Puts Certainty On Hold: Supreme Court Verdict In JSW-Bhushan Case

Introduction

On May 2, 2025, a 2 Judge Bench of the Supreme Court of India rejected JSW Steel's ("JSW") resolution plan for the insolvency resolution of Bhushan Power and Steel Limited ("BPSL"). The resolution plan had been approved by the Committee of Creditors ("COC") under the Insolvency and Bankruptcy Code, 2016 ("IBC") and thereafter by the National Company Law Tribunal ("NCLT") and was also upheld by the National Company Law Appellate Tribunal ("NCLAT").

Having found certain lapses and irregularities, not only did the Supreme Court reject the resolution plan, it invoked its extraordinary constitutional jurisdiction under Article 142 of the Constitution of India – not to provide an opportunity to remove any lacuna and allow continuation of the plan – but to direct liquidation proceedings against BPSL. Article 142 vests the Supreme Court with extraordinary constitutional jurisdiction to render "complete justice in any cause or matter pending before it". 

The message from the Supreme Court is clear – all processes under the IBC must be strictly adhered to and corporate insolvency resolution process ("CIRP") must be completed in a time bound process within the mandatory timelines. On the other hand, the Supreme Court has also held that just because a resolution plan has been implemented during the pendency of an appeal, it would not be fait accompli and the Court can still reverse the entire process and reject the implementation (even if it is after 5 years) particularly when the Court finds that the CIRP process had ex facie stood vitiated on account of non-compliance of the mandatory provisions of law etc. 

The decision has created ripples in corporate India on the certainty of the IBC process, specifically considering that it has been 5 years since JSW had implemented the plan, invested in BPSL and took steps for turning around the company.

To be clear, there have been instances where the Supreme Court rejected a resolution plan which had been approved by COC and NCLT. For instance, on February 12, 2024, a 3 Judge Bench of the Supreme Court (Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, (2024)2 SCR 258), passed an order setting aside a resolution plan for JNC Construction (P) Limited which was approved by the COC and NCLT. The said order was passed on an appeal filed by Greater Noida Industrial Development Authority, a statutory body and a creditor of JNC Construction (P) Limited. Amongst other things, in that case, the Supreme Court found that the order approving the resolution plan did not envisage obtaining requisite approvals from the statutory body that owned the land utilised by the corporate debtor. Consequently, the plan was found infeasible and therefore, failed to satisfy the IBC's requirement that a resolution plan be both feasible and viable. Further, the secured creditor was not served with notices of the meetings of the COC even though this was a requirement under IBC.

However, unlike the JSW – BPSL decision where liquidation of BPSL has been directed, in earlier instances, typically the Supreme Court had sent the resolution plan back to the COC for resubmission after satisfying the parameters in the IBC, and in most cases the implementation of the plan had not yet begun. In fact, previously a 3 Judge Bench of the Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Limited ("Jaypee Case") ((2022) 1 SCC 401), had discussed the scope of judicial review over a resolution plan approved by the COC and held that there is no scope for interference with the commercial aspects of the decision of the COC, and the jurisdiction of an appellate authority is limited to the 5 grounds specified in Section 61(3) of the IBC. These grounds include instances where the resolution plan does not comply with the requirements specified by the Insolvency and Bankruptcy Board of India ("IBBI"), or there has been a material irregularity in exercise of the powers by the resolution professional, or the resolution plan is in contravention of any law. The Supreme Court in the Jaypee Case held that within its limited jurisdiction, if the adjudicating authority or the appellate authority finds any shortcoming in the resolution plan vis-à-vis the specified parameters in the IBC, it would only send the resolution plan back to the COC, for re-submission after satisfying the parameters delineated by IBC. In the JSW – BPSL decision, the Supreme Court has acknowledged that the jurisdiction of an appellate authority is limited to only the 5 grounds specified in Section 61(3) of the IBC. However, having found that there were infirmities in the resolution plan, instead of sending the resolution plan back to the COC for re-submission, it directed liquidation proceedings against BPSL.

This paper discusses the decision of the Supreme Court and some of the finer points of law that emerge.

A quick rewind

• CIRP commenced in respect of BPSL on July 26, 2017.
• After JSW's resolution plan for BPSL was approved by the COC, the Resolution Professional ("RP") filed an application before NCLT on February 14, 2019, seeking approval for the resolution plan.
• On September 5, 2019, NCLT approved the resolution plan but imposed several conditions.
• On October 10, 2019, the Enforcement Directorate ("ED") issued a provisional attachment order for attaching the assets of BPSL under the Prevention of Money Laundering Act, 2002.
• JSW filed an appeal before the NCLAT against the decision of NCLT imposing conditions.
• On February 17, 2020, NCLAT passed an order removing almost all of the conditions imposed by NCLT. NCLAT also set aside the attachment order passed by the ED.
• On March 6, 2020, the Supreme Court admitted various appeals filed before it.
• On March 26, 2021, JSW paid INR 19,350 crore to the financial creditors. Operational creditors were paid in 2022.
• On May 2, 2025, the Supreme Court passed its final order rejecting the resolution plan and directing liquidation of BPSL.

Key points decided by the Supreme Court

After discussing the factual background and preliminary objections, the Supreme Court's order pointed out various flaws in the resolution plan as well as the process followed, concluding the following:

• The RP had utterly failed to discharge his statutory duties contemplated under the IBC and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("Regulations").
• JSW wilfully contravened and did not comply with the terms of the approved resolution plan for a period of about 2 years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIRP of BPSL.
• The resolution plan of JSW as approved by the COC did not meet the requirements in the IBC and the Regulations and was liable to be rejected by the NCLT.
• The COC had failed to exercise its commercial wisdom while approving the resolution plan of JSW, which was in absolute contravention of the mandatory provisions of IBC and the Regulations.
• The judgment passed by the NCLAT in allowing the appeal of JSW and issuing the directions without any authority of law and without jurisdiction was perverse, coram non judice and liable to be set aside.

The following paragraphs deal with some of the issues discussed by the Supreme Court.

RP's failure to discharge his statutory duty

One of the grounds on which an order approving a resolution plan can be challenged is if there has been a material irregularity in exercise of the powers by the RP. The Supreme Court found various instances of the RP failing to discharge his duties.

Delay in completing the insolvency resolution process and failure to file necessary applications for extension

The Supreme Court, relying on an earlier decision in ArcelorMittal India Private Limited v. Satish Kumar Gupta (Civil Appeal Nos. 9402 – 9405 of 2018, decided on October 4, 2018), held that the requirement in Section 12 of the IBC to complete the entire insolvency process within 270 days from the date of admission of the CIRP is a mandatory requirement. Instead, the application seeking NCLT's approval for the resolution plan was made by the RP after almost one and a half years. It also observed that the RP had not filed any application for extension before NCLT as was required under IBC.

The RP's contention that the reason for the delay was an appeal filed by Tata Steel which was pending before NCLAT, was not accepted by the Supreme Court on the ground that NCLAT had specifically permitted the RP to file an approved resolution plan before NCLT pending the appeal.

Though it must be mentioned that there were orders of NCLAT which excluded the period of pendency of appeal for calculating the 270-day period.

The required compliance certificate was not filed by the RP and JSW's eligibility under Section 29A of the IBC was not verified

Regulation 39(4) of the Regulations requires an RP to submit a compliance certificate in the prescribed Form H along-with the resolution plan submitted to NCLT for its approval. The said Form H specifically requires the RP to certify that the resolution applicant is eligible to submit a resolution plan under Section 29A of the IBC. Section 29A sets out certain disqualification criteria, and anyone disqualified under Section 29A cannot submit a resolution plan.

In the present case, the Supreme Court observed that not only did the RP not file the compliance certificate as required, the RP did not even provide a certificate or make any statement to the effect that JSW's affidavit regarding its eligibility was in order. There was also nothing on record to show that the RP verified compliance with Section 29A. However, in NCLAT's order there was a specific observation that the RP had confirmed that JSW is not disqualified under Section 29A.

The Supreme Court concluded that since the RP did not verify JSW's eligibility under Section 29A, it raises doubts regarding the eligibility of JSW. Importantly, the order does not conclude that JSW was ineligible under Section 29A. It is not clear from the order as to whether the RP attempted to demonstrate to the Supreme Court that JSW is not ineligible under Section 29A.

RP failed to make any application for avoidance of transactions in accordance with Chapter - III of the IBC

The Supreme Court observed that when the Reserve Bank of India had issued directions to Indian banks to mandatorily initiate CIRP against corporates infamously known as 'dirty dozen' companies including BPSL, it was obligatory on the part of the RP to discharge his statutory duty cast upon him to file applications for avoidance of transactions in accordance with Chapter-III of IBC.

It is not clear from the order whether the RP had made a determination that the criteria for filing applications for avoidance of transactions were not met and therefore he did not file any application, or whether the RP did not even assess whether such applications were required to be made. In case it is the former then it is not clear as to how there has been a failure by the RP because the RP can file an application for avoidance only if the relevant provisions apply. In case it is the latter, then there certainly has been a violation by the RP – however, even if that be the case, the question that arises is whether a default by the RP on this aspect would vitiate a resolution plan. The judgment does not have a detailed deliberation on this issue.

RP failed to confirm that the resolution plan complied with the requirement regarding payment of debts to the operational creditors in priority

As per Regulation 38(1) as it stood then, the amount due to the operational creditors under a resolution plan had to be given priority in payment over the financial creditors. In the resolution plan, the dues of financial creditors were given priority over the dues of the operational creditors. Thus, the RP failed to confirm compliance with the said requirement.

Other matters

The Supreme Court has passingly referred to some other non-compliances without elaborating on the same. The Supreme Court referred to objections raised by financial creditors and of the operational creditors as regards the manner in which the proceedings were being conducted, permitting JSW only to submit and amend the resolution plan submitted earlier; and the RP having not having checked the compliances of the revised resolution plan of JSW, though the COC had pointed out that the plan of JSW reviewed by the RP earlier was different from the resolution plan of JSW put forth subsequently for voting. However, as mentioned above, the Supreme Court did not delve further into this issue.

Interestingly, while the Supreme Court pointed out the various instances of the RP failing to discharge his duties, there is no specific discussion in the judgment on whether all of these should be considered as 'material irregularities' in the exercise of powers by the RP for the purposes of Section 61(3) of the IBC. In other judicial decisions, not all non-compliances by an RP have been held to be 'material irregularities'. For example, in another case before the Supreme Court, where the RP had not published Form G inviting EOIs on the designated website, but had published it on all newspapers and had also informed IBBI about technical issues in uploading the Form on the website, the Supreme Court had held that it was not a material irregularity for which the entire process would be vitiated. On the other hand, in a case where the COC had given its conditional approval to a resolution plan and the RP submitted a modified plan before the NCLT without receiving the final approval of the COC for the modified plan, it was held that it was a material irregularity by the RP.

The resolution plan of JSW was not in conformity with Sections 30(2) and 31(2) of the IBC and non-compliances by JSW

The Supreme Court concluded that JSW's resolution plan was not in conformity with Sections 30(2) and 31(2) of the IBC.

Section 30(2) of the IBC as it stood at the relevant point of time provided that the RP should confirm that the resolution plan, inter-alia, does not contravene any provisions of law and confirms to the requirements specified by IBBI. Section 31(2) of the IBC provides that if the NCLT is satisfied that the resolution plan does not meet the requirements under Section 30(2) of the IBC, then it may reject the resolution plan.

While discussing the non-compliances of mandatory provisions and misuse of process of law, the Supreme Court broadly identified the following grounds:

Delay in completing the insolvency resolution process and delays in implementation by JSW

This issue regarding delay in making an application before NCLT has already been discussed above. Additionally, the Supreme Court was not pleased that JSW did not implement the resolution plan within 30 days of NCLT passing the order approving the resolution plan as was mentioned in the plan, but instead took about '540' days in respect of payments to the financial creditors and about '900' days in respect of payments to the operational creditors. The Supreme Court held that the resolution plan as approved by the COC was an unconditional plan, and JSW was supposed to implement the same regardless of any unprecedented challenges or circumstances.

The Supreme Court was also not convinced that the 30-day time period in the resolution plan to make the payment was validly extended by the COC. It did not help that the COC itself had filed an affidavit earlier before the Supreme Court raising serious grievances against JSW. The COC had contended that the conduct of JSW demonstrated ill-intent and mala fides to mislead the Court and misuse the process of the Court in order to delay and defer the implementation of the resolution plan (which was unconditional) and there was wilful breach of the plan by not implementing the same. The COC appears to have changed its stands once it received payment from JSW.

Even though JSW did pay the amounts to the creditors eventually, this was not enough to convince the Supreme Court of JSW's bona fide and it observed that "there was a dishonest and fraudulent attempt made by JSW, misusing the process of the Court by not making the upfront payments as committed by it for about two and a half years and thereby enriching itself unjustly, and thereafter considering the rising prices of steel in the market, JSW sought to comply with the terms of Resolution Plan at a very belated stage, in collusion with the CoC and the Resolution Professional".

The Supreme Court has made it clear that a resolution applicant must implement its resolution plan and make payments to the creditors strictly within the timeline mentioned in the plan submitted by it irrespective of whatever challenges or unforeseen obstacles it faces. It has also clearly stated that any contravention of the terms of the resolution plan would result in prosecution and punishment. On the other hand, the Supreme Court has also held that just because a resolution applicant implements a plan during the pendency of an appeal, it would not mean that it is fait accompli and the plan cannot be rejected later on by the court.

Such a strict position will certainly not be viewed favourably by investors looking to invest in a distressed company. While 'bad actors' should not be allowed to get away by not implementing the plan, there may be bona fide reasons for waiting before implementation of a plan.

An interesting point of law that also emerge from the order of the Supreme Court is the scope of appeal by a resolution applicant whose resolution plan has been approved by the NCLT. In the present instance, the NCLT had imposed certain conditions prior to approving the resolution plan. JSW filed an appeal before the NCLAT against some of these conditions. The Supreme Court held that such an appeal was not maintainable because JSW could not be said to be a person aggrieved entitling it to file an appeal, and one of the grounds under Section 61(3) of the IBC should necessarily exist.

The resolution plan violated Regulation 38 of the IBBI Regulations as operational creditors were not given priority in payment

As discussed above, as per Regulation 38(1) as it stood then, the amount due to operational creditors under a resolution plan had to be given priority in payment over the financial creditors. However, as per the Supreme Court, in the resolution plan, the said mandatory requirement was not complied with and the dues of financial creditors were given priority over the dues of the operational creditors.

COC failed in its duty

The Supreme Court questioned the bona fide of the COC and faulted the COC for approving the resolution plan without verifying the mandatory requirements of Regulation 38. The Supreme Court held that if a resolution plan does not comply with mandatory requirements and such plan is approved by the COC, then it cannot be said that COC had exercised its commercial wisdom.

It was observed that the COC also did not discharge its duty to carefully examine the feasibility and viability of the plan, and the capacity and resources of JSW for the implementation of the plan proposed by it. Considering that JSW has already implemented the resolution plan, it is unclear which aspect of the plan did the Supreme Court find infeasible or why it doubted the capacity and resources of JSW to implement the plan.

The Supreme Court was also not pleased that the COC had at one time raised serious grievances against JSW for the delay in implementing the plan, but once JSW made the required payments to COC after about 2 years, the COC accepted the payment without raising any objection, and also supported the stand of JSW about the implementation of plan during the course of arguments. The Supreme Court observed that "such a contradictory stands taken by the COC at various stages of proceedings clearly proves that COC had played foul".

Looking back - especially now that the Supreme Court's ruling has taken 5 years - one wonders whether stakeholders would have gained anything if the COC had rejected JSW's funds and kept BPSL running under a stop-gap monitoring committee. Many may agree that such a scenario would not have benefitted many.

Conclusion

Supreme Court has attempted to deliver a powerful message that the IBC framework is not a box-ticking formality, and all processes and timelines need to be strictly followed. This is indeed a noble message, but the question is at what cost has this message been delivered. Also, to ensure that insolvency processes are completed in a time bound manner, not just stakeholders but even adjudicating authorities should decide matters in a time bound manner and not take years to decide a matter.

This decision is certainly not the last word on this matter. There are a few avenues available for JSW including a review of the decision.