Comprehensive Analysis: Kalyani Transco Vs. Bhushan Power And Steel Ltd. & Ors. (Hon'ble Supreme Court, 02nd May 2025)

I. Factual Background and Procedural History

The case of Kalyani Transco vs. Bhushan Power and Steel Ltd. & Ors. arises from the insolvency resolution process of Bhushan Power and Steel Ltd. (BPSL), one of the largest and most high-profile insolvency cases under the Insolvency and Bankruptcy Code, 2016 (IBC). BPSL was among the "dirty dozen" accounts identified by the Reserve Bank of India (RBI) for immediate resolution due to their significant contribution to the non-performing assets (NPAs) in the Indian banking sector.

The Corporate Insolvency Resolution Process (CIRP) was initiated by Punjab National Bank before the Ld. National Company Law Tribunal (NCLT), which admitted the petition on 26 July 2017. The Interim Resolution Professional (IRP) invited claims from all stakeholders, and the Committee of Creditors (CoC) was constituted. After a competitive bidding process, JSW Steel Ltd. emerged as the highest-scoring resolution applicant, and its plan was approved by the CoC.

The Ld. NCLT approved JSW's resolution plan on 5 September 2019, but imposed several conditions. The Ld. National Company Law Appellate Tribunal (NCLAT) modified some of these conditions on 17 February 2020, particularly in relation to the implementation mechanism, treatment of statutory dues, and the effect of criminal proceedings and asset attachments under the Prevention of Money Laundering Act, 2002 (PMLA).

Multiple appeals were filed in 2020 before the Hon'ble Supreme Court by operational creditors, former promoters, and government authorities, challenging the Ld. NCLAT's order and the implementation of the resolution plan. The Hon'ble Supreme Court's judgment, delivered on 2 May 2025 (after a period of approximately 5 years of the approved resolution plan), is a comprehensive and critical review of the entire insolvency process in this case. It is important to mention that even though the Hon'ble Supreme Court have commented w.r.t delay however it is also impertaive to mention that even the Hon'ble Supreme Court also took more than 4 years to decide the case and more than 2 years when the Stakeholders have received the amount as mentoined in Resolution Plan. However, the Hon'ble Supreme Cour turned on the wheel and the case of Bhushan Steel is there from where it started even worse.

II. Issues Raised Before the Hon'ble Supreme Court

1. Maintainability of Appeals: Whether appeals filed by operational creditors, ex-promoters, and government authorities were maintainable under Section 62 of the IBC.
2. Eligibility of JSW Steel as Resolution Applicant: Whether JSW Steel was eligible under Section 29A of the IBC to submit a resolution plan, and whether the Resolution Professional (RP) had complied with the mandatory disclosure and verification requirements.
3. Compliance with Timelines under Section 12 of IBC: Whether the CIRP and approval of the resolution plan were completed within the mandatory timelines prescribed under Section 12 of the IBC.
4. Jurisdiction of Ld. NCLT/NCLAT over PMLA Attachments: Whether the Ld. NCLT or Ld. NCLAT had jurisdiction to review or set aside the provisional attachment of BPSL's assets by the Enforcement Directorate (ED) under the PMLA.
5. Implementation and Modification of Resolution Plan: Whether JSW Steel and the CoC could modify or delay the implementation of the resolution plan post-approval, and whether such actions were in compliance with the IBC and the approved plan.
6. Distribution of Profits (EBITDA) During CIRP: Whether profits generated during the CIRP should be distributed among creditors or retained by the SRA.
7. Treatment of Operational Creditors and Government Dues: Whether the resolution plan's treatment of operational creditors and government dues (such as taxes) was in compliance with the IBC and relevant regulations.

III. The Hon'ble Supreme Court's Analysis and Answers to the Issues

1. Maintainability of Appeals
   The Hon'ble Supreme Court held that the phrase "any person aggrieved" in Section 62 of the IBC is broad and inclusive. It encompasses operational creditors, ex-promoters, and government authorities, especially since insolvency proceedings are collective in nature and affect all stakeholders. The Court relied on the recent decision in Glas Trust Company LLC vs. Byju Raveendran to affirm that there is no rigid locus requirement, and all aggrieved stakeholders have the right to appeal orders of the Ld. NCLT/NCLAT. Meaning thereby, before this judgment the litigations brought by ex-promoters etc which were rejected by the Tribunals will now be heard as they are considered as aggreived.
2. Eligibility of JSW Steel as Resolution Applicant
   The Court found that the Resolution Professional failed to comply with the mandatory requirements of Section 29A and the relevant regulations. There was no proper verification or certification of JSW's eligibility, and material facts (such as a joint venture agreement) were suppressed. The RP did not submit the required compliance certificate (Form H), and the CoC did not ensure that the eligibility criteria were met. This raised serious doubts about JSW's eligibility to submit a resolution plan.
3. Compliance with Timelines under Section 12 of IBC
   The Hon'ble Supreme Court emphasized that the timelines under Section 12 of the IBC are mandatory. At the relevant time, the maximum period for completion of CIRP was 270 days. The RP failed to seek timely extensions, and the resolution plan was submitted and approved well beyond the statutory period. The Court found this to be a gross violation of the IBC, holding that the entire process was vitiated by non-compliance with the mandatory timeline.
4. Jurisdiction of Ld. NCLT/NCLAT over PMLA Attachments
   The Court held that neither the Ld. NCLT nor the Ld. NCLAT has the power of judicial review over decisions of statutory authorities under public law statutes like the PMLA. The Ld. NCLAT's order setting aside the ED's attachment was without jurisdiction and coram non judice. The Hon'ble Supreme Court clarified that the insolvency forums' jurisdiction is limited to matters arising out of or in relation to insolvency resolution and does not extend to reviewing actions under other statutes such as the PMLA. However, the judgement misses to discuss on a very important aspect that is the scope of Section 32A of the I&B Code that was inserted with an objective to give a clean slate to the SRA who is taking over the Corporate Debtor under the insolvency regime.
5. Implementation and Modification of Resolution Plan
   The Court found that JSW Steel, after securing approval, failed to implement the plan within the stipulated time, and the CoC's subsequent acceptance of delayed payments was irregular and contrary to the IBC. The plan was supposed to be unconditional and implemented within 30 days of Ld. NCLT approval. The Court criticized both the CoC and JSW for collusion, misuse of process, and for creating a situation of fait accompli to frustrate the proceedings before the Court. The Court held that the commercial wisdom of the CoC is not absolute and must be exercised within the confines of the law. Before this judgment, all the judgments of all judicial forums including Hon'ble Apex Court had held that CoC's commerical wisdom is of a paramount consideration.
6. Distribution of Profits (EBITDA) During CIRP
   The Hon'ble Supreme Court expressly left open the question of whether profits generated during CIRP should be distributed among creditors or retained by the SRA. The Court noted that this issue was argued but did not provide a definitive answer, leaving it for future determination.
7. Treatment of Operational Creditors and Government Dues
   The Court found that the resolution plan did not comply with the requirement to pay operational creditors in priority over financial creditors, as mandated by Regulation 38. The plan's treatment of government dues was also found to be non-compliant. The Court noted that the interests of operational creditors and government authorities cannot be sidelined and must be addressed in accordance with IBC and regulations.

Findings of the Hon'ble Supreme Court:

• The Hon'ble Supreme Court quashed and set aside the orders of the Ld. NCLT and Ld. NCLAT approving the JSW resolution plan.
• The resolution plan of JSW was rejected for non-compliance with the IBC and its regulations.
• The Ld. NCLT was directed to initiate liquidation proceedings against BPSL under Chapter III of the IBC.
• Payments made by JSW to creditors were to be dealt with as per the earlier undertaking to the Hon'ble Supreme Court, i.e., subject to the outcome of the appeals.
• The question of EBITDA distribution was left open for future consideration.
• The Hon'ble Apex Court did not express any opinion on the merits of the claims of the State of Odisha regarding electricity and entry tax dues, leaving those issues to be addressed in the liquidation process.

IV. Questions That Remain Open

1. Distribution of Profits (EBITDA) During CIRP:
   The Hon'ble Apex Court did not decide whether profits generated during the CIRP should be distributed among creditors or retained by the SRA. This remains a significant unresolved issue, especially in large insolvency cases where the corporate debtor continues as a going concern during CIRP.
2. Scope of Judicial Review over Public Law Attachments in CIRP:
   While the Court clarified that Ld. NCLT/NCLAT lack such powers, the broader interplay between insolvency proceedings and other public law statutes (like PMLA) may require further legislative or judicial clarification, particularly regarding the timing and effect of attachments vis-à-vis the approval of resolution plans.
3. Treatment of Government Dues in Resolution Plans:
   The Court did not conclusively decide the priority or treatment of government dues (such as taxes) in all circumstances, especially in light of evolving jurisprudence post-Rainbow Papers. The question of whether government dues are to be treated as secured or unsecured, and their priority in distribution, remains open for further judicial or legislative clarification.

V. Impact of the Judgment on the Insolvency and Bankruptcy Code, 2016 and Stakeholders

A. Impact on the IBC Framework

1. Strict Adherence to Timelines:
   The judgment reinforces that the timelines under Section 12 of the IBC are mandatory and not merely directory. Any deviation or delay, unless specifically condoned within the statutory framework, will vitiate the entire CIRP. This will compel all stakeholders—RPs, CoCs, and resolution applicants—to ensure strict compliance with statutory deadlines, failing which the process may be rendered void and the corporate debtor may be pushed into liquidation.
2. Mandatory Compliance with Eligibility and Disclosure Requirements:
   The decision underscores the importance of thorough verification of resolution applicants' eligibility under Section 29A and the need for full disclosure. RPs must exercise due diligence and cannot rely on mere affidavits. Any suppression or non-disclosure of material facts can result in the rejection of the resolution plan and potential liability for the RP.
3. Limits on Tribunal Powers:
   The judgment clarifies that Ld. NCLT and Ld. NCLAT cannot exercise judicial review over actions of statutory authorities under other laws (e.g., PMLA), reinforcing the limited jurisdiction of insolvency forums. This ensures that insolvency proceedings do not become a means to circumvent or override other statutory processes.
4. Binding Nature and Timely Implementation of Resolution Plans:
   Successful resolution applicants cannot delay or modify implementation post-approval. The plan is binding and must be implemented as approved, within the stipulated time. Any attempt to delay or renegotiate the plan post-approval, or to create a situation of fait accompli, will not be condoned by the courts.
5. Role of Commercial Wisdom of CoC:
   While the commercial wisdom of the CoC is given primacy, it is not absolute. The CoC must act within the confines of the law and in the interests of all stakeholders. The Court will intervene where there is evidence of collusion, abuse of process, or gross non-compliance with statutory requirements. "This judgment may instill fear in the CoC, discouraging them from making innovative or unconventional decisions that could be crucial for resolving complex issues in the Corporate Debtor's insolvency process.

B. Impact on Stakeholders

1. Resolution Applicants:
   The bar for eligibility and compliance is set high. Any misrepresentation, delay, or non-compliance can result in the rejection of the plan and even liquidation of the corporate debtor. Resolution applicants must ensure full and honest disclosure and be prepared to implement the plan within the stipulated time.
2. Committee of Creditors (CoC):
   The CoC's commercial wisdom is not unbridled. It must be exercised in compliance with the IBC and regulations. The CoC's actions are subject to judicial scrutiny, especially if they act in collusion or contrary to the interests of other stakeholders. The CoC must ensure that the resolution plan is feasible, viable, and in compliance with all statutory requirements.
3. Resolution Professionals:
   RPs are reminded of their critical role as both facilitators and invigilators. Failure to comply with statutory duties, including verification of eligibility and adherence to timelines, can have severe consequences for the process and the stakeholders. RPs must act independently and diligently to protect the integrity of the process.
4. Operational Creditors and Government Authorities:
   The judgment affirms their right to challenge resolution plans and ensures that their interests cannot be sidelined by the CoC or SRA. The requirement to pay operational creditors in priority over financial creditors must be strictly followed, and government dues must be addressed in accordance with the law.
5. Creditors and Investors:
   The decision may lead to greater caution and diligence in the insolvency process, potentially resulting in fewer but more robust and timely resolutions. Creditors must ensure that the process is conducted in accordance with the law to avoid the risk of liquidation.
6. Corporate Debtors:
   The risk of liquidation is heightened if the process is not conducted strictly in accordance with the law, which may impact the willingness of promoters and management to cooperate. The judgment serves as a warning that any attempt to manipulate or delay the process can have severe consequences.

C. Systemic and Market Impact

1. Increased Litigation and Scrutiny:
   The judgment may lead to increased litigation, as stakeholders seek to ensure strict compliance at every stage. It also sets a precedent for courts to intervene where there is gross non-compliance or abuse of process.
2. Potential for Legislative Amendments:
   The gaps identified such as the treatment of profits during CIRP and the interface with public law statutes may prompt legislative or regulatory clarifications. The legislature may need to address these issues to provide greater certainty and predictability in the insolvency process.
3. Deterrence Against Abuse:
   The strong language against misuse of process and collusion serves as a deterrent to parties seeking to game the system. The judgment reinforces the need for integrity, transparency, and adherence to the rule of law in the insolvency process.

VI. Recovery Rate in Corporate Insolvency Resolution Processes under the Insolvency and Bankruptcy Code, 2016

The recovery rate in cases where the Corporate Insolvency Resolution Process (CIRP) has taken place under the Insolvency and Bankruptcy Code, 2016 (IBC), is a key metric that reflects the effectiveness of the insolvency framework in India. The recovery rate is typically expressed as the percentage of the admitted claims of creditors that is actually realized through approved resolution plans.

Historical and Recent Recovery Rates

1. Average Recovery Rate:
   As per data published by the Insolvency and Bankruptcy Board of India (IBBI) and various government and industry reports, the average recovery rate for creditors in resolved cases under the IBC has generally ranged between 25% and 45% of the admitted claims. This means that, on average, creditors have been able to recover about one-fourth to less than half of their total admitted claims through the resolution process.
2. Latest Available Data (as of 2023-2024):
   The most recent IBBI quarterly and annual reports indicate that the recovery rate has stabilized around 32% to 35%. This figure is calculated as the total amount realized by creditors through approved resolution plans divided by the total amount of claims admitted by the resolution professionals.
3. Breakdown by Year:
   In the initial years after the IBC was implemented (2017-2019), the recovery rate was higher, sometimes exceeding 40%, due to the resolution of some large, high-value cases. In subsequent years, as more cases entered the process including many with weaker asset bases or prolonged litigation the average recovery rate declined and has remained in the low- to mid-30% range.
4. Key Points to Note
   The recovery rate is significantly higher than what was typically realized under the previous legal regime (such as SARFAESI Act, DRT, and SICA), where recoveries were often in single digits. The recovery rate varies widely depending on the sector, the size of the company, and the specific circumstances of each case. In liquidation cases (where no resolution plan is approved and the company is liquidated), the recovery rate is much lower, often less than 10%.
   Summary Table
   

   Period	Average Recovery Rate (Resolution Cases)
   2017-2019	40% - 45%
   2020-2022	32% - 35%
   2023-2024	32% - 35%

5. The average recovery rate for creditors in all cases where the Corporate Insolvency Resolution Process has occurred under the Insolvency and Bankruptcy Code, 2016, up to date, is approximately 32% to 35% of the admitted claims. This rate is based on the aggregate data of all resolved cases and reflects the overall performance of the IBC framework in facilitating debt recovery for creditors in India.

VII. Status of the 'Dirty Dozen' Cases Referred by RBI under the Insolvency and Bankruptcy Code, 2016

The term "Dirty Dozen" refers to the 12 large defaulting companies that were identified by the Reserve Bank of India (RBI) in 2017 and referred for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). These companies accounted for a significant portion of the non-performing assets (NPAs) in the Indian banking sector at the time. The cases were sent to the National Company Law Tribunal (NCLT) for initiation of the Corporate Insolvency Resolution Process (CIRP).

The 12 companies included:

1. Essar Steel India Ltd
2. Bhushan Steel Ltd
3. Bhushan Power & Steel Ltd
4. Alok Industries Ltd
5. Monnet Ispat & Energy Ltd
6. Electrosteel Steels Ltd
7. Amtek Auto Ltd
8. Era Infra Engineering Ltd
9. Jaypee Infratech Ltd
10. Lanco Infratech Ltd
11. ABG Shipyard Ltd
12. Jyoti Structures Ltd

• Successful Resolutions: Several of the above cases have seen successful resolution plans approved by the Hon'ble NCLT, resulting in new ownership and partial recovery for creditors. Notable examples include:
• 1. Essar Steel: Acquired by ArcelorMittal; creditors recovered about 85% of their admitted claims.
  2. Bhushan Steel: Acquired by Tata Steel; creditors recovered approximately 63%.
  3. Electrosteel Steels: Acquired by Vedanta; creditors recovered about 40%.
  4. Alok Industries: Acquired by Reliance Industries and JM Financial ARC; recovery was around 17%.
  5. Monnet Ispat: Acquired by JSW Steel and AION Capital; recovery was about 26%.
  6. Bhushan Power & Steel: Acquired by JSW Steel; recovery was about 41%. However, now by the order of the Hon'ble Supreme Court in the case of Kalyani Transco vs Bhushan Power & Steel Ltd. & Ors. have been ordered to Liquidation.
• Liquidation or Ongoing Proceedings: Some of the above cases could not attract viable resolution plans and have either gone into liquidation or are still undergoing the CIRP:
• 1. Lanco Infratech, ABG Shipyard, Era Infra Engineering, Jyoti Structures: These companies have either been ordered for liquidation or are in advanced stages of liquidation due to lack of resolution.
  2. Amtek Auto: Initially saw a resolution plan, but the process faced setbacks and was reopened; the company has faced liquidation proceedings.
  3. Jaypee Infratech: The case has seen multiple rounds of bidding and litigation, with the process still ongoing as of the latest updates.

Summary Table of Outcomes

1. The majority of the Dirty Dozen cases have been resolved, with varying degrees of recovery for creditors, generally ranging from 17% to 85%. However, a few cases remain unresolved or have ended in liquidation, where recoveries are typically much lower.
2. The "Dirty Dozen" cases under the I&B Code have exposed several significant gaps in the law. These include persistent delays in the resolution process, low and inconsistent recovery rates for creditors, and a high incidence of liquidation, which often leads to value destruction. Legal and procedural hurdles, such as protracted litigation and unclear guidelines, have further complicated and slowed down proceedings. Additionally, the I&B Code has been criticized for its treatment of operational creditors, challenges in asset management during insolvency, and the lack of effective early warning systems to address financial distress before it becomes unmanageable.
3. Overall, these shortcomings highlight the need for reforms to ensure timely, fair, and effective insolvency resolutions. Improvements are needed in enforcing timelines, managing assets, and balancing the interests of all creditor classes to fulfill the I&B Code's objectives of swift and value-maximizing resolutions.

VIII. Comparing the Bhushan Power and Steel with the Jet Airways judgement was not required

1. The Jet Airways judgment passed by the Hon'ble Supreme Court focused on conduct of the stakeholders involved post-approval of the resolution plan, the Successful Resolution Applicant's (SRA) failure to implement the plan. The SRA failed to infuse funds as required, did not pay workmen/employee dues, and did not comply with other key plan obligations, despite multiple extensions by the tribunals. The NCLT and NCLAT were criticized for repeatedly extending deadlines and not enforcing the plan's terms. The Hon'ble Supreme Court invoked its powers under Article 142 to order liquidation, emphasizing the importance of timely implementation and the consequences of non-compliance with an approved plan.
2. However, in the case of Bhushan Power and Steel, the SRA (JSW Steel), despite delays, ultimately made substantial payments amounting to INR 19,350 crores to financial creditors and 50% recovery to operational creditors (capped at Rs. 350 crores) by March 2022. It is pertinent to note that the delays in implementation were largely due to complex, multi-party litigation, regulatory hurdles, and issues such as attachments under the Prevention of Money Laundering Act, not solely due to the SRA's unwillingness or incapacity to perform. In the case of BPSL, the SRA did not abandon the resolution plan or treat its obligations as optional; rather, it continued to engage with stakeholders and made significant financial contributions.
3. By equating the two, the Hon'ble Supreme Court overlooked the fact that the SRA in BPSL was at a better footing, having made substantial payments and having been hampered by factors beyond its control, whereas the SRA in Jet Airways failed to perform despite being given every opportunity and facing no comparable external impediments. The Hon'ble Supreme Court's comparison of Bhushan Power and Steel with Jet Airways is misplaced because the SRA in BPSL was on a demonstrably better footing. JSW Steel's delays were not due to a lack of intent or capacity, but to external, systemic factors, and it ultimately fulfilled the core financial terms of the plan. In contrast, Jet Airways SRA failed to fulfil its obligations despite clear opportunities and no comparable external obstacles. Treating both SRAs as equally culpable ignores these critical distinctions and risks unfairly penalizing SRAs who act in good faith but are hampered by circumstances beyond their control. The legal and factual matrix of BPSL warranted a differentiated approach, and the Supreme Court's failure to recognize this difference resulted in an erroneous comparison.

IX. Conclusion

The Hon'ble Supreme Court's judgment in the Bhushan Power and Steel Ltd. case is a watershed moment in the evolution of the Insolvency and Bankruptcy Code, 2016. It sends a clear and unequivocal message that the insolvency process must be conducted with utmost integrity, transparency, and within the strict confines of the law.

At the same time, the judgment leaves certain important questions open, particularly regarding the distribution of profits during CIRP and the treatment of government dues. These issues will require further judicial or legislative clarification. Until then, all participants in the insolvency process must exercise the highest standards of diligence, honesty, and compliance to avoid the risk of liquidation and to ensure the success of the IBC framework.

On the other side, the Hon'ble Supreme Court has adopted an excessively rigid and formalistic approach that ultimately undermines the core objective of the Insolvency and Bankruptcy Code, 2016 namely, the revival and preservation of viable businesses as going concerns. By quashing the resolution plan and directing liquidation solely on the basis of technical and procedural violations such as delays in the CIRP timeline, alleged deficiencies in eligibility verification, and the manner of plan implementation. The Hon'ble Apex Court has prioritized strict statutory adherence over pragmatic commercial realities and the interests of all stakeholders, including employees, creditors, and the broader economy. This approach disregards the substantial value already realized through the resolution process, the significant recoveries made by creditors, and the fact that the plan was ultimately implemented, albeit belatedly, with the overwhelming support of the Committee of Creditors. The judgment's failure to balance the need for regulatory discipline with the practical complexities of large-scale insolvency proceedings risks setting a precedent that could deter prospective resolution applicants, encourage litigation over minor infractions, and lead to more liquidations contrary to the IBC's intent to maximize value and preserve enterprise. In its zeal to enforce procedural sanctity, the Court has arguably sacrificed the very economic and social objectives the Code was designed to achieve.

Footnote

1. Now by the order of the Hon'ble Supreme Court in the case of Kalyani Transco vs Bhushan Power & Steel Ltd. & Ors. [CIVIL APPEAL NO. 1808 of 2020] have been ordered to Liquidation under the Insolvency & Bankruptcy Code, 2016.

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