Supreme Court Restores JSW Steel’s ₹19,700 Crore Resolution Plan for Bhushan Power & Steel

Introduction

In a landmark decision, the Supreme Court of India has restored JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power & Steel Ltd (BPSL). The ruling reverses the Court’s own May 2025 verdict that had ordered liquidation of the debt-ridden company, thereby reaffirming the sanctity of India’s Insolvency and Bankruptcy Code (IBC). This judgment brings clarity to one of the most contentious insolvency cases in recent years and ensures stability for lenders, resolution applicants, and the insolvency ecosystem at large.

Background: The BPSL Insolvency

Bhushan Power & Steel Ltd (BPSL), part of the group of 12 large corporate defaulters identified by the Reserve Bank of India in 2017, defaulted on loans exceeding ₹47,000 crore. Following a competitive bidding process, JSW Steel emerged as the top bidder in 2018, offering ₹19,700 crore. The plan received approval from 97% of lenders, was cleared by the National Company Law Tribunal (NCLT) in 2019, and upheld by the National Company Law Appellate Tribunal (NCLAT) in 2020.

However, repeated litigations by dissenting creditors, challenges by former promoters, and asset attachment by the Enforcement Directorate (ED) delayed implementation for years. JSW was finally able to take charge in March 2021, nearly 900 days after initial approval.

The Supreme Court’s May 2025 Liquidation Order

In May 2025, a two-judge bench of the Supreme Court quashed JSW Steel’s resolution plan and ordered liquidation of BPSL, invoking its powers under Article 142 of the Constitution. The decision stunned the financial sector, forcing banks to return ₹19,350 crore already distributed and placing nearly ₹34,000 crore of debt at risk.

On 31 July 2025, another bench recalled the order, acknowledging factual inaccuracies and misapplication of IBC principles, paving the way for rehearing and the final verdict delivered on September 2025.

Key Highlights of the Supreme Court Ruling

1. Sanctity of Committee of Creditors’ Decisions

The Court reaffirmed that decisions of the Committee of Creditors (CoC), approved by the requisite majority, hold sanctity. It clarified that resolution plans cannot be invalidated merely due to delays caused by factors beyond the bidder’s control.

2. Role of Monitoring Committees

Rejecting the argument that CoC’s authority ends once a plan is approved, the Court clarified that CoC continues to oversee implementation until completion or liquidation. Under current IBBI regulations, CoCs are required to form a monitoring committee.

3. Equity Infusion Requirement

The promoters’ objection that JSW failed to infuse the committed ₹8,550 crore upfront was dismissed. The Court held that issuance of compulsorily convertible debentures (CCDs) worth ₹8,450 crore by JSW’s group company satisfied the equity requirement.

4. Treatment of Profits During Litigation

Lenders’ demand for a share of over ₹6,000 crore in BPSL’s EBITDA accrued during litigation was rejected. The Court ruled that unless explicitly mentioned in the resolution plan or request for resolution plan (RfRP), creditors cannot reopen claims later. Allowing such claims would “open a Pandora’s box.”

5. Promoters’ Standing and Conduct

The Court curtailed the standing of former promoters, such as Sanjay Singal, in challenging resolution plans. While defaulting promoters can technically qualify as “aggrieved persons,” their conduct remains a decisive factor in assessing bona fides.

Impact of the Judgment

  • For JSW Steel: The ruling secures control of BPSL, a key asset for its growth strategy. The company has already integrated BPSL into operations and expanded production capacity from 2.3 mtpa in 2017 to 4.5 mtpa in 2025.

  • For Creditors: Banks retain the ₹19,350 crore already distributed and avoid the massive losses liquidation would have triggered.

  • For Insolvency Ecosystem: The ruling reinforces the principle that resolution, not liquidation, is the primary objective of IBC. It restores faith in judicial approval as final and binding.

  • For Future Cases: The judgment clarifies treatment of profits during CIRP, equity infusion norms, and the continuing authority of CoCs.

Expert Views

Legal experts hailed the verdict as a stabilizing force. Shruti Kanodia, Managing Partner at Sagus Legal, noted:

“The verdict restores stability while reinforcing the underlying principles behind the enactment of IBC. For creditors and resolution professionals, it clarifies that issues like EBITDA distribution must be expressly dealt with in the RFP itself, establishing the primacy of the RFP as the governing document.”

Conclusion

The Supreme Court’s decision to restore JSW Steel’s ₹19,700 crore resolution plan for BPSL is a watershed moment for India’s insolvency regime. By upholding the sanctity of CoC decisions, rejecting retrospective claims, and preserving the principle of resolution over liquidation, the ruling strengthens the IBC framework.

For India Inc., it signals predictability and faith in judicial finality. For creditors, it ensures stability in recoveries. And for JSW Steel, it cements control over a strategic asset — proving that perseverance in the insolvency process can deliver long-term rewards.


Location: Pune, Maharashtra, India

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