Supreme Court orders Liquidation of Bhushan Power and Steel Ltd. – Rejects Resolution Plan of JSW Steel for Gross Non-Compliance with IBC | Status Quo Order on Liquidation Proceedings Granted Later to Allow JSW to File a Review Petition

The Hon’ble Supreme Court, vide its judgment dated May 02, 2025, in the matter of Kalyani Transco v. M/s Bhushan Power and Steel Ltd. & Ors., addressed various appeals pertaining to approval of JSW Steel’s resolution plan for Bhushan Power and Steel Ltd. (BPSL) by the Ld. National Company Law Tribunal (NCLT) and Ld. National Company Law Appellate Tribunal (NCLAT).

Several appeals were filed challenging the NCLAT’s judgment, including by operational creditors like Kalyani Transco and the State of Odisha.

The primary issues included:

1. Non-compliance with mandatory provisions of the IBC;
2. Non-disclosure of material information by JSW regarding its prior relationship with BPSL;
3. Delay in implementing the resolution plan; and
4. NCLAT’s jurisdiction to review decisions of statutory authorities under PMLA.

The Hon’ble Supreme Court held as follows:

• Non-Compliance of Plan: The Resolution Plan of JSW was in complete contravention of mandatory IBC requirements, specifically Regulation 38(1) and Section 30(2), as it did not mandate priority payment to operational creditors over financial creditors.
• Failure of the RP to discharge his duties: The Resolution Professional utterly failed to discharge statutory duties, including examining plan compliance with Section 30(2), verifying JSW’s eligibility under Section 29A and submitting the required Compliance Certificate (Form H), and ensuring priority to operational creditors.
• Failure of the CoC: The CoC failed to exercise commercial wisdom by approving a plan that contravened mandatory provisions, ignoring objections raised in CoC meetings, and taking contradictory stands.
• Timeline Violation: The Corporate Insolvency Resolution Process (CIRP) exceeded the mandatory 270-day limit for completion, and the NCLT committed a grave error by approving the plan after this period.
• Limited NCLT/NCLAT Jurisdiction: The NCLAT had no power or jurisdiction to review decisions of the Enforcement Directorate under the PMLA, as PMLA is a public law beyond the ambit of NCLT/NCLAT’s jurisdiction under IBC.
• Limited Grounds for Appeal: JSW’s appeal before the Ld. NCLAT was not legally maintainable as an appeal against plan approval under Section 31 is limited to specific grounds in Section 61(3), which JSW did not raise. Consequently, the Hon’ble Supreme Court quashed the judgments of both the NCLT and NCLAT, rejected JSW’s resolution plan, and directed the NCLT to initiate liquidation proceedings against BPSL.

In light of this judgment, it is imperative for all stakeholders in the insolvency process, particularly RPs, the CoCs and the Ld. Adjudicating Authorities, to ensure strict adherence to the mandatory provisions of the IBC and its Regulations. This includes diligent verification of Resolution Applicant eligibility, ensuring priority payments as mandated, adhering to statutory timelines, and prompt implementation of approved plans. The judgment underscores that the commercial wisdom of the CoC is not absolute and must operate within the legal framework of the IBC. It also provides clarity on the limited jurisdiction of NCLT/NCLAT regarding public law matters like PMLA.

It is, however, pertinent to note that later, by way of an order dated May 26, 2025, a Bench comprising Hon’ble Mrs. Justice B.V. Nagarathna, and Hon’ble Mr. Justice Satish Chandra Sharma, granted a status quo order on the liquidation proceedings of BPSL before the Ld. NCLT, following a petition filed by JSW Steel. This was stated to be done in the interest of justice and to avoid any further complications.