In a major victory for JSW Steel and the insolvency and resolution process, the Supreme Court on Friday upheld the successful resolution of Bhushan Power and Steel Limited (BPSL) by dismissing a batch of appeals challenging the company’s takeover by JSW Steel. The judgment confirms the final order passed by the National Company Law Appellate Tribunal (NCLAT) on February 17, 2020, thereby providing finality to the Corporate Insolvency Resolution Process (CIRP) initiated against BPSL.
BPSL was one of the "dirty dozen" large corporate defaulters identified by the Reserve Bank of India (RBI) in 2017. The insolvency process against the company had started on July 26, 2017.
The court took considerate view that if the appeals were allowed it would have led to ‘disastrous results’
“The Corporate debtor (BSPL) in the present case was running into substantial losses, which has now become a profit – making entity, earning substantial profits. The Successful Resolution Applicant (SRA) – JSW -- invested huge amounts in modernization and expansion of the entity (Corporate Debtor). Not only that but thousands of employees have been earning their livelihood on account of the Corporate Debtor running as an on-going concern due to the Resolution Plan being implemented by the SRA – JSW,” noted the court.
The Court addressed and ruled on several contentious issues raised primarily by the erstwhile promoters and a few Operational Creditors (OCs). On the issue of EBITDA distribution, the apex court upheld the NCLAT’s decision that the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) generated by BPSL during the CIRP period would remain with the company. The court rejected the arguments for its distribution among creditors.
The judgment emphasised the need for finality in the CIRP, noting that the JSW Steel has successfully revived the company, transforming it from a "loss-making to a profit-making entity". The Court stated that permitting new claims not part of the approved plan to be raised at this belated stage "could open a Pandora’s Box".
It rejected the contention that the Committee of Creditors (CoC) becomes functus officio (ceases to have legal authority) once the Resolution Plan is approved by the Adjudicating Authority. It clarified that the CoC "continues to exist till the Resolution Plan is implemented or an order of liquidation is passed".
On the issue of delay in implementation of resolution plan, the court indirectly supported the JSW's position that the delay in full implementation was justified, citing the initial challenges to the approval order, the stay on the plan's implementation by the NCLAT, and the pending legal clarity concerning the Provisional Attachment Order (PAO) by the Directorate of Enforcement (ED).