In a major setback to Sajjan Jindal-led JSW Steel, the Supreme Court on Friday quashed the company’s Rs 19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL), declaring it “illegal” and ordering the liquidation of the debt-ridden company.
A Bench comprising Justices Bela M Trivedi and Satish Chandra Sharma held that JSW Steel’s plan violated provisions of the Insolvency and Bankruptcy Code (IBC), primarily because the bid was funded via a mix of equity and optionally convertible debentures (OCDs) instead of equity alone. The court cited the failure to implement the resolution plan within the stipulated timeline as a critical flaw. The apex court ruled that the Committee of Creditors (CoC) had erred in approving JSW Steel’s plan, which, the court found, was in violation of the IBC framework. The resolution of BPSL—one of the first 12 cases referred by the RBI under the IBC—was long drawn and fraught with delays, legal challenges and enforcement actions. The company was admitted for corporate insolvency resolution in 2017.
At the time, the company owed over Rs 47,000 crore to financial creditors and more than Rs 780 crore to operational creditors. Its financial woes were further exacerbated by a high-profile investigation by the Enforcement Directorate (ED) into alleged loan diversion of Rs 4,025 crore by its former promoters. In October 2019, the ED provisionally attached BPSL’s assets under the Prevention of Money Laundering Act (PMLA), citing them as proceeds of crime.
JSW Steel had emerged as the successful resolution applicant in 2019, offering over Rs 19,000 crore to financial creditors. The plan was approved by the National Company Law Tribunal (NCLT) in September 2019 and subsequently upheld by the National Company Law Appellate Tribunal (NCLAT), despite ongoing legal challenges, including objections raised by the ED. Meanwhile, JSW Steel, in a statement said the company is yet to receive the formal copy of the order to understand the grounds for rejection in detail and its implications. So, once they receive the order and are able to review the same along with our legal advisors. Ruling comes at a time when JSW has already invested significantly, expanding BPSL’s capacity from 2.75 million tonne (mt) at acquisition to 4.5 mt, with plans to raise it to 5 mt by September 2027.