NEW DELHI: The Supreme Court of India has upheld the successful resolution of Bhushan Power and Steel Limited (BPSL), one of the country's most prominent corporate defaulters, by dismissing a batch of appeals challenging the takeover by JSW Steel Limited (SRA - JSW).
The judgment, arising from Civil Appeal No. 1808 of 2020 and connected appeals, confirms the common 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. Its CIRP commenced on July 26, 2017.
Key issues addressed
The Court addressed and ruled on several contentious issues raised primarily by the erstwhile promoters and a few Operational Creditors (OCs):
EBITDA distribution confirmed to stay with BPSL: The Supreme 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, noting that neither the Request for Resolution Plan (RfRP) nor the Resolution Plan itself provided for its distribution, and allowing the claim now would "frustrate the very purpose for which the IBC came to be enacted".
Finality of resolution plan: The judgment emphasized the need for finality in the CIRP, noting that the SRA-JSW 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".
Continuity of CoC: The Court 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".
Delay in implementation of resolution plan: The Court indirectly supported the SRA-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).
In its conclusion, the Supreme Court dismissed the batch of appeals and explicitly upheld the NCLAT's judgment. As a result, the resolution of BPSL under the Insolvency and Bankruptcy Code (IBC) by JSW Steel Ltd., is now legally conclusive.