Supreme Court Nullifies JSW Steel’s Acquisition of Bhushan Power & Steel
In a dramatic ruling that has sent shockwaves through India’s corporate and legal landscape, the Supreme Court has nullified JSW Steel’s ₹19,700 crore acquisition of Bhushan Power & Steel Ltd (BPSL). The deal, approved under the Insolvency and Bankruptcy Code (IBC) in 2019, was struck down on the grounds of serious procedural violations, marking a major turning point in India’s insolvency resolution framework.
Court Finds Multiple IBC Violations
The apex court observed that the Resolution Professional failed to comply with mandatory provisions under Section 29A of the IBC, which prohibits ineligible promoters or their related parties from participating in resolution processes. It was noted that the resolution plan submitted by JSW Steel was filed beyond the 270-day limit specified under the IBC, making the entire process legally void.
Adding to this, the Supreme Court strongly objected to the delay in implementation. Though the resolution plan was approved by the National Company Law Tribunal (NCLT) in September 2019, payments to financial creditors were delayed until March 2021, and operational creditors had to wait till March 2022. The court called out this postponement as unjustified, especially in the absence of any legal stay or restraining orders.
Committee of Creditors Also Under Fire
The judgment did not spare the Committee of Creditors (CoC) either. It criticized the CoC’s decision to greenlight a time-barred and incomplete resolution plan, thereby diluting the sanctity of creditor-driven decision-making under the commercial wisdom principle. The court warned that such lapses would erode the credibility of the IBC regime and compromise its objective of timely insolvency resolution.
Liquidation and Financial Fallout
With the resolution plan scrapped, BPSL now heads for liquidation, and JSW Steel, which had already integrated BPSL’s operations, may be staring at significant financial and operational losses. The banks involved in the deal may also be compelled to refund the amounts received as part of the resolution, further complicating the financial aftermath.
The government is said to be actively reviewing the implications of this ruling and is expected to formulate a response soon. Discussions are underway to understand the broader consequences on other IBC-driven acquisitions.
Implications for IBC and Future Acquisitions
This verdict serves as a stern reminder of the need for rigorous compliance in insolvency proceedings. It reaffirms that any deviation from the statutory timeline or eligibility norms can not only derail major corporate acquisitions but also lead to drastic legal consequences. For investors and lenders alike, the ruling signals a more stringent interpretation of the IBC going forward.
