Author: Nishant
College: ILS law college, pune
LinkedIn Profile Link: https://www.linkedin.com/in/nishant-shastri-035b722a5?utm_source=share_via&utm_content=profile&utm_medium=member_android
To the Point
The corporate insolvency resolution process (CIRP) of M/s Bhushan Power and Steel Limited (BPSL), valued at approximately ₹19,700 crore, represents one of the most legally contested restructurings in India’s financial history. Initiated in 2017 following a Section 7 petition by Punjab National Bank , the insolvency proceedings became a constitutional and regulatory battleground due to the provisional attachment of BPSL’s core assets by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA). This led to a classic clash of statutory priorities between the asset preservation goals of the PMLA and the corporate rescue objectives of the Insolvency and Bankruptcy Code, 2016 (IBC).
The case experienced an extraordinary judicial trajectory. On May 2, 2025, a division bench of the Supreme Court of India in Kalyani Transco v. M/s Bhushan Power and Steel Ltd. (2025 INSC 621) initially struck down the Committee of Creditors (CoC)-approved resolution plan submitted JSW Steel Limited and ordered BPSL’s immediate liquidation. The Court based this decision on procedural irregularities, specifically the Resolution Professional’s (RP) failure to file the mandatory Form H compliance certificate, inadequate Section 29A eligibility checks, and delays that exceeded the statutory limits of Section 12. This initial ruling shocked the Indian banking and corporate restructuring sectors, as JSW Steel had already successfully operated and modernized BPSL since March 2021.
In a rare and significant procedural turn, the Supreme Court issued a status quo order on May 26, 2025, and subsequently recalled its May judgment on July 31, 2025, admitting review petitions. Finally, on September 26, 2025, a three-judge bench of the Supreme Court led by Chief Justice B.R. Gavai delivered a definitive final judgment (2025 INSC 1165). The Court dismissed all appeals, set aside the liquidation order, and fully reinstated the resolution plan of JSW Steel. This landmark judgment represents a critical course correction, reinforcing the finality of completed resolutions, validating the post-approval continuity of the CoC, classifying Compulsorily Convertible Debentures (CCDs) as equity, and prioritizing economic revival over rigid proceduralism.
Use of Legal Jargon
The extensive litigation in the BPSL insolvency necessitated the application and interpretation of several key statutory provisions and advanced legal doctrines under the IBC and allied financial regulations.
Statutory Provision / Legal Doctrine
Legal Context and Application in the BPSL Litigation
Corporate Insolvency Resolution Process (CIRP)
The statutory process initiated under Section 7 of the IBC to resolve BPSL’s massive defaults and restructure its debts.
Section 12 Statutory Timelines
Mandates a strict outer limit of 330 days, inclusive of litigation delays, for the completion of the resolution process.
Functus Officio Doctrine
The legal principle that an entity’s authority ceases once its primary task is performed. Under BPSL, the Court decided whether the CoC becomes functus officio after plan approval.
Clean Slate Doctrine
A judicial principle ensuring that a successful resolution applicant acquires the corporate debtor free from historical liabilities, preventing future claims from popping up.
Section 32A Asset Immunity
Provides that the liability of the corporate debtor for pre-CIRP offences ceases, and its assets cannot be attached by agencies like the ED, once a resolution plan is approved and management changes hands.
Section 29A Eligibility Scrutiny
An absolute statutory bar preventing defaulting promoters or connected entities from participating in bids. The RP must verify this eligibility.
Regulation 39(4) & Form H Certificate
The mandatory compliance certificate filed by the RP to verify that the approved plan complies with all statutory provisions.
Compulsorily Convertible Debentures (CCDs)
Hybrid instruments that must be converted into equity at maturity. The Court held CCDs qualify as upfront equity infusions under the resolution plan.
Treatment of EBITDA
The operating profit generated by the corporate debtor during the CIRP. The Court ruled on whether lenders can claim these profits post-approval.
Plenary Jurisdiction (Article 142)
The Supreme Court’s constitutional power to pass orders to do complete justice, which was invoked in May 2025 to order BPSL’s liquidation but recalled in July 2025.
Section 61 “Any Person Aggrieved”
The statutory provision governing appeals. The Court examined whether erstwhile promoters have the locus to appeal under this section.
The strict adherence to statutory timelines under Section 12 of the IBC requires the completion of the Corporate Insolvency Resolution Process (CIRP) within a mandatory period. Mathematically, this is expressed as:
T_{\text{CIRP}} \le 330 \text{ days}
Where T_{\text{CIRP}} represents the total time elapsed from the insolvency commencement date, inclusive of extensions, litigation delays, and any exclusions granted by judicial authorities.
The Proof
The evidence, factual background, and procedural progression of the BPSL restructuring highlight a complex narrative of institutional conflict and subsequent judicial correction.
Chronological Milestones of the Litigation
Date
Legal and Operational Milestones
June 2017
Punjab National Bank files a Section 7 petition, initiating the CIRP of Bhushan Power and Steel Limited.
September 5, 2019
The NCLT approves JSW Steel’s acquisition bid of ₹19,700 crore.
October 10, 2019
The ED issues a provisional attachment order under Section 5 of the PMLA, seizing BPSL’s steel manufacturing plants.
February 17, 2020
The NCLAT upholds JSW Steel’s resolution plan and stays the ED’s provisional attachment, citing Section 32A asset immunity.
March 2021
JSW Steel completes the acquisition, infuses the resolution amount, and assumes management control.
May 2, 2025
The Reversal (2025 INSC 621): A division bench of the Supreme Court rejects the plan and orders BPSL’s liquidation under Article 142 of the Constitution.
May 26, 2025
The Supreme Court orders status quo on the liquidation to allow JSW Steel to submit a review petition.
July 31, 2025
The Supreme Court recalls its May 2 judgment, noting potential misapplications of settled IBC principles, and schedules fresh hearings.
September 26, 2025
The Final Ruling (2025 INSC 1165): A three-judge bench of the Supreme Court dismisses all appeals and formally reinstates JSW Steel’s resolution plan.
Procedural Lapses and the Initial Liquidation Order
In its initial judgment on May 2, 2025, the Supreme Court ordered liquidation based on multiple procedural deviations by the Resolution Professional (RP) and the CoC.
First, the RP failed to submit the mandatory compliance certificate in Form H under Regulation 39(4), which verifies the plan’s compliance with statutory rules. Second, the RP failed to perform proper due diligence regarding JSW Steel’s eligibility under Section 29A, neglecting to independently verify the contents of its eligibility affidavit. Third, the CoC bypassed full-body meetings, choosing instead to negotiate the final plan through a select “core committee” representing only a small group of lenders, and permitted JSW Steel to amend its plan selectively. Fourth, the plan was modified post-approval using an unauthorized “Addendum Letter” and bypassed priority payment provisions for operational creditors under Regulation 38.
The division bench strictly enforced the 330-day outer limit of Section 12, refusing to overlook these “illegal acts” simply because JSW Steel had already completed part-implementation and operated the plant since March 2021.
Operational Takeover and Post-March 2021 Evidence
During the review and final rehearing stage, JSW Steel presented compelling evidence showing that it had successfully taken over the loss-making steel plant in March 2021, modernized its operations, turned BPSL into a highly profitable enterprise, and secured thousands of industrial jobs. JSW Steel argued that the delays were entirely due to external factors, primarily the ED’s PMLA provisional attachment and pending litigation, rather than any bad faith or default on its part. These arguments eventually persuaded the three-judge bench to reverse the liquidation order, recognizing that dismantling a fully operational and revived company would defeat the primary legislative objective of the IBC—the successful revival of debt-ridden firms.
Abstract
A major turning point in India’s corporate insolvency regime was the litigation in Kalyani Transco v. M/s Bhushan Power and Steel Ltd. & Ors., which highlights the conflict between strict procedural compliance and commercial pragmatism. Bhushan Power and Steel Limited, one of India’s largest corporate defaulters, entered insolvency in 2017. Although JSW Steel’s ₹19,700 crore resolution plan was approved in 2019 and implemented in 2021, the process was delayed by asset attachments under the PMLA.
The Supreme Court initially ordered the liquidation of BPSL in May 2025 due to several procedural lapses, including the RP’s failure to file the mandatory Form H certificate and verify Section 29A eligibility. However, recognizing the potential systemic damage of dismantling an active, modernized, and profit-making enterprise, the Court recalled its decision and delivered a final ruling on September 26, 2025. This landmark final judgment dismissed the appeals, upheld JSW Steel’s acquisition, and clarified critical aspects of the insolvency process, including the CoC’s post-approval continuity, the equity classification of CCDs, and the treatment of accumulated EBITDA.
Case Laws
The judicial deliberations in the BPSL insolvency relied heavily on several landmark precedents that have shaped India’s bankruptcy jurisprudence.
1. Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta
This precedent established the paramount status of the CoC’s commercial wisdom and introduced the “clean slate” principle. In the BPSL litigation, the Supreme Court relied on this ruling to dismiss the CoC’s late-stage claims for BPSL’s operational profits (EBITDA). The Court reaffirmed that in the absence of any explicit provisions in the RFRP, any accumulated profits generated during the CIRP must remain with the corporate debtor to support its operational revival, rather than being distributed to lenders. Entertaining such retroactive claims would reopen settled issues and undermine the finality of approved plans, amounting to “hydra heads popping up”.
2. Vijay Kumar Jain v. Standard Chartered Bank and Others
This judgment addressed the rights of erstwhile directors and promoters to participate in the insolvency process and access relevant documents. In the BPSL appeals, the Supreme Court rejected the contention that former promoters lacked locus standi to challenge the resolution plan. Citing Vijay Kumar Jain, the Court recognized that because a resolution plan directly impacts the rights, obligations, and liabilities of personal guarantors—a role typically held by promoters—they have standing to appeal under Section 61 of the IBC.
3. Swiss Ribbons Pvt. Ltd. v. Union of India
This landmark ruling established that the primary objective of the IBC is the economic revival of distressed enterprises and the maximization of asset value, rather than debt recovery. The Supreme Court’s final review judgment in the BPSL case aligned with Swiss Ribbons, noting that the commercial wisdom of the CoC should only be overridden in exceptional cases of fraud, bad faith, or clear violations of Section 30(2). The Court observed that using technical procedural delays to force an operational, revived company into liquidation would run directly counter to the public interest objectives of the Code.
4. Narendra Kumar Maheshwari v. Union of India
This decision established that Compulsorily Convertible Debentures (CCDs) are inherently equity instruments rather than debt, given their mandatory and inevitable conversion into equity shares. In the BPSL dispute, operational creditors argued that JSW Steel’s infusion of funds via CCDs did not meet the upfront equity infusion requirements of the resolution plan. Relying on Narendra Kumar Maheshwari, the Supreme Court dismissed this objection, confirming that CCDs satisfy the definition of equity and are fully valid under the IBC framework.
Conclusion
The litigation in Kalyani Transco v. M/s Bhushan Power and Steel Ltd. & Ors. serves as a vital case study on the importance of finality and commercial pragmatism within India’s corporate insolvency framework. The case demonstrated the risks of procedural absolutism when the Supreme Court’s initial May 2025 ruling ordered the liquidation of a revived, profit-making steel plant on technical grounds, causing significant concern in the corporate sector.
The subsequent course correction by the three-judge bench on September 26, 2025, restored stability to India’s insolvency regime. By confirming that the CoC remains active post-approval to oversee plan implementation, validating the equity classification of CCDs, and protecting independent buyers from retroactive liabilities or PMLA attachments under Section 32A, the Court reinforced the “clean slate” principle. This landmark final judgment provides critical reassurance to global and domestic investors, confirming that once a resolution plan has been approved and implemented in good faith, technical delays will not be used to undo years of restructuring work or dismantle operational businesses.
FAQS
What was the core legal conflict in Kalyani Transco v. M/s Bhushan Power and Steel Ltd.?
The central conflict was the tension between strict procedural compliance (procedural absolutism) and the preservation of a revived enterprise (commercial pragmatism) under the IBC. The case examined whether minor procedural omissions by the RP and CoC, combined with implementation delays caused by external PMLA asset attachments, should invalidate an approved, ₹19,700 crore resolution plan and force the company into liquidation.
Why did the Supreme Court recall its initial May 2025 judgment?
The Court recalled its initial judgment on July 31, 2025, after JSW Steel and the CoC filed review petitions pointing out that BPSL had already been successfully acquired and operated as a profitable enterprise since March 2021. The Court recognized that ordering the liquidation of an active and modernized company on narrow, technical grounds misapplied settled IBC principles, and chose to rehear the appeals.
Does the CoC cease to exist immediately after a resolution plan is approved?
No. The Supreme Court’s final judgment clarified that the CoC does not become functus officio immediately upon NCLT’s plan approval. Instead, the CoC continues to exist and operate until the approved resolution plan is fully implemented and all legal challenges to its validity have been resolved.
Why were JSW Steel’s Compulsorily Convertible Debentures (CCDs) recognized as equity?
Applying established corporate finance principles and its decision in Narendra Kumar Maheshwari, the Supreme Court confirmed that CCDs are inherently equity instruments because their conversion into equity shares is mandatory and inevitable. Consequently, JSW Steel’s infusion of funds via CCDs fully satisfied its upfront equity commitments under the resolution plan.
Works cited
1) SCC – 2025 SCC OnLine SC 1010
2) Bar and bench
