Supreme Court Rejects Non-Compliant Resolution Plan, Orders Liquidation for Bhushan Power and Steel Ltd

The Supreme Court, in Kalyani Transco v. M/s Bhushan Power and Steel Ltd & Ors (May 2, 2025), rejected the resolution plan of Bhushan Power and Steel Ltd (BPSL), approved by the Committee of Creditors (CoC) and NCLT on September 5, 2019, directing liquidation. The Corporate Insolvency Resolution Process (CIRP) was initiated by Punjab National Bank, with financial creditors claiming Rs. 47 Crores and operational creditors over Rs. 621 Crores. JSW’s resolution plan, approved by the CoC and upheld by NCLAT with modifications, was challenged by promoters, operational creditors, and the Government of Odisha in the Supreme Court over non-compliance with the Insolvency and Bankruptcy Code (IBC).

The key legal questions centered on compliance with IBC provisions, specifically Sections 29A, 30(2), and 12, and Regulation 38 of the CIRP Regulations, 2016. Appellants argued that the Resolution Professional (RP) failed to submit Form H, casting doubt on JSW’s eligibility under Section 29A, which bars certain entities from submitting resolution plans. They contended the plan violated Section 30(2) and Regulation 38 by prioritizing financial creditors over operational creditors, contrary to the requirement for equitable treatment. Additionally, they highlighted the breach of Section 12’s CIRP timeline, as the plan was submitted to NCLT after one and a half years, without a valid extension. The appellants also criticized the CoC’s inadequate scrutiny of the plan’s feasibility and JSW’s delayed payments—financial creditors in March 2021 and operational creditors in March 2022—as an abuse of process.

The Supreme Court interpreted these legal questions strictly, emphasizing that non-compliance with Section 29A, due to the missing Form H, undermined JSW’s eligibility, a foundational requirement. It held that violations of Section 30(2) and Regulation 38, by failing to prioritize operational creditors, breached mandatory IBC provisions. The Court clarified that Section 12’s timeline is imperative, and delays without extensions warranted liquidation, distinguishing this from Essar Steel where extensions were allowed in exceptional cases. It ruled the CoC’s commercial wisdom is not absolute and must align with statutory mandates, as per K. Sashidhar v. Indian Overseas Bank. The Court condemned JSW’s delays as willful, undermining IBC objectives. This judgment is significant for reinforcing strict adherence to IBC’s statutory framework, ensuring equitable creditor treatment, and upholding the integrity of the insolvency process.