In May 2025, the Supreme Court of India delivered a watershed ruling in the long-drawn insolvency saga of Bhushan Power & Steel Ltd. (“BPSL”). The judgment in Kalyani Transco v. Bhushan Power & Steel Ltd. & Ors. (2025 INSC 1164) did not merely decide the fate of a single resolution plan—it reaffirmed the very architecture of the Insolvency and Bankruptcy Code, 2016 (“IBC”).
The Court quashed the approvals granted by the NCLT and NCLAT to JSW Steel Ltd.’s (“JSW”) resolution plan, citing non-compliance with statutory provisions, unexplained delays, and infirmities in equity infusion. Ultimately, the Court directed liquidation of BPSL under Section 33 of the IBC, invoking its plenary powers under Article 142 of the Constitution.
This ruling is a clarion call: resolution plans are not malleable instruments of convenience but must withstand the test of law, equity, and time-bound discipline.
Background: From CIRP to the Supreme Court
BPSL was one of the Reserve Bank of India’s infamous “dirty dozen” large corporate defaulters identified for immediate insolvency proceedings. In July 2017, the Corporate Insolvency Resolution Process (“CIRP”) commenced. After competitive bidding, JSW emerged as the Successful Resolution Applicant (“SRA”), and its plan was approved by the Committee of Creditors (“CoC”).
Yet, what followed was years of litigation. The plan faced challenges from erstwhile promoters, operational creditors, and international claimants. Parallel proceedings under the Prevention of Money Laundering Act, 2002 (“PMLA”) further complicated implementation. Despite approvals by the NCLT (2019) and the NCLAT (2020), appeals eventually culminated before the Supreme Court.
Key Findings of the Supreme Court
1. Mandatory Compliance with Section 30(2) and Section 31(2)
The Court held that the resolution plan, as approved, did not meet the mandatory conditions under Section 30(2) IBC. Among the infirmities were:
- Payment sequencing where financial creditors were favoured over operational creditors;
- An open-ended clause allowing indefinite extension of plan implementation; and
- Arbitrary treatment of contingent claims.
The Court underscored that statutory compliance is non-negotiable. Lex lata must prevail; commercial wisdom cannot override legal mandates.
2. The Role of the Committee of Creditors
Rejecting the submission that the CoC becomes functus officio after NCLT’s approval, the Court clarified that the CoC continues to exist until full implementation of the plan or finality of appellate proceedings. However, its powers must be exercised strictly within the four corners of the Code.
3. Time is of the Essence
The Court strongly emphasised the principle underlying Section 12 IBC—that CIRP is a time-bound process. Delays not only erode creditor confidence but also defeat the very legislative purpose.
The Court noted that the delay in implementing the JSW plan—over 540 days—was not genuinely caused by enforcement proceedings under PMLA, but appeared to coincide with market opportunism driven by fluctuations in steel prices. Vigilantibus non dormientibus jura subveniunt—the law aids the vigilant, not those who slumber.
4. Equity Infusion and Financial Engineering
JSW’s attempt to satisfy equity infusion commitments via Compulsorily Convertible Debentures (CCDs) was rejected. The Court held that substance must prevail over form (substantia praevalet forma). Creditors’ expectations of “pure equity” could not be diluted by financial structuring that undermined transparency.
5. EBITDA Debate Deferred
The contentious issue of whether Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) generated during CIRP ought to be distributed among creditors was left open. The Court declined to adjudicate conclusively but recognised its doctrinal importance, signalling that future cases may provide clarity.
Consequence: Liquidation of BPSL
In a decisive turn, the Court quashed both NCLT and NCLAT orders, rejected JSW’s resolution plan, and directed liquidation of BPSL under Section 33 IBC. The Court also invoked Article 142 to ensure comprehensive relief and equitable adjustment of payments already made during interim implementation.
This outcome reflects a rare but necessary judicial intervention: when a plan violates the Code’s core, liquidation becomes ultima ratio—the last resort.
Doctrinal Significance
This judgment crystallises several jurisprudential principles that will govern insolvency practice in India:
1. Primacy of Law over Commercial Wisdom
The CoC’s decisions, though accorded deference, cannot sanctify a plan that contravenes Section 30(2). The Court reaffirmed that commercial discretion is not a shield against statutory non-compliance.
2. Strict Adherence to Timelines
Resolution is meaningful only if delivered swiftly. Judicial tolerance of delays risks reducing CIRP into a hollow ritual. The Court reinforced that “time is the soul of insolvency.”
3. Integrity of Equity Infusion
Resolution applicants cannot camouflage obligations through financial engineering. Genuine infusion of capital remains central to credibility of resolution.
4. Judicial Oversight of Fairness
Even in a creditor-driven regime, courts remain guardians of fairness and legality, ensuring balance between financial creditors, operational creditors, and other stakeholders.
Conclusion
The Bhushan Power & Steel decision is not simply about one corporate debtor. It is a structural reaffirmation of the IBC’s purpose: value maximisation through timely, lawful, and transparent processes.
For insolvency professionals, resolution applicants, and creditors alike, the message is unambiguous—resolution plans must comply with the letter and spirit of the Code, or risk judicial annulment.
As India continues to strengthen its insolvency ecosystem to match global benchmarks, this judgment resonates internationally. It projects India as a jurisdiction committed to integrity, predictability, and fairness in insolvency resolution.
Fiat justitia ruat caelum—let justice be done, though the heavens may fall.
This blog is intended for educational and professional discussion purposes. It should not be construed as legal advice. For specific legal queries, please consult a qualified practitioner.