India’s Supreme Court has ruled that JSW Steel Limited’s acquisition of Bhushan Power & Steel Limited (BPSL) through the bankruptcy resolution process was illegal and ordered the company’s liquidation. The verdict, delivered on May 2, comes four years after JSW Steel acquired BPSL under the Insolvency and Bankruptcy Code (IBC).
A two-judge bench determined that the resolution process violated provisions of the IBC. The court stated that JSW’s resolution plan, approved by the committee of creditors (CoC), failed to meet the requirements of Section 30(2) of the IBC and should have been rejected by the National Company Law Tribunal (NCLT) at the initial stage. The ruling also overturned a prior judgment by the National Company Law Appellate Tribunal (NCLAT), calling it “perverse and coram-non-judice.”
Additionally, the court criticized the CoC for failing to protect creditor interests, citing contradictory actions and acceptance of payments from JSW Steel without objection. The resolution professional overseeing the process was also found to have neglected his statutory duties under the IBC and Corporate Insolvency Resolution Process (CIRP) regulations.
This decision marks a significant legal precedent in India’s insolvency framework, highlighting the importance of adherence to regulatory guidelines in bankruptcy proceedings.
