The verdict of the Supreme Court is a setback for the resolution process | Photo credit: Lakshmiprasad S
Can a trial be correct in the law, but is never wrong? The answer seems to be in the case of the recent judgment of the Supreme Court, establishment of Stetide JSW Steel LTDS (JSW) Resolution Plan for the acquisition of Bhushan Power and Steel Ltd (BPSL).
More than five years after the Court of the National Company Law approved the Resolution Plan and affirmed by the Court of Appeal of the National Law (NCLAT), the Court has ordered BPSL to be Luquidated.
The Court was not words in maintaining that it had heinous legs of legs by the resolution professional, the Creditors Committee (COC) and the applicant for successful resolution, JSW, in the realization of the inquister process.
Failures
Among the many failures highlighted by the court were the following.
First, The Resolution Professional had not made appeal Beason for the for the Beave Beason for the for the Beave Beason for the for the Beve Bone Beason for the Nectt Beave Beason for the NCLT Beave Beason for the NCLT Beason for the NCLT Beason for the NCLT Beve Benon for the NCLT. It has been reason for the NCLT.
Secondly, the resolution professional had not assured that the resolution plan complied with the IBC before presenting it to COC. For example, the resolution professional could not verify JSW’s election to present a plan under section 29a of the IBC, a provision that restricts the related parties of the debtors to present resolution plans. The resolution professional had also allowed the plan to be presented for consideration by COC, even thought did not provide (as required in regulations) so that operational creditors were paid in priority to financial creditors.
Thirdly, the COC could not exercise its commercial wisdom for the benefit of all creditors and according to the IBC and had not managed to consider the viability of the resolution plan presented by JSW. Finally, JSW had acted with bad AUSH intentions and had misused the legal process, among other things, not revealing his relationship with BPSL with COC and subsequently delaying the implementation of the resolution plan in more than 500 days. JSW finally made the required payments to financial creditors in March 2021 and the operational creditors in March 2022.
BPSL was one of the “dirty boxes” debt companies that had initially directed the IBC process by the Bank of the India Reserve and its resolution process was full of complications.
Shortly after the NCLT approved the Resolution Plan, the Control Directorate (ED) ordered the proof of BPSL assets for crimes under the money laundering prevention law and it seems that the delays in the ED action, finally in action.
However, the findings indicate violations by several interested parties that the Supreme Court called rightly. In fact, the court continued to say that allowing the implementation of the plan as a “consummate fact” would be equivalent to tolerate illegalities in the process and breastfeed JSW.
But was the liquidation the only option available? While the judges follow the letter of the law, it is Dtrimental for the largest objectives of the IBC of timely resolution, maximization of value and predictability.
The consequences
Resting a resolution plan that has already been implemented has disastrous consequences for all interested parties and, in particular, the debtors itself, its creditors and employees. It is likely that the court ruling in BPSL also has negative consequences for the development of a market for assets in difficulties in India.
If a resolution plan can be reopened and reserved several years after its implementation, it is likely that prospective resolution applicants are heart to offer for the partners under the IBC.
While the court was right by emphasizing the need for all interested parties, including the applicant for successful resolution, strictly adhere to the deadlines and the process under the IBC, could explore alternatives to achieve more their consistency base.
There are occasions on the legs in which the Supreme Court, for the sake of the Renaissance of the corporate debtor, has modified the part of a resolution plan that was illegal instead of completely disburseing it.
Also in this case, the Court could have considered a middle ground, such as imposing sanctions on the wrong makers, given the disastrous effects that a resolution plan has on the certainty of the transaction.
The elephant in the room is the moment of the court ruling. The insolvency application against BPSL was admitted in 2017; The JSW resolution plan was approved in 2019 by the NCLT and affirmed by the NCLAT a few months later; Several petitioners appealed NClat’s order to the Supreme Court in 2020.
The Supreme Court finally issued its sentence in May 2025, a few years after the very late implementation of the Resolution Plan. Perhaps, if the Supreme Court had applied the criticality of the timelines under IBC to itself, could this disorder have been avoided?
The writer is a partner of S&R Associates. The opinions expressed are personal
Posted on May 6, 2025