Case Comment: Kalyani Transco vs M/S Bhushan Power and Steel Ltd

Citation: 2025 SCC OnLine SC 1010

Date of the Judgement: 2^nd May 2025

Authority: Supreme Court of India

Bench: The Bench comprising of Justice Bela M. Trivedi and Justice Satish Chandra Sharma

FACTS:

1. The insolvency proceedings against Bhushan Power & Steel Ltd. (BPSL) began when Punjab National Bank filed a petition under the Insolvency and Bankruptcy Code (IBC), which was admitted by the National Company Law Tribunal (NCLT) on 26.07.2017.
2. The Interim Resolution Professional (IRP) invited claims from creditors and admitted total claims worth ₹47,204.51 crores from financial creditors and ₹621.37 crores from operational creditors.
3. The Committee of Creditors (CoC) evaluated resolution plans submitted by JSW Steel, Tata Steel, and Liberty House, ultimately selecting JSW Steel’s plan as the highest bidder based on the evaluation matrix.
4. After negotiations, JSW Steel submitted a revised resolution plan, which was approved by the CoC through e-voting in October 2018 and later filed before the NCLT for final approval in February 2019.
5. During the resolution process, the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) registered cases against BPSL’s former directors for alleged fraud and money laundering, with the ED attaching BPSL’s assets in October 2019.
6. The NCLT approved JSW Steel’s resolution plan on 05.09.2019 but imposed certain conditions, including ensuring payments to operational creditors as per amended IBC provisions, suspending BPSL’s board of directors, and allowing criminal proceedings against ex-directors to continue.
7. JSW Steel challenged some of the NCLT’s conditions before the National Company Law Appellate Tribunal (NCLAT), which modified the order in February 2020 by replacing the Monitoring Agency with a Steering Committee and clarifying that recovered proceeds from tainted transactions would not impact the resolution plan.
8. The NCLAT’s decision aligned with the Supreme Court’s ruling in the Essar Steel case, emphasizing the finality of approved resolution plans and protecting the successful bidder from future undecided claims.
9. The final resolution allowed JSW Steel to take over BPSL’s operations while settling creditor claims.

ISSUES:

• Who could be said to be an “aggrieved person” for filing an appeal before the Supreme Court and before the NCLAT under Section 62 of the IBC?
• Whether JSW’s appeal before the NCLAT was maintainable under Section 61 of the IBC?
• Whether the NCLAT had any powers of Judicial Review over the decision taken by the Statutory Authority under the PMLA?

CONTENTIONS BY APPELLANTS:

1. Broad Interpretation of “Person Aggrieved” Under Section 62: The term “any person aggrieved” in Section 62 of the IBC must be given a liberal construction, encompassing all stakeholders including ex-promoters, operational creditors, and statutory authorities who are directly impacted by the resolution plan.
2. Violation of Principles of Natural Justice: The CoC and Resolution Professional failed to follow the principles of natural justice by excluding the legitimate claims and concerns of operational creditors and statutory authorities like the State of Odisha, without proper notice or hearing.
3. Improper Implementation of the Resolution Plan: The resolution plan, even after being approved, was not implemented as per law. Government dues such as entry tax and electricity dues were not paid or settled, violating Section 30(2)(e) of the IBC, which requires plans to comply with existing laws.
4. Commercial Wisdom Not Absolute: While the CoC’s commercial wisdom is respected, it is not absolute. The CoC failed to exercise its discretion in accordance with the law, particularly by approving a resolution plan that failed to pay statutory dues or treat similarly situated creditors equitably.
5. Resolution Plan is in Violation of IBC and Public Interest: The plan contravenes the IBC and constitutional principles by allowing a backdoor entry to ineligible promoters, unfairly extinguishing statutory claims, and permitting selective satisfaction of creditors thereby undermining the integrity of the insolvency process.

CONTENTIONS BY RESPONDENT:

1. Maintainability under Section 62: Appeals filed by ex-promoters, operational creditors, and government authorities are not maintainable under Section 62 IBC as they are not “persons aggrieved” and have raised new issues not brought before the NCLAT.
2. Issues Raised Were Not Earlier Argued: The ex-promoters raised concerns about implementation of the resolution plan for the first time before the Supreme Court, bypassing the NCLAT process.
3. Successful Implementation of Plan: JSW has already implemented the resolution plan by clearing dues to financial creditors (March 2021) and operational creditors (March 2022); thus, no further grievance survives.
4. Waiver of Rights by Accepting Payments: Operational creditors, like Kalyani Transco, who accepted payments under the plan, can no longer be considered “aggrieved persons.”
5. State of Odisha’s Belated Claims: The State of Odisha did not file claims for entry tax or electricity dues before the RP or raise them before the NCLT/NCLAT and cannot raise them for the first time before the Supreme Court.

RATIONALE:

Ratio Decidendi:

1. The court observed that under Section 61 and 62 of the IBC, there is no rigid locus requirement to file an appeal under these provisions. Once CIRP is initiated, the process becomes in rem, involving all stakeholders, not just the applicant creditor or corporate debtor.
2. Under Section 62 of the IBC, “any person aggrieved” includes all materially affected stakeholders, not just parties to the original application.
3. An appeal under Section 61 of the IBC against approval of a resolution plan is maintainable only if specific grounds listed in Section 61(3) exist, and parties who do not meet these criteria cannot challenge the approval; furthermore, the appellate authority cannot exceed its jurisdiction by modifying the plan or issuing unrelated directions.
4. The mandatory timelines under Section 12 IBC are sacrosanct, and any resolution plan approved after the statutory period (270/330 days) is legally void, necessitating liquidation.

Obiter Dicta:

1. The court interpreted that the NCLAT’s jurisdiction under the IBC is limited and does not extend to reviewing decisions of statutory authorities under public law, such as the ED’s provisional attachment order under the PMLA.
2. Non-compliance with mandatory provisions of the IBC and CIRP Regulations renders the resolution process fundamentally flawed, and such violations cannot be condoned merely by CoC approval or NCLT endorsement.

DEFECTS OF LAW:

1. Ineffective Enforcement of Section 12 IBC Timelines- Despite reiterating the sacrosanct nature of the statutory 270-day limit under Section 12 IBC, the law fails to provide effective deterrents against its violation. In this case, the Resolution Professional (RP) and Committee of Creditors (CoC) bypassed the timeline with impunity, and the NCLT approved a plan filed long after the deadline. The absence of automatic consequences for such non-compliance reveals a loophole in the IBC’s enforcement framework.
2. Lack of Procedural Safeguards Against Strategic Delays– The judgment exposed how resolution applicants can misuse procedural gaps to delay implementation and exploit improving market conditions. JSW Steel’s deliberate delay in plan implementation, followed by a “fait accompli” argument, highlights the Code’s failure to anticipate and penalize strategic non-compliance, thereby incentivizing opportunistic behavior.
3. No Mechanism for Independent Eligibility Scrutiny– Although Section 29A disqualifies ineligible applicants, the RP’s failure to verify JSW’s past links with BPSL underscores a systemic flaw—there is no mandatory independent scrutiny mechanism for eligibility affidavits. The law depends excessively on self-certification, allowing applicants to conceal material facts without immediate detection or penalty.
4. Jurisdictional Ambiguity on Section 32A Application– The Supreme Court correctly barred the NCLAT from reviewing Enforcement Directorate (ED) actions under PMLA but failed to clarify how and when Section 32A protections apply. This omission perpetuates regulatory uncertainty and discourages bona fide resolution applicants, undermining the “clean slate” doctrine’s commercial efficacy.
5. Inadequate Accountability of Resolution Professionals and CoC– Despite serious lapses by the RP and CoC—ranging from ignoring eligibility issues to violating procedural mandates—there is no legal provision for their disqualification, penal consequences, or civil liability in such cases. This creates a culture of impunity and erodes trust in the CIRP’s fairness and transparency.
6. Overbroad Discretion of the CoC in the Absence of Judicial Checks– The CoC’s acceptance of delayed payments and inconsistent stance during litigation reveal the excessive latitude granted to it under the banner of “commercial wisdom.” The IBC lacks a structured framework for judicial review of such discretion, allowing commercial decisions to override equity, legality, and due process.

INFERENCE:

The Supreme Court’s ruling in the Bhushan Power & Steel Ltd. (BPSL) insolvency case delivers a stern reminder about the foundational principles of the Insolvency and Bankruptcy Code (IBC), particularly emphasizing procedural sanctity, adherence to timelines, and institutional boundaries. Through its detailed observations and subsequent judgment, the Court unequivocally held that once the Corporate Insolvency Resolution Process (CIRP) is initiated, it becomes in rem, meaning that all stakeholders—not just the parties to the original petition—are affected and have standing to challenge material irregularities.

Importantly, the Court ruled that JSW Steel’s appeal before the NCLAT was not maintainable and that the NCLAT overstepped its jurisdiction by modifying the resolution plan and interfering with actions taken by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA). This reinforced the legal boundary that appellate authorities under the IBC cannot review or invalidate decisions made by statutory bodies functioning under other legislations.

Additionally, while the CIRP may have formally concluded within the statutory period, the Court observed gross non-compliance with mandatory provisions—ranging from procedural irregularities to suppression of material facts—by the Resolution Professional (RP), the Committee of Creditors (CoC), and JSW Steel. These systemic failures rendered the entire CIRP process defective and unworthy of judicial approval. A key finding was that JSW delayed implementation of the approved resolution plan for over two years, violating Section 30(2) and exploiting rising steel prices for undue financial gain. Such conduct was labeled as mala fide and contrary to the objectives of the IBC, which is designed to facilitate time-bound resolution rather than enabling strategic delays for commercial advantage.

The judgment thus signals that while the CoC’s commercial wisdom is accorded deference, it is not immune from scrutiny—particularly when statutory requirements are bypassed or when equity among stakeholders is compromised. The decision also clarifies that protections like Section 32A of the IBC, which shield the assets of the corporate debtor from liability post-resolution, cannot be retrospectively applied or misused to cleanse prior fraud.

Ultimately, the Supreme Court’s decision to invalidate the resolution plan and push for liquidation underscores a clear message: procedural discipline and statutory compliance are the bedrock of the IBC framework. Any circumvention—whether by powerful corporate bidders, negligent resolution professionals, or complacent creditors—will not be tolerated. The case sets a strong precedent for safeguarding the insolvency ecosystem against abuse, ensuring transparency, and preserving the IBC’s integrity as a creditor-friendly, time-bound resolution mechanism.