[Aditya Vaid is a penultimate year law student at Jindal Global Law School]
The recent landmark Supreme Court judgment in the case of Kalyani Transco v. Bhushan Power and Steel Limitedrepresents a significant milestone in India’s insolvency regime. On May 2, 2025, the Supreme Court set aside JSW Steel Ltd.’s (“JSW Steel”) resolution plan for Bhushan Power and Steel Ltd (“BPSL”) and ordered the liquidation of the Corporate Debtor, five years after the plan had been approved by the Committee of Creditors (“COC”). While the judgment upholds the legal principles and rule of law, it deals a big blow to the effectiveness of the resolution process.
The judgment was delivered in response to an appeal filed by the promoters and operational creditors of BPSL, challenging the National Company Law Appellate Tribunal’s (“NCLAT”) order dated February 17, 2020. The Court further directed refund of all payments made by JSW Steel to financial creditors, operational creditors and towards equity shareholding within two months from the date of the judgment. The judgment stands out for the extraordinary relief it grants, as it sets aside a resolution plan that had already been substantially implemented. The seriousness of the wrongdoing ranging from delayed payments and failure to meet statutory requirements, to alleged bad faith and procedural lapses under section 29A, suggests that the Supreme Court viewed the resolution process as flawed and therefore undeserving of the usual standards of finality.
While the Supreme Court’s reasoning rests on the egregious nature of the violations in the resolution process, it fails to delimit the scope of its ruling. The judgment does not clarify whether such severe consequences, including the reversal of an implemented resolution plan, are intended to apply solely in cases involving grave and extraordinary breaches, or whether they could also extend to routine proceedings involving less serious procedural lapses. By failing to demarcate clear doctrinal boundaries, the ruling risks blurring the line between enforcing compliance and destabilizing settled commercial outcomes. The author contends that overturning JSW Steel’s acquisition of BPSL has rekindled a fundamental debate in India’s insolvency regime: can commercial resolutions attain finality, or will they continue to be subject to ongoing judicial scrutiny and uncertainty?
This post is divided into three key subheadings. Firstly, it discusses the context and the background of this development. Secondly, it will analyze the Supreme Court judgment, and then discuss the implications of the ruling for investors. Lastly, the post highlights some persisting concerns and concludes with considerations for the way forward.
Context and Legal Position
The factual background of the case is quite straightforward. BPSL was among the Reserve Bank of India’s list of the “dirty dozen”, a group of highly distressed assets. The case was distinct because after the National Company Law Tribunal (“NCLT”) approved BPSL’s resolution plan (valued around Rs.19,800 Crores), the Enforcement Directorate (“ED”) attached BPSL’s assets. JSW being the successful resolution applicant challenged this attachment before the NCLAT and the Supreme Court in 2019. The NCLAT upheld the resolution plan approved by the NCLT, which led to certain operational creditors and BPSL’s promoters to file an appeal before the Supreme Court. Due to the uncertainty caused by the ED’s actions, JSW implemented the resolution plan in stages. JSW made payments worth around Rs. 19,350 Crores to the financial creditors in 2021; and approximately Rs. 350 Crores to the operational creditors in 2022.
Notably, while admitting the appeals in 2020, the Supreme Court recorded a statement from COC’s counsel, assuring that all amounts would be returned within two months if the appeals by BPSL’s promoters and operational creditors were successful.
Decoding the Implications
After engaging in a detailed analysis of the provisions of Insolvency and Bankruptcy Code (“IBC”) and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Supreme Court rejected the plan, citing payment delays, issues with financial arrangement, alleged bad faith on the part of the resolution applicant, along with failures by both the COC and the resolution applicant. The case underscores the importance of a broader economic legal and economic imperative: finality.
The author contends that the judgment effectively penalizes the new ecosystem of stakeholders who joined the company post-resolution, rather than the wrongdoers. The same may create a concerning precedent for prospective resolution applicants, who may hesitate to invest if transactions remain vulnerable to being overturned years after implementation.
Firstly, the time factors may be particularly troubling for investors. The fact that a resolution plan implemented in 2019 could be undone as late as 2025 introduces an extended period of uncertainty, something that most investment committees are unlikely to accept. Such prolonged unpredictability undermines confidence in the finality of commercial transactions and may deter serious bidders from participating in future resolution processes.
Secondly, the judgment raises significant questions surrounding liability of an investor. Specifically, whether an investor can be held accountable for future liabilities arising from procedural defects in the resolution, even if they were not involved or responsible for those irregularities.
Thirdly, the judgment is likely to undermine investor faith and confidence in the credibility of the corporate insolvency resolution process (“CIRP”) and the IBC as an effective resolution mechanism. The same may negatively impact India’s ease of doing business reputation, as the current ruling sets a dangerous precedent for reopening resolution plans that have already been partially implemented.
Lastly, another significant implication of the judgment is that the Supreme Court appears to have departed from the well-established principle that the COC’s wisdom holds primacy in approving and implementing a resolution plan. The position of the Court is in contrast to its earlier ruling in the Essar Steel judgment, where it had given preeminence to the commercial wisdom of the COC, stating decisions driven purely by commercial consideration lie beyond the purview of judicial review. The author argues that the Court’s reproach of the COC for accepting delayed payments without interest encroaches upon the assessment of commercial merits, rather than remaining within the bounds of legal scrutiny.
The ruling becomes a tipping point for distressed asset investment community. Potential investors may exercise a higher degree of caution and restraint regarding future investments in India’s stressed development and insolvency markets. Furthermore, the IBC was envisioned to promoted timely and equitable resolutions, making the five-year delay in adjudicating the matter stark when compared to landmark cases such as Essar Steel and Binani Cements, which reached finality within months.
Concerns and Conclusion
The judgment raises some pertinent concerns, and while the Court’s observations may be valid, the solution must strike a balance between ensuring accountability and preserving economic continuity.
First, there was a question regarding non-compliance with the certification requirement under section 29-A. The Supreme Court observed that the Resolution Professional had failed to submit the mandatory compliance certificate in Form ‘H’ verifying JSW’s ineligibility under section 29A. While there was indeed a lapse, it is doubtful that any real prejudice was caused, particularly since the question of whether JSW was a related party to BPSL was not actively raised before the Court.
Even if the failure to raise this issue does not negate the obligation to establish eligibility under section 29A, a more appropriate course of action would have been to remand the matter for a factual determination on the basis of JSW’s eligibility. The author suggests that treating a procedural lapse under section 29A as an automatic ground for ineligibility appears excessive, particularly in the absence of any challenge to the applicant’s eligibility by the stakeholders. Crucially, procedural non-compliance alone should not, in itself, disqualify a resolution applicant from the process.
Secondly, the Court’s interpretation of section 12 of the IBC as mandating strict adherence to the 270-day limit for completing CIRP raises serious concerns. The Court noted that the Resolution Professional had failed to comply with the timeline prescribed under section 12, read with regulations 39(4) and 40A of the CIRP Regulations, and concluded that approving a resolution plan beyond this statutory period amounted to a grave error. It further observed that only after the 2018 amendments to section 12 did the statute permit any extension beyond 270 days.
The author contends that the rejection of a resolution plan solely on the basis of delay is overly rigid. The NCLT’s inherent power to condone such delays in the interest of justice could have been utilized to address the timing issue. Ironically, the Supreme Court had recently invoked this same doctrine of inherent judicial power to allow limited modifications to arbitral awards under section 34 of the Arbitration and Conciliation Act. Furthermore, it remains unclear whether the Court took into the account the time consumed by the NCLT in admitting the section 7 application, a process statutorily required to be completed within 14 days. However, the same is a deadline that the Supreme Court has previously deemed to be directory rather than mandatory.
The Court’s reasoning in the recent judgment appears to depart from its established doctrines of proportionality and substance over form. Unwinding or reversing transactions that have already been diverted towards investors is not commercially viable. The author suggests that a review of the judgment could help restore investor confidence while preventing procedural irregularities from undermining significant recoveries. The preservation of the efficacy of the IBC requires that judicial interference in commercial matters must remain exceptional, and where required, must balance legal scrutiny with practical economic considerations.
– Aditya Vaid