The verdict does not show the IBC under a good light | Photo credit: Akhilesh
In a sentence that could shake the IBC system, the Supreme Court recently set aside the Bhushan Power and Steel Limited (BPSL) resolution and its transfer to JSW. Now, BPSL has been published for liquidation. Judge Bela M Trivedi and Judge SáSH Chandra Sharma annulled the September 2019 resolution (where JSW has paid around ₹ 19.8 billion rupees to comply with the quotas of approximately ₹ 47.8 billion rupees) as completely violation of due. But the failure could have allowed BPSL to continue, instead of requesting its liquidation.
Given the shameless illegalities, the court could have requested actions against all guilt players: JSW, the resolution professional (RP), creditors committee (COC), but left BPSL without touching another plan. Now, their workers, shareholders and buyers or steel are looking at the barrel. This, in fact, is for them a spontaneous abortion of justice. A Supply of Kalyan Transco, an operational creditor, against BPSL led to a radical investigation especially the resolution process. This opened a surprising can of worms. The greatest of these is the fact that JSW did not reveal his JV with BPSL (page 32-34 of the order), which should remain immediately disqualified from the resolution career. Under section 29a or IBC, existing promoters or any related part cannot offer for the indebted unit. It is disconcerting and illegal that the RP and the COC does not press for the free space of section 29a, and that the NCLT will also overlook the same.
Looking towards the future, a key question that cultivates is the import of liquidation in this case. The court could have thrown some light here. The liquidation in a commonly accepted sense implies that BPSL is closing and its removal of blocking, stock and barrel. But under regulation 32 (e) of the regulations of the liquidation process, 2016, the entity in question can be sold as a company underway. However, NCLT cannot really direct such a process of this type, so such initiative will have to come from the center, which can legally intervene in this case. The other possibility, which seems ambitious, is to try a change of the order of liquidation to resolution. Searching for liquidation as a group in progress would not imply annuling the trial. In this case, there must be more clarity on whether section 32a or IBC, where all claims can be held in a moratorium, including those made by the configuration address, as a gying is applied. If you do, the process becomes easier. The center and other interested parties must explore feasible options to maintain a concern, if it has a broader economic impact. This problem also arose in the case of the liquidation of Jet Airways.
However, the decision correctly establishes the land for greater scrutiny within the IBC system. The responsibility of the key actors must be established, with punishments instead. BPSL does not appear IBC with flattering light.
Posted on May 6, 2025
