JudiciaryImportant2025-09-26

Bhushan Power & Steel IBC Resolution Upheld

In News

What Happened

On September 26, 2025, a three-judge Supreme Court bench reversed an earlier May 2025 ruling and upheld JSW Steel's 19,700 crore rupee acquisition of Bhushan Power and Steel Limited (BPSL). The court dismissed appeals from former promoters and operational creditors. In doing so, it permanently halted the earlier mandated liquidation of the company.

Why It Matters

This judgment preserves the credibility of India's Insolvency and Bankruptcy Code (IBC) by prioritizing corporate revival over liquidation. It firmly reasserted that the commercial wisdom of the Committee of Creditors is supreme and protected a resolution that had already successfully turned the company around.

Background

History & Context

The National Company Law Tribunal (NCLT) and NCLAT had approved JSW Steel's resolution plan for BPSL back in 2019 and 2020. However, on May 2, 2025, a two-judge Supreme Court bench surprisingly rejected the plan and ordered BPSL's liquidation over procedural delays and disputes regarding profit distribution. JSW Steel and lenders filed review petitions, leading to the court recalling the order in July 2025 and constituting a new bench to hear the matter.

What Changed

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BEFORE: The May 2025 ruling declared that the Committee of Creditors (CoC) becomes 'functus officio' (lacks further authority) once the NCLT approves a resolution plan. NOW: The Supreme Court clarified that the CoC continues to exist and function until the resolution plan is completely implemented and all legal challenges attain finality.
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BEFORE: Lower courts and previous rulings entertained appeals regarding the distribution of interim profits (EBITDA) generated during the insolvency process, overriding creditor decisions. NOW: The court reaffirmed that the commercial wisdom of the CoC regarding the distribution of funds, including EBITDA, cannot be interfered with by the judiciary.
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BEFORE: The earlier judgment suggested procedural delays could result in forced liquidation under the strict 330-day IBC timeline. NOW: The court adopted a pragmatic approach, holding that delays caused by extraneous circumstances (like asset attachments by the Enforcement Directorate) should not automatically derail a successful corporate revival.

Prelims Angle

NCERT Connection

This case connects to the Class 11 Business Studies chapter 'Sources of Business Finance' and Class 12 Macroeconomics discussions on the banking system. It illustrates the real-world application of the Insolvency and Bankruptcy Code (IBC) in resolving non-performing assets (NPAs) and facilitating corporate restructuring.

Practice Questions

Q1

Correct Statement(s)

Which of the following statements regarding the Supreme Court's September 2025 judgment in the Bhushan Power and Steel Ltd (BPSL) insolvency case is/are correct? 1. The Supreme Court ruled that the Committee of Creditors (CoC) becomes 'functus officio' immediately after the NCLT approves the resolution plan. 2. The judgment reaffirmed the principle that the commercial wisdom of the CoC is supreme and cannot be lightly interfered with by judicial authorities.

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