SC reverses own order, upholds JSW’s Rs 19.7K-crore plan to acquire Bhushan Steel

Reversing its earlier decision, the Supreme Court on Friday upheld JSW Steel’s Rs 19,700-crore resolution plan for debt-ridden Bhushan Power and Steel Limited (BPSL).

“We do not find any merit in the appeals. The appeals are, therefore, dismissed,” a Bench of Chief Justice of India BR Gavai, Justice Satish Chandra Sharma and Justice K Vinod Chandran said, rejecting the objections raised by former promoters and certain BPSL creditors.

By dismissing the appeals, the top court upheld the February 17, 2020, impugned judgment of the National Company Law Appellate Tribunal (NCLAT). Noting that JSW invested huge amounts in turning BPSL into a profit-making company, the Bench said it could not be penalised for doing so, and that allowing the appeals would lead to disastrous consequences.

“Should SRA-JSW be penalised for that? Commercial wisdom cannot be interfered with... Once the resolution plan has been approved by the Committee of Creditors (CoC) and the adjudicating authority under Section 31(2), permitting any claims to be reopened which were not a part of the RfRP (request for resolution plan) or resolution plan, in our view, will be doing violence to the provisions of IBC (Insolvency and Bankruptcy Code),” said the Bench, which had reserved the verdict on a batch of petitions on August 11.

“Any interference in the paramount objective of the CoC of exercising its commercial wisdom would amount to the court rewriting the law and going against the very objectives of the IBC,” it said.

“Permitting the erstwhile promoters or the CoC to raise an argument in that regard at such a belated stage would amount to doing violence to the very intention with which the IBC was enacted,” it said, adding if the contention of either the ex-promoters-cum-directors of the Corporate Debtor or the CoC was accepted, it would frustrate the very purpose for which the IBC was enacted.

The Supreme Court had on July 31 recalled its earlier order that set aside the Rs 19,700-crore resolution plan submitted by JSW Steel for BPSL and ordered liquidation of the beleaguered company.

“Prima facie we are of the view that the impugned judgment does not correctly consider the legal position as has been laid down in catena of judgments,” a Bench of CJI Gavai and Justice Satish Chandra Sharma had said about the May 2 judgment authored by Justice Bela M Trivedi (since retired).

“We, therefore, think that this is a fit case wherein the judgment under review needs to be recalled and the matter needs to be considered afresh,” the Bench had said.

Earlier, a Bench of Justice Trivedi (since retired) and Justice Satish Chandra Sharma had on May 2 set aside the resolution plan, holding it illegal and in violation of the IBC.

CJI Gavai had earlier expressed shock after being told that there were 25,000 workers in BPSL, which had been revived by JSW Steel by infusing Rs 30,000 crore. “We should also look at the larger picture…. 25,000 people cannot be thrown on the road,” he had noted.

Solicitor General Tushar Mehta had submitted that the May 2 judgment interfered with the commercial wisdom of the CoC, something courts were generally barred from doing under the IBC.

On behalf of JSW Steel, senior advocate Neeraj Kishan Kaul argued that 97.75 per cent of creditors had approved the resolution plan and that it had been upheld by both the National Company Law Tribunal (NCLT) and the NCLAT.

BPSL, one of the first major insolvency cases initiated under the IBC in 2017, had defaulted on dues exceeding Rs 45,000 crore. JSW Steel acquired BPSL through the IBC process in 2019. The NCLT had approved the resolution plan on September 5, 2019. However, five years later, on May 2, the Supreme Court had held that the CoC erred in approving JSW Steel's plan as it was in violation of the IBC. It had directed creditors to return the funds already disbursed under the now-invalidated plan, including equity contributions.