Supreme Court Stalls Liquidation Amid Legal Review

In a pivotal turn in the high-stakes corporate insolvency battle, the Supreme Court of India has ordered a status quo on the ongoing liquidation proceedings of Bhushan Power and Steel Limited. A Bench led by Justices BV Nagarathna and Satish Chandra Sharma passed the order, allowing JSW Steel to file a review petition against the May 2 verdict, which had previously quashed JSW’s $2.36 billion (₹19,700 crore) resolution plan and directed BPSL’s liquidation. The Court stated that any action to implement the May judgment could jeopardize JSW's legal recourse.

The May 2 Judgment: Resolution Plan Rejected

The Supreme Court’s May 2 judgment had stirred the corporate legal landscape by declaring the resolution plan illegal. Delivered by a separate Bench of Justices Bela Trivedi and Satish Chandra Sharma, the ruling invalidated the approval given by the Committee of Creditors, citing that it contravened key provisions of the IBC. The Court underscored that the resolution applicant, JSW Steel, had failed to adhere to crucial post-approval responsibilities. The judgment stressed the importance of time-bound resolution and asset value maximisation as core objectives of the IBC.

JSW Steel’s Bid: Timeline & Approval

JSW Steel had emerged as the highest bidder for BPSL back in 2019. The steel major’s resolution plan promised to infuse ₹19,700 crore, aimed at repaying financial creditors and reviving the company’s operations. The National Company Law Tribunal had approved the plan in September 2019, followed by the National Company Law Appellate Tribunal, despite objections raised by government agencies, particularly the Enforcement Directorate, over the legitimacy of asset ownership.

ED’s Opposition & Asset Attachment History

The Enforcement Directorate had strongly opposed the resolution plan on grounds that BPSL’s assets, valued at ₹4,025 crore, were attached under Section 5 of the Prevention of Money Laundering Act. These attachments were linked to alleged financial misconduct by former BPSL promoters, accused of siphoning funds and defrauding banks. The ED’s contention was that these “tainted” assets could not be transferred under the IBC’s framework.

Section 32A of IBC: The Legal Pivot

The legal debate pivoted around Section 32A of the IBC, introduced in December 2019. This section provides immunity to the corporate debtor and its assets from prosecution and attachment if a resolution plan is approved. Initially, the ED argued that this provision should not apply retrospectively to BPSL. However, the agency eventually revised its position, citing the primacy of the resolution mechanism. By December 2024, the ED formally withdrew its Supreme Court challenge and returned the attached assets to JSW Steel.

A Temporary Reprieve for JSW Steel

The current status quo order is a significant albeit temporary relief for JSW Steel. During Monday’s hearing, senior counsel appearing for JSW pointed out that the statutory period to file a review petition was still active. The Bench acknowledged the legal right to review and highlighted that immediate implementation of the May order could irreparably harm JSW's position. “We find that the interest of justice will be served,” the Bench observed, by maintaining status quo until the review petition is decided.

Legal Teams: Heavyweights on All Sides

The legal fray is marked by representation from some of India’s most prominent law firms and senior advocates. JSW Steel’s legal team includes Senior Advocates Neeraj Kishan Kaul and Gopal Jain, supported by Karanjawala & Co. and AZB & Partners. Bhushan Power was represented by Senior Advocate Pinaki Misra. Former promoters were represented by Senior Advocate Dhruv Mehta. The Committee of Creditors was defended by Solicitor General Tushar Mehta, along with a team from Cyril Amarchand Mangaldas, underlining the case’s legal gravitas.

Future Implications for India’s Insolvency Regime

The outcome of the review petition, now pending before the Supreme Court, may set critical jurisprudential precedent for how the IBC interacts with PMLA and government enforcement agencies. It also raises questions on the extent of protection offered by Section 32A and how retrospective it can be considered. With billions at stake and major legal principles in contest, this case remains one of the most closely watched in India’s corporate insolvency history.

Key Takeaways

• The Supreme Court ordered status quo on BPSL liquidation, allowing JSW Steel to file a review petition.

• JSW’s $2.36 billion resolution plan was previously rejected for violating IBC provisions.

• ED withdrew its asset attachment case after Section 32A of IBC provided legal immunity.