Landmark Ruling Disrupts Major SteelAcquisition
In a decision that has sent shockwaves through India'ssteel industry and bankruptcy resolution ecosystem, the Supreme Court on May 2,2025, rejected JSW Steel's long-pursued acquisition plan for Bhushan Power andSteel Limited. The ruling overturns previous approvals granted by the NationalCompany Law Appellate Tribunal, effectively derailing what would have been oneof the largest steel sector consolidations in recent years. JSW Steel, in aregulatory filing, acknowledged the adverse judgment while noting they areawaiting the detailed order to understand the specific grounds for rejection.The company, headed by billionaire Sajjan Jindal, had previously secured NCLATapproval for its ₹19,700 crore ($2.37 billion) resolution plan after aprotracted legal battle spanning nearly four years, making the Supreme Court'sintervention particularly consequential for all stakeholders involved.
Implications for India's Bankruptcy Framework
The Supreme Court's rejection raises fundamental questionsabout the stability and predictability of India's Insolvency and BankruptcyCode, which was established in 2016 to streamline the resolution of stressedassets. Legal experts suggest this ruling could significantly impact investorconfidence in the bankruptcy resolution process, particularly for large-scaleacquisitions involving complex legal challenges. "This judgmentpotentially reopens debates about the finality of NCLAT approvals and createsuncertainty about the resolution timeline for distressed assets,"explained Rajiv Kumar, a senior corporate law specialist at Delhi LawAssociates. The decision comes at a critical juncture when India's bankingsector is working to resolve numerous large stressed assets through the IBCframework, and may prompt lenders to reassess their approach to bankruptcyproceedings, potentially slowing down resolution processes that are alreadycriticized for delays.
JSW Steel Faces Strategic Recalibration
For JSW Steel, India's leading private sector steelproducer, the ruling represents a significant strategic setback that may necessitatea comprehensive reassessment of its expansion plans. The acquisition of BPSLwould have increased JSW's steelmaking capacity by approximately 3.5 millionmetric tons annually, strengthening its market position against competitorslike Tata Steel and ArcelorMittal Nippon Steel India. The company's stockresponded negatively to the news, dropping nearly 4% in trading following theannouncement. Financial analysts note that JSW Steel had already madesubstantial preparations for integrating BPSL's assets into its operations,including arranging financing structures and operational transition plans."JSW will now need to explore alternative growth avenues to achieve itscapacity expansion targets," noted Priyanka Sharma, metals sector analystat Capital Market Research. The company's statement indicates it will considerfurther legal options once the detailed order is available.
Creditors Face Renewed Uncertainty
The banking consortium led byPunjab National Bank, which had expected resolution of BPSL's outstanding debtof approximately ₹47,000 crore ($5.65 billion), now faces renewed uncertaintyregarding recovery prospects. The lenders had already factored the expectedrecovery into their financial projections, with most banks having madeprovisions for haircuts based on the JSW Steel resolution plan. The SupremeCourt's rejection effectively returns the resolution process to an earlierstage, potentially delaying recovery and requiring banks to reassess theirprovisioning strategies. Banking sector analysts suggest this could impact thequarterly financial performance of several public sector banks with significantexposure to BPSL. "Lenders will need to maintain higher provisions forlonger than anticipated, affecting their profitability and capital allocationplans," explained Rahul Agarwal, banking sector analyst at FinancialInsights Research.
Legal Complexities Behind the Rejection
While the detailed order remains awaited, legal sourcesfamiliar with the case suggest several potential grounds for the SupremeCourt's rejection. These may include concerns about the treatment of attachedproperties under money laundering investigations, disputes over thedistribution mechanism among creditors, or procedural irregularities in theapproval process. The case has been particularly complex due to parallelproceedings by the Enforcement Directorate regarding alleged financialirregularities by BPSL's previous management. "The intersection of IBCproceedings with other regulatory and enforcement actions has created a legallabyrinth that the Supreme Court may have found problematic," suggestedAnand Varma, a senior insolvency law practitioner. The detailed judgment, whenreleased, will likely provide critical guidance on how similar cases should behandled in the future, potentially establishing new precedents for theresolution of distressed assets under investigation by multiple agencies.
Industry-Wide Repercussions Expected
The Supreme Court's decision is expected to have broaderimplications for India's steel industry, which has been undergoing significantconsolidation through the IBC route. Several major steel assets have changedhands through bankruptcy proceedings in recent years, reshaping the competitivelandscape. This ruling may slow the pace of such consolidation and createuncertainty for ongoing and future resolution processes involving steel assets.Industry analysts also note potential impacts on steel capacity addition plansin India, which aims to reach 300 million metric tons of annual productioncapacity by 2030. "This decision could delay capacity expansion throughthe acquisition route, potentially affecting India's steel production growthtrajectory," observed Vikram Mehta, Secretary-General of the SteelManufacturers Association. The ruling may also influence how foreign investorsapproach potential acquisitions of stressed steel assets in India, potentiallydemanding additional legal safeguards before committing capital.
Government Response and Policy Implications
The Ministry of Corporate Affairs and the Insolvency andBankruptcy Board of India are closely monitoring the situation, according togovernment sources. The ruling may prompt regulatory authorities to consideramendments to the IBC framework to address issues highlighted by the SupremeCourt. "This case underscores the need for greater clarity on theintersection of various laws affecting corporate resolution processes," asenior ministry official stated on condition of anonymity. The government haspreviously demonstrated willingness to amend the IBC to address emergingchallenges, having made several modifications since its inception. Policyexperts suggest that this case might accelerate consideration of amendmentsrelated to the treatment of assets under investigation by enforcement agenciesand the finality of appellate tribunal decisions, potentially leading tolegislative changes aimed at reducing legal uncertainties in the resolutionprocess.
Next Steps for Stakeholders
As stakeholders await the detailed Supreme Court order,various contingency plans are being formulated. JSW Steel's regulatory filingindicates the company will decide on its "further course of action"after reviewing the judgment with legal advisors. Options potentially availableinclude filing a review petition if legal grounds exist, submitting a modifiedresolution plan addressing the concerns raised by the Supreme Court, orwithdrawing from the acquisition entirely. For BPSL, which has been operating underthe supervision of monitoring agencies during the legal proceedings, the rulingcreates uncertainty about its operational future. The Committee of Creditorsmay need to reconvene to assess alternative resolution options, potentiallyincluding inviting fresh bids for the company. "The immediate priority forall parties will be to maintain operational stability at BPSL while legal andfinancial implications are sorted out," noted industry observer RajeshGupta, former steel ministry advisor.
Key Takeaways:
• The Supreme Court has rejected JSW Steel's ₹19,700 crore($2.37 billion) resolution plan for acquiring Bhushan Power and Steel Limited,overturning previous approvals granted by the National Company Law AppellateTribunal
• The ruling creates significant uncertainty for creditorsled by Punjab National Bank, who now face delays in recovering portions ofBPSL's outstanding debt of approximately ₹47,000 crore ($5.65 billion)
• The decision may have broader implications for India'sbankruptcy resolution framework, potentially slowing down consolidation in thesteel sector and prompting regulatory authorities to consider amendments to theInsolvency and Bankruptcy Code
