In a landmark judgment that has sent ripples through India’s corporate and banking sectors, the Supreme Court of India on May 2, 2025, struck down JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL). The court ordered the liquidation of the debt-ridden company instead, effectively ending a prolonged legal battle over one of India’s largest insolvency cases.

This verdict not only nullifies years of legal proceedings and negotiations but also reopens uncertainties for BPSL’s thousands of employees, creditors, and stakeholders.

Why the Supreme Court Rejected the Resolution Plan

The apex court found two primary violations in the resolution plan that led to its invalidation:

1. Improper Capital Structure:
   JSW Steel had proposed to fund the acquisition through a mix of equity and optionally convertible debentures (OCDs). However, the Insolvency and Bankruptcy Code (IBC) mandates that such takeovers must be executed entirely through equity, not through hybrid instruments like OCDs. The court held that the use of OCDs violated IBC norms and should have never been accepted by the Committee of Creditors (CoC) in the first place.

2. Failure to Meet Timeline:
   The resolution plan was not implemented within the time limits stipulated by insolvency law. The court emphasized the importance of adhering to statutory deadlines, especially in high-stakes cases like this. The prolonged delay, partly caused by ongoing litigation and regulatory interventions, made the resolution plan non-compliant.

The court unequivocally stated that the plan approved by the CoC was illegal and, therefore, set aside the entire resolution process, clearing the path for liquidation proceedings.

A Long and Controversial Legal Battle

JSW Steel had emerged as the successful resolution applicant for BPSL in what was once touted as a marquee deal under India’s IBC framework. The resolution plan was worth ₹19,700 crore, making it one of the largest insolvency resolutions in India’s corporate history.

However, the deal became entangled in a web of legal and regulatory disputes:

• In 2020, the Enforcement Directorate (ED) filed a money laundering case against Bhushan Power and Steel Ltd and its former top executives, relating to a ₹47,204 crore bank fraud.

• In a significant development, the Delhi High Court quashed these money laundering proceedings earlier in 2025, offering temporary relief to the company and potentially clearing the way for JSW Steel to proceed with the takeover.

• But the Supreme Court’s recent decision overrides all previous approvals and brings the process to an abrupt halt.

Fallout for JSW Steel and Its Stock

Following the announcement of the Supreme Court verdict, shares of JSW Steel plummeted on the Bombay Stock Exchange (BSE). At 11:30 am, the stock was down 4.59%, trading at ₹982.50 per share.

The sharp decline reflects investor concerns over the financial and reputational implications for JSW Steel. Not only has the company lost a strategic acquisition opportunity, but it may also face scrutiny over its compliance practices and due diligence processes during such large-scale bids.

Implications for the Insolvency Ecosystem in India

This decision is expected to reshape the contours of India’s insolvency framework in several key ways:

• Strict Adherence to IBC Norms:
  The judgment sends a strong message to all stakeholders that deviations from the IBC’s prescribed structure will not be tolerated, even if approved by creditor committees or lower courts.

• Increased Legal Scrutiny:
  Resolution applicants and CoCs will now face heightened legal scrutiny, particularly over financial structuring, implementation timelines, and regulatory compliance.

• Risk for Creditors and Employees:
  With liquidation proceedings now imminent, creditors may recover less than they would have under the resolution plan. Employees and operational vendors of BPSL also face renewed uncertainty, as liquidation typically results in job losses and operational shutdowns.

Future Prospects for Bhushan Power and the Industry

BPSL’s liquidation is likely to attract new buyers, although the asset’s valuation and condition may have deteriorated over years of uncertainty and legal limbo. Some analysts suggest that public sector steelmakers or international players may now express renewed interest.

However, the process will be time-consuming and complex, involving multiple stakeholders and legal approvals. The impact on India’s broader steel and banking sectors could be significant, especially for creditors who have already made provisions for haircuts on their exposure to BPSL.

Key Takeaways from the Supreme Court Ruling

• The IBC must be followed to the letter. Creative financial structuring, even if well-intentioned, is not permissible unless explicitly allowed under the law.

• Time-bound implementation is non-negotiable. Delays—whether due to litigation or administrative hurdles—cannot be used as justification for extending timelines indefinitely.

• Creditors' approval alone is insufficient if the plan violates the core principles of insolvency law.

Conclusion

The Supreme Court’s ruling to strike down JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel is a milestone moment for India’s insolvency regime. It reflects judicial commitment to the integrity of the IBC and sets a precedent that could influence future resolution strategies across industries.

While the decision brings temporary disruption and uncertainty, it also lays the foundation for a more disciplined and transparent insolvency process. For JSW Steel, BPSL, and the financial ecosystem at large, this verdict is a powerful reminder that legal compliance and procedural accuracy are non-negotiable—even in the pursuit of billion-dollar acquisitions.

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