REWRITING RESOLUTION: SUPREME COURT RECALLS BHUSHAN STEEL LIQUIDATION RULING

The Supreme Court of India has thrown out its May 2, 2025 ruling which earlier directed that two listed companies should be wound down, including the Bhushan Steel and Power Limited (BSPL). The court has accepted to re-hear the case itself observing that the earlier judgment failed to give correct legal position and necessary precedent as established in earlier cases.

Report

The petitions were heard by a bench of Chief Justice B. R. Gavai and Justice Satish Chandra Sharma whose office was approached by JSW Steel, the resolution professional and lenders to BSPL. Justice Bela M. Trivedi, who penned the May 2 verdict quashing the resolution plan offered by JSW Steel to BSPL, felt that priority should be given to management creditors over other secured lenders.

The previous decision had struck down the resolution plan of JSW Steel as defective and in contravention of the Insolvency and Bankruptcy Code (IBC), and had faulted all especially interested parties, viz., the resolution professional, the Committee of Creditors (CoC) as well as the National Company Law Tribunal (NCLT), of what the court termed as a criminal exploitation of the IBC.

The interpretation of the judge which is impugned however, was observed by the current bench not to have accorded proper regard to this legal position, in particular to the restrictive role of judiciary in interfering with what has been termed by the CoC as its commercial wisdom.

On this, Solicitor General Tushar Mehta arguing on behalf of the lenders emphasized that the core objective of IBC is not to liquidate a company rather to revive a company and he averred that the BPSL which had been in a bad financial condition due to a severe financial crisis has been made a fit and functioning company under JSW Steel. The court considered the ground realities such as the lives of 25,000 employees associated with the decision and the huge investment that JSW Steel had put into the company to revive it and proceeded to accept that it was a fit case to be reviewed, recalled the judgment and directed it to be placed under a new hearing.