'Nobody to be permitted to misuse process of law,' SC sets aside resolution plan by JSW for Bhushan Steel

The Supreme Court has on May 2, 2025 rejected the resolution plan by JSW Steel for the debt-ridden M/s Bhushan Power and Steel Limited, holding that it was not in conformity with the provisions of the Insolvency and Bankruptcy Code, 2016.

A bench of Justices Bela M Trivedi and Satish Chandra Sharma, in exercise of the jurisdiction conferred under Article 142 of the Constitution, directed the adjudicating authority i.e. the National Company Law Tribunal to initiate the liquidation proceedings against the corporate debtor-BPSL under Chapter III of the IBC and in accordance with law.

The court found JSW did not implement the resolution plan for about two years since its approval by the NCLAT, though there was no legal impediment in implementing the same. Such flagrant violation of the terms of the resolution plan, has frustrated the very object and purpose of the Code, the bench said.

The court noted the mala fide and dishonest intention on the part of JSW, in firstly securing highest score making misrepresentation before CoC and then not implementing the same under the garb of pendency of proceedings, though the resolution plan was supposed to be an unconditional one.

"In our opinion, nobody should be permitted to misuse the process of law nor should be permitted to take undue advantage of the pendency of any proceedings in any Court or Tribunal," the bench said in its judgment rendered on appeals filed by operational creditors Kalyani Transco and others.

The court emphasised, it is needless to say that the resolution plan, after its approval by the adjudicating authority i.e. NCLT under Section 31, is binding not only to the corporate debtor, its employees, members, creditors and the Government authorities but also to all the stakeholders including the successful resolution applicant itself.

The court set aside the judgments and orders of September 05,2019 and February 17, 2020 passed by the NCLT and NCLAT respectively.

In its judgment, the bench said, merely because the Code is silent with regard to the phase of implementation of the resolution plan by the successful resolution applicant, neither the Tribunal nor the Courts should give excessive leeway to the successful resolution applicant to act in flagrant violation of the terms of the resolution plan or in a lackadaisical manner.

In damning observations, the bench said after obtaining the approval of its resolution plan from CoC by presenting a rosy picture, misguiding the CoC, and defeating the rights of other resolution applicants, JSW did not respect and honour the said commitments, and on the contrary tried its level best to delay the implementation of the resolution plan without any cogent reason or justification, which is nothing but a misuse of process of law and a fraud committed by JSW with the CoC and other stakeholders.

The Committee of Creditors had failed to exercise its commercial wisdom while approving the resolution plan of the JSW, which was in absolute contravention of the mandatory provisions of IBC and CIRP regulations. The CoC also had failed to protect the interest of the creditors by taking contradictory stands before this Court, and accepting the payments from JSW without any demurer, and supporting JSW to implement its ill-motivated plan against the interest of the creditors, the bench said.

The successful resolution applicant-JSW, after securing the highest score in the evaluation matrix in the 18th meeting of CoC, submitted the revised consolidated resolution plan with addendum under the garb of complying with the amendments made in the CIRP Regulations, 2016, and got the same approved from the CoC.

However, JSW even after the approval of its plan by the NCLAT, willfully contravened and not complied with the terms of the said approved resolution plan for a period of about two years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIR proceedings of the corporate debtor-BPSL, the bench added.

The court held the impugned judgment passed by the NCLAT in allowing the company appeal of JSW and issuing the directions without any authority of law and without jurisdiction was perverse, coram non judice and liable to be set aside.

After the approval of resolution plan of JSW by the NCLT on September 05, 2019, subject to the conditions, a provisional attachment order came to be passed by the ED on October 10, 2019 under Section 5 of the PMLA.

The said order was challenged by SRA-JSW directly in the company appeal, and the NCLAT by the ex parte order on October 14, 2019 had stayed the said order. Subsequently on a plea by CoC, this court on December 18, 2019 stayed the attachment order, yet the NCLAT while passing the impugned judgment recorded its findings on Section 32A of IBC to the effect that the assets of the corporate debtor of which JSW was a successful resolution applicant, were immuned from attachment by Directorate of Enforcement.

"Such an order of NCLAT is clearly in teeth of the law laid down by this court. The PMLA being a public law, the NCLAT did not have any power or jurisdiction to review the decision of the statutory authority under the PMLA," the bench said.

The bench said, it has been reiterated time and again by this court that one of the main objects for enacting the IBC is to complete the entire CIR Proceedings in a time bound manner, and that is the reason, a time-line is set out in the Code and its Resolutions for every stage of the proceedings. As well settled, time is a crucial factor of the scheme under IBC. To allow the proceedings to lapse into indefinite delay will frustrate the very object of the Code.

The court said it was not impressed with the submissions that the resolution plan in question has been implemented in part by making payments to the financial creditors in March, 2021 and in full by making payments to the operational creditors in March, 2022.

It was claimed, though JSW initially infused only Rs 100 Crores as share capital towards Equity contribution commitments, subsequently pending the present appeals, the reconstituted board in its meeting held on March 26, 2021 has approved the issuance of Compulsory Convertible Debentures to Piombino Steel Limited (group entity of SRA-JSW which was to be merged into BPSL) having value of Rs 8,450 Crores, and thus requirement of infusion of Rs 8,550 Crores was complied with.

In the instant set of appeals, the bench said, the respondents-JSW, CoC and resolution professional have sought to sweep many seminal issues under the carpet to cover up gross violations of the provisions of the IBC and of the Regulations 2016, at every stage of the CIR proceedings initiated against the coporate debtor-BPSL.

Case Title: Kalyani Transco Vs M/s Bhushan Power & Steel Ltd & Ors