Supreme Court orders liquidation of Bhushan Power, sets aside JSW's resolution plan

The Supreme Court on Friday rejected JSW Steel's ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd (BPSL), declaring it illegal. The Court has also directed BPSL's liquidation..A Bench of Justices Bela Trivedi and Satish Chandra Sharma held that the Committee of Creditors (CoC) erred in approving JSW Steel's plan, which the Court opined was in violation of the Insolvency and Bankruptcy Code (IBC). A copy of the judgment is yet to be made available. .JSW Steel had emerged as the successful resolution applicant for BPSL in 2019, after offering to pay over ₹19,000 crore to financial creditors. The plan was approved by the National Company Law Tribunal (NCLT) in September 2019. It was later upheld by the National Company Law Appellate Tribunal (NCLAT) as well, despite legal challenges, including concerns raised by the Enforcement Directorate (ED) regarding the attachment of BPSL’s assets.The matter reached the Supreme Court amid growing concern that JSW Steel had not implemented the plan for the years since approval. The Court noted that the resolution applicant failed to fulfill essential post-approval obligations, undermining the very objectives of the IBC, which includes time-bound resolution of insolvency and maximization of asset value..Notably, in December 2024, the ED decided not to pursue its appeal before the Supreme Court against JSW Steel's takeover of Bhushan Power and Steel under the IBC.It also returned attached assets valued at ₹4,025 crore to JSW Steel so that it could take control of Bhushan Power pursuant to the insolvency resolution process under IBC. The restitution was made after the Supreme Court’s order of December 11, 2024, directing ED to hand over the attached properties of Bhushan Power, after the central agency decided not to pursue its case against Bhushan. .The ED had previously attached Bhushan Power's assets under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) because the former promoters of BPSL were accused of defrauding banks and diverting funds for personal gains.The Committee of Creditors (CoC) challenged the ED attachment during the corporate insolvency resolution process (CIRP), claiming it violated IBC protections.The ED, in turn, opposed JSW Steel's resolution plan, arguing that the assets attached under PMLA were tainted.However, the ED later withdrew its challenge citing Section 32A of IBC. .Section 32A was inserted in IBC with effect from December 2019 and provides immunity to the corporate debtor and its assets from prosecution or attachment if a resolution plan of a company under insolvency is approved. This meant that the attachment of properties by ED also ceased on the approval of a resolution plan.The ED had earlier argued that this immunity should not apply to the Bhushan Power case, as the asset attachment by the ED preceded the introduction of Section 32A. However, it changed its stance later on, leading to the withdrawal of its earlier plea in the matter.