JSW Steel Faces Major Setback as Supreme Court Orders Liquidation of Bhushan Power and Steel

In a significant blow to JSW Steel, the Supreme Court of India on May 2 rejected the company’s resolution plan for Bhushan Power and Steel Ltd (BPSL) and ordered the liquidation of the debt-ridden firm. This decision marks a turning point in one of the high-profile cases under the Insolvency and Bankruptcy Code (IBC).

Supreme Court Declares JSW’s Resolution Plan Illegal

According to reports by CNBC-TV18, the apex court stated that JSW Steel’s resolution plan, approved by the Committee of Creditors (CoC), was illegal and should not have been accepted in the first place.

The court’s order effectively nullifies JSW Steel’s Rs 19,700-crore bid that had positioned it as the successful resolution applicant for BPSL.

As a direct result of the ruling, JSW Steel shares tumbled nearly 6%, hitting Rs 971 on the BSE by 11:58 AM. This sharp decline reflects market concerns over the legal and financial implications of the verdict.

Background: BPSL’s Long-Drawn Insolvency Battle

Bhushan Power and Steel was one of the first 12 companies identified by the RBI to be taken to the National Company Law Tribunal (NCLT) for insolvency proceedings. The company owed a massive Rs 47,158 crore in admitted claims to a group of lenders led by Punjab National Bank (PNB).

The insolvency case had been in the spotlight for years, especially due to its magnitude and the number of legal twists it encountered. Earlier this year, the Delhi High Court had quashed money laundering proceedings initiated against BPSL, which had brought a glimmer of hope for resolution.

However, the situation became more complex when the Enforcement Directorate (ED) filed a prosecution complaint in 2020, naming BPSL and its former top executives in a money laundering case related to a massive bank fraud of Rs 47,000 crore.

What This Means for PNB and Other Lenders

The liquidation order comes as a major setback for creditors, especially Punjab National Bank, which had been eyeing a recovery of Rs 3,800 crore from the debt resolution process. This recovery was crucial to PNB’s broader target of achieving Rs 8,000 crore in cash recoveries for the fiscal year.

With the liquidation process now set to begin, lenders may face delays or reduced recoveries, compared to what could have been achieved through JSW Steel’s resolution plan.

A Legal and Financial Jolt to JSW Steel

This ruling doesn’t just impact BPSL’s future; it’s also a serious jolt for JSW Steel, which had invested time and resources in acquiring the steelmaker through the IBC process. The setback raises fresh concerns about legal uncertainties in India’s insolvency framework, especially in high-value cases.

In conclusion, the Supreme Court’s decision to scrap JSW Steel’s resolution plan and direct liquidation of Bhushan Power and Steel has far-reaching implications for all parties involved—from JSW and BPSL to banks like PNB. It underscores the importance of legal clarity and due process in high-stakes insolvency cases.