Supreme Court Upholds JSW Steel's Resolution Plan For Bhushan Power & Steel, Says JSW Can't Be Penalised For Reviving Loss-Making Entity

The Supreme Court today upheld the resolution plan of JSW Steel Ltd for Bhushan Power and Steel Ltd (BPSL) and rejected the objections raised by the ex-promoters and certain creditors of BPSL.Allowing the appeals after JSW has revived the loss-making entity by infusing huge amounts of funds will lead to "diastrous results", the Court said.A bench comprising Chief Justice of India BR Gavai, Justices SC Sharma and K Vinod Chandran had re-heard the appeals against the resolution plan after recalling the judgment delivered by a two-judge bench in May which invalidated the resolution plan and ordered the liquidation of BPSL.The judgment authored by CJI Gavai held that the ex-promoters have the locus to challenge the NCLAT judgment, given the wide meaning to be given to the term "person aggrieved" in Section 62 of the Insolvency and Bankruptcy Code. However, on merits, the Court upheld the NCLAT judgment, which approved the resolution plan.Delay in implementation cannot be the sole reason to invalidate the resolution plan, the Court held. The Court held that the delay was attributable to various other factors, including proceedings under the Prevention of Money Laundering Act. The conduct of the appellants was also criticised, saying that they were making attempts to stall the resolution process.The Court also held that the commercial wisdom exercised by the Committee of Creditors has to be given primacy and should not be lightly interfered with.JSW cannot be penalised for reviving a loss-making entity : SCThe Court noted that the Successful Resolution Applicant (SRA-JSW) has invested huge amounts to revive and modernise the Corporate Debtor (CD-BPSL). The SRA has converted a "loss-making entity" into a profitable venture, the Court noted. Thousands of employees have been earning their livelihood on account of the Corporate Debtor running as an on-going concern due to the Resolution Plan being implemented by the SRA – JSW.If the resolution plan approved by both the NCLT/NCLAT is interfered with at a belated stage, it will open a "Pandora's box", which will affect the sanctity of the resolution process."As such, the very purpose for which the IBC was enacted—namely, to ensure that the Corporate Debtor continues as a going concern—has not only been achieved, but the Corporate Debtor has been transformed from a loss- making to a profit-making entity. If, after the implementation of the Resolution Plan, the SRA – JSW has converted a loss- making entity into the one making profits, can it be penalised for that? Suppose if instead of the Corporate Debtor being converted into a profit-making entity, the losses would have increased, can the Corporate Debtor claim refund of the amount paid? If we permit the claim not to be part of the Resolution Plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a Pandora's Box and the very purpose of the IBC providing sanctity to the finality of the Resolution Plan duly approved would stand vitiated."The Court held that permitting the erstwhile promoters or the CoC to raise an argument at such a belated stage would amount to "doing violence to the very intention with which the IBC was enacted."Notably, the Court also accepted the argument of the Solicitor General of India that the CoC's role will remain till the implementation of the resolution plan.On July 31, the bench led by CJI Gavai, in exercise of review power, had recalled the May 2 judgment delivered by the bench of Justices Bela Trivedi and SC Sharma which rejected the JSW resolution plan.Solicitor General of India Tushar Mehta for the Committee of Creditors submitted that the BPSL was a company which went into serious financial crisis because of various defaults and now, it is a "healthy company" because of the acquisition by JSW Steel. SG added that the the timeline to submit the resolution plan, the breach of which was flagged in the judgment as a serious violation, is extendable. Even if there is a breach of the timeline, it is not so gross a violation so as to repudiate a resolution plan approved by the Committee of Creditors.Senior Advocate Neeraj Kishan Kaul, for JSW, submitted that the May 2 judgment sends "dangerous signals" because a valid resolution plan of about Rs 20,000 crores, approved by the CoC, NCLT and the NCLAT, has been thrown off after five years. He also questioned the locus stand of the promoter of the BPSL in challenging the resolution plan. If at all there is an violation, only a creditor can challenge it, and not a promoter, because of whose misdeeds the company went into crisis, Kaul argued.Sr Advocate Dhruv Mehta, appearing for the erstwhile promoters of BPSL, mainly contended that JSW had faltered in executing the plan as promised. Mehta submitted that the promoters wanted the Insolvency process to happen afresh and did not favour the liquidation of BPSL. He stressed that once a plan is approved by the Adjudicating Authority, the CoC ceased to...

Supreme Court Upholds JSW Steel's Resolution Plan For Bhushan Power & Steel, Says JSW Can't Be Penalised For Reviving Loss-Making Entity

Anmol Kaur Bawa

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