The Supreme Court of India, in a significant order dated 2 May 2025, directed the liquidation of Bhushan Power and Steel Limited (BPSL) under Chapter III of the Insolvency and Bankruptcy Code, 2016 (IBC). A two-judge Bench rejected the resolution plan submitted by JSW Steel Limited, finding fundamental procedural non-compliance with the Code despite JSW's acquisition of the company for approximately Rs 19,700 crore in 2021.
Background
Bhushan Power and Steel Limited, one of India's largest steel manufacturers, was admitted into the corporate insolvency resolution process (CIRP) under the IBC. JSW Steel emerged as the successful resolution applicant and acquired the company. However, questions arose regarding compliance with mandatory timelines and eligibility verification requirements under the Code.
The matter reached the Supreme Court on the issue of whether the resolution plan could be sustained given the procedural deficiencies that had occurred during the insolvency process. The case raised fundamental questions about the enforceability of IBC timelines and the consequences of non-compliance with statutory safeguards designed to protect creditor interests.
Key Holdings
The Supreme Court identified the following grounds for rejecting the resolution plan and ordering liquidation:
Mandatory timeline breach: The Court held that the corporate insolvency resolution process was not completed within the mandatory period of 270 days as required under Section 12 of the IBC, and no valid extension had been sought or granted within the statutory framework.
Missing eligibility certification: The resolution professional had failed to submit the mandatory Compliance Certificate in Form H verifying JSW Steel's eligibility under Section 29A of the IBC. The Court emphasised that eligibility verification of the resolution applicant goes to the root of the matter and cannot be treated as a mere procedural formality.
Liquidation under Section 33: Finding the resolution plan fundamentally vitiated by non-compliance, the Court directed liquidation of BPSL under Section 33 of the IBC and mandated the return of payments made by JSW Steel to creditors and equity contributions within two months.
Status quo order: On 26 May 2025, the Court subsequently granted a status quo order on the liquidation proceedings, staying the liquidation to allow JSW Steel to file a review petition.
Implications for Practitioners
This order sends a strong signal to resolution applicants, resolution professionals, and adjudicating authorities about strict compliance with IBC procedural requirements. The consequences of the Bhushan Power ruling are far-reaching for the insolvency ecosystem.
Resolution professionals must treat Form H eligibility certification as a non-negotiable step in the process. The failure to verify Section 29A compliance before plan approval now carries the risk of the entire resolution being set aside, regardless of the commercial value of the plan or the stage of implementation.
For resolution applicants, the message is clear: procedural compliance under the IBC is not subordinate to commercial considerations. Even where a plan has been substantially implemented over several years, fundamental statutory non-compliance can result in liquidation.
Creditors and stakeholders in ongoing CIRP proceedings should conduct independent audits of timeline compliance and eligibility verification to mitigate the risk of similar outcomes. The subsequent status quo order suggests the matter may see further judicial consideration on review.