Supreme Court Weighs JSW Steel Resolution Plan for Bhushan Power
- THE MAG POST
- 15 hours ago
- 9 min read
The Supreme Court is deliberating on JSW Steel’s INR 19,700 crore resolution plan for Bhushan Power. This is a critical moment, as the court's decision will significantly impact the future of corporate insolvency resolutions. The core issue revolves around earnings and interests during the resolution period, specifically whether these should benefit creditors or remain with the company. JSW Steel contends that the original agreement didn't mandate sharing EBITDA, while creditors seek INR 3,569 crore in EBITDA and INR 2,500 crore in delay-related interest. The outcome will set a precedent for similar cases.
The Supreme Court has recently reserved its verdict on a batch of pleas concerning JSW Steel’s INR 19,700 crore resolution plan for Bhushan Power and Steel Limited (BPSL), a company laden with debt; the resolution plan is a complex financial restructuring aimed at reviving the ailing steel giant. This legal battle highlights the intricate dynamics of corporate insolvency and the challenges in balancing the interests of various stakeholders. The court's decision will have significant implications for the future of BPSL and will set a precedent for similar cases under the Insolvency and Bankruptcy Code (IBC). The final judgment is eagerly awaited by creditors, investors, and industry analysts, all keen to understand the nuances of this high-stakes financial restructuring.
Understanding the JSW Steel Resolution Plan
The core of the dispute revolves around the resolution plan proposed by JSW Steel, which aims to rehabilitate Bhushan Power and Steel Limited (BPSL) through a comprehensive financial restructuring. The plan involves a substantial investment of INR 19,700 crore, intended to settle the debts of BPSL and revive its operations. However, the Committee of Creditors (CoC) and former promoters have raised objections, leading to a protracted legal battle. The Supreme Court's intervention is crucial to resolve these conflicts and provide clarity on the implementation of the resolution plan. The success of the JSW Steel resolution plan is vital for the future of BPSL and the confidence of investors in the IBC process, making the court's decision a landmark event in Indian corporate law.
A key contention is the allocation of earnings before interest, tax, depreciation, and amortization (EBITDA) generated during the resolution period; the JSW Steel resolution plan stipulates that the CoC seeks INR 3,569 crore in EBITDA and INR 2,500 crore in delay-related interest. JSW Steel argues that neither the request for resolution plan (RFRP) nor the resolution plan itself mandated sharing EBITDA with creditors. This point of contention underscores the importance of clear contractual terms in resolution plans. The Supreme Court's decision will clarify whether such earnings should be allocated to the creditors or remain with the company to support its operational revival. This ruling will have a far-reaching impact on future insolvency cases, setting a precedent for the treatment of EBITDA during resolution periods.
The arguments presented by the involved parties are complex and multifaceted; the JSW Steel resolution plan has been challenged by both the CoC and the former promoters of BPSL. JSW Steel, represented by senior advocate Neeraj Kishan Kaul, asserts that its bid for BPSL was made on an “as is, where is” basis, accepting both its losses and profits. The company also argues that the delay in implementing the plan was due to the Enforcement Directorate's (ED) asset attachment, which was lifted only in December 2024. This delay, according to JSW Steel, should not be held against them. The Supreme Court must weigh these arguments carefully to ensure a fair and just resolution.
The former promoters, represented by senior advocate Dhruv Mehta, have also challenged the JSW Steel resolution plan; they allege that JSW Steel failed to inject the promised working capital and benefited from rising steel prices before implementing the plan. They argue that the CoC's powers do not extend beyond plan approval by the NCLT and that disputes over non-compliance should be taken back to the tribunal. These allegations raise serious questions about the integrity of the resolution process and the conduct of JSW Steel. The Supreme Court's decision will determine whether these claims have merit and whether further investigation is warranted.
The Role of the Committee of Creditors (CoC)
The Committee of Creditors (CoC) plays a pivotal role in the insolvency resolution process; in the JSW Steel resolution plan, the CoC is seeking a substantial amount in EBITDA and delay-related interest, highlighting their vested interest in maximizing returns. The Solicitor General, representing the CoC, argued that the former promoters had “brought the company to dust” and described the case as “one of the worst cases of siphoning.” This strong statement underscores the CoC's determination to recover as much debt as possible. The Supreme Court must consider the CoC's claims while ensuring that the resolution plan is fair and equitable to all stakeholders.
The CoC's authority and actions have been under scrutiny throughout the JSW Steel resolution plan proceedings; the former promoters have challenged the CoC's powers, arguing that they do not extend beyond plan approval by the NCLT. The CoC, however, maintains that it remains a legal entity until the Supreme Court's final decision under Section 62 of the IBC. This dispute highlights the ongoing tension between the CoC and the former promoters. The Supreme Court's ruling will clarify the extent of the CoC's powers and responsibilities in the resolution process, providing much-needed guidance for future cases.
The Supreme Court had previously criticized the conduct of the CoC, the resolution professional, and the NCLT; this criticism was based on what the court termed a “flagrant violation” of the Insolvency and Bankruptcy Code (IBC). This led the court to recall its earlier verdict that had directed liquidation of BPSL and set aside JSW Steel's resolution plan. The court's strong stance underscores its commitment to upholding the integrity of the IBC process. The current proceedings are a result of the court's decision to hear the pleas afresh, ensuring a thorough and fair examination of all issues.
The CoC's claims over EBITDA and delay interest are central to the ongoing dispute; in the JSW Steel resolution plan, the CoC argues that these claims are justified and necessary to compensate for the losses incurred due to the delay in implementing the resolution plan. JSW Steel, on the other hand, contends that it should not be held responsible for the delay caused by the ED's asset attachment. The Supreme Court must carefully consider the arguments from both sides to determine whether the CoC's claims are valid and enforceable.
The Supreme Court's decision will have significant implications for the future of the CoC's role in insolvency resolutions; the JSW Steel resolution plan case will set a precedent for how CoCs operate and the extent of their authority. A clear and definitive ruling will provide guidance for future cases, ensuring that the CoC's actions are aligned with the principles of fairness, transparency, and efficiency. This will help to build confidence in the IBC process and promote a more effective resolution of corporate insolvencies.
Challenges to JSW Steel's Compliance
JSW Steel's compliance with the resolution plan has been a major point of contention; the JSW Steel resolution plan has faced challenges from the former promoters, who allege that the company failed to inject the promised working capital and benefited from rising steel prices before implementing the plan. These allegations raise serious questions about JSW Steel's commitment to the resolution plan and its adherence to the agreed-upon terms. The Supreme Court must carefully examine these claims to determine whether JSW Steel has fulfilled its obligations and whether any corrective action is necessary.
The former promoters argue that JSW Steel's actions have undermined the integrity of the resolution process; according to them, the JSW Steel resolution plan was not implemented in good faith. They claim that JSW Steel delayed the implementation of the plan to take advantage of favorable market conditions, thereby increasing its profits at the expense of the creditors. These allegations, if proven true, could have serious consequences for JSW Steel and its reputation. The Supreme Court's decision will determine whether these claims have merit and whether JSW Steel should be held accountable for its actions.
JSW Steel, however, maintains that it has complied with all the terms of the resolution plan; the JSW Steel resolution plan, according to the company, was implemented in accordance with the agreed-upon terms and conditions. JSW Steel argues that any delays were due to circumstances beyond its control, such as the ED's asset attachment. The company also asserts that it has made significant investments in BPSL and has taken all necessary steps to revive its operations. The Supreme Court must weigh these arguments carefully to determine whether JSW Steel has acted in good faith and has fulfilled its obligations under the resolution plan.
The Supreme Court's scrutiny of JSW Steel's compliance is crucial for ensuring the fairness and effectiveness of the IBC process; the JSW Steel resolution plan case serves as a test case for the implementation of the IBC and its ability to resolve corporate insolvencies in a fair and transparent manner. The court's decision will send a clear message to companies about the importance of adhering to the terms of resolution plans and the consequences of non-compliance. This will help to build confidence in the IBC process and promote a more disciplined approach to corporate insolvency resolutions.
The outcome of this case will set a precedent for future insolvency resolutions; the JSW Steel resolution plan case is closely watched by investors, creditors, and industry analysts, all keen to understand the implications of the Supreme Court's decision. A clear and definitive ruling will provide guidance for future cases, ensuring that the resolution process is fair, transparent, and effective. This will help to promote a more stable and predictable business environment, encouraging investment and economic growth.
Implications of the Supreme Court's Verdict
The Supreme Court's verdict will have far-reaching implications for all stakeholders involved; the JSW Steel resolution plan case is a high-stakes legal battle that will determine the future of BPSL and set a precedent for similar cases under the IBC. The court's decision will impact the rights and obligations of creditors, promoters, and resolution applicants, shaping the landscape of corporate insolvency resolution in India. A clear and definitive ruling will provide much-needed clarity and guidance for future cases, promoting a more efficient and equitable resolution process.
For JSW Steel, the verdict will determine whether its resolution plan is upheld and whether it can proceed with the acquisition and revival of BPSL; the JSW Steel resolution plan represents a significant investment and a strategic opportunity for the company. A favorable ruling will allow JSW Steel to expand its operations and strengthen its position in the steel industry. However, an unfavorable ruling could jeopardize the entire resolution plan and expose JSW Steel to significant financial losses. The stakes are high, and the company is eagerly awaiting the Supreme Court's decision.
For the creditors of BPSL, the verdict will determine the extent to which they can recover their dues; the JSW Steel resolution plan offers a potential pathway for creditors to recover a portion of their outstanding debts. A favorable ruling will ensure that the creditors receive the agreed-upon payments and that their interests are protected. However, an unfavorable ruling could result in liquidation of BPSL, which would likely lead to lower recovery rates for the creditors. The creditors are closely monitoring the proceedings and are hoping for a resolution that maximizes their returns.
The former promoters of BPSL also have a significant stake in the outcome of the case; the JSW Steel resolution plan effectively removes them from control of the company. However, they continue to challenge the resolution plan, seeking to protect their interests and assert their rights. The Supreme Court's verdict will determine whether their claims have merit and whether they are entitled to any compensation or other relief. The former promoters are determined to fight for their rights and are prepared to pursue all available legal avenues.
The Supreme Court's decision will also have broader implications for the Indian economy and the business environment; the JSW Steel resolution plan case is a test case for the effectiveness of the IBC and its ability to resolve corporate insolvencies in a fair and efficient manner. A positive outcome will enhance confidence in the IBC and encourage investment in distressed assets. However, a negative outcome could undermine confidence in the IBC and deter potential investors. The Supreme Court's verdict is therefore of critical importance for the future of corporate insolvency resolution in India.
Issue | Arguments | Stakeholders |
JSW Steel's Resolution Plan | JSW Steel proposes a INR 19,700 crore plan to revive Bhushan Power and Steel Limited (BPSL). | JSW Steel, Bhushan Power and Steel Limited (BPSL) |
EBITDA Allocation | The CoC seeks INR 3,569 crore in EBITDA and INR 2,500 crore in delay-related interest. JSW Steel argues that the resolution plan does not mandate sharing EBITDA. | Committee of Creditors (CoC), JSW Steel |
Former Promoters' Challenge | Former promoters challenge JSW Steel's compliance, alleging failure to inject promised working capital and benefiting from rising steel prices. | Former Promoters, JSW Steel |
Comments