SC Reverses Own Verdict, Upholds JSW Steel’s ₹19,700 Crore Plan for BPSL

Apex Court Reverses Its Own Verdict

In a landmark turn of events, the Supreme Court has upheld JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power & Steel Limited (BPSL), marking one of the most significant insolvency rulings under the Insolvency and Bankruptcy Code (IBC). The bench clarified that unraveling the plan—after substantial investment by JSW—would be “disastrous” not only for the company but for the insolvency regime itself.

The ruling effectively reverses the Court’s own May 2025 judgment, which had cast uncertainty on the plan’s implementation. By restoring it, the Court has placed emphasis on the principle that the commercial wisdom of creditors must prevail, reaffirming the Code’s design to facilitate quick and final resolutions rather than prolonged litigation.

Why the Court Changed Its Position

The reversal was not undertaken lightly. The bench underscored that in the months following the May judgment, JSW Steel had already infused thousands of crores into BPSL, restructured operations, and assumed liabilities. To claw back the transaction at this stage would have created chaos across the insolvency ecosystem.

The Court noted:

• “Undoing this resolution after such substantial investment would be catastrophic.”

• Finality in IBC proceedings is essential to maintain faith in the system.

The judges acknowledged that their earlier ruling had inadvertently unsettled settled expectations. By course-correcting, the Court has sought to restore predictability, which is indispensable for investor participation in distressed-asset markets.

The Commercial Wisdom Principle

At the heart of the ruling lies a reaffirmation of the “commercial wisdom of the Committee of Creditors (CoC).”

Under the IBC framework, once a resolution plan is approved by the CoC with requisite majority, courts have limited scope to interfere, except on grounds of legal infirmity. This judicial deference ensures that decisions grounded in financial viability and business judgment are not second-guessed by courts.

In this case, JSW Steel’s plan had been vetted and approved by the CoC years ago. The Court’s judgment strengthens the view that creditors—not courts—are best placed to assess viability and recovery prospects.

Implications for the Insolvency and Bankruptcy Code

The decision is more than just a win for JSW Steel. It has systemic implications for India’s insolvency regime:

1. Finality of Proceedings: The judgment underscores that endless litigation cannot derail a concluded resolution. Once a plan is approved and implemented, it gains a near-irreversible character.

2. Investor Confidence: Potential bidders can take assurance that their investments will not be jeopardized by judicial flip-flops or post-approval challenges.

3. Speed and Certainty: By curbing prolonged disputes, the Court aligns with the IBC’s mandate of time-bound resolution.

4. Revival over Liquidation: The ruling reinforces that viable revival plans, once executed, should not be disturbed—even if subsequent doubts arise—since liquidation is the least desirable outcome.

A Case Study in Balancing Interests

Bhushan Power & Steel was one of the largest non-performing assets to enter insolvency. The ₹19,700 crore resolution by JSW Steel had been hailed as a model revival plan, combining debt repayment with industrial revitalization.

However, legal disputes, including those arising from enforcement directorate attachments and competing claims, bogged down implementation for years. The May verdict added yet another layer of uncertainty.

By reversing itself, the Supreme Court balanced competing considerations:

• The rights of creditors and stakeholders to maximize recovery.

• The legitimate expectations of resolution applicants investing massive capital.

• The systemic need for consistency and predictability in insolvency law.

How This Shapes Investor Behaviour

The ruling is expected to positively influence investor appetite for distressed assets in India. For global funds and corporate houses eyeing India’s insolvency market, a central concern has been judicial unpredictability.

With this judgment, the Supreme Court signals that once a resolution plan is substantially performed, the sanctity of the transaction will be protected. This is crucial for:

• Foreign investors, who often require legal certainty before deploying large sums.

• Domestic corporates, who may now bid more aggressively, knowing their plans won’t unravel mid-course.

• Creditors, who benefit from higher bids driven by restored investor confidence.

Reconciling with Past Precedents

The judgment aligns with the Court’s earlier jurisprudence, particularly Essar Steel v. ArcelorMittal, where the Court had limited its own scope of intervention and strongly upheld the primacy of CoC decisions.

However, the twist lies in the Court reversing its May ruling. This unusual step indicates judicial humility and recognition that the prior decision was impractical in its consequences. It demonstrates the Court’s willingness to adapt when legal interpretation collides with economic realities.

The Broader IBC Landscape

Since its enactment in 2016, the IBC has undergone continuous evolution. The JSW-BPSL case illustrates several persistent challenges:

• Litigation Delays: Despite the Code’s strict timelines, high-value cases often get stuck in protracted disputes.

• Regulatory Overlaps: Attachments and parallel proceedings by agencies like the Enforcement Directorate complicate resolution.

• Judicial Intervention: While courts have generally shown restraint, occasional interventions create uncertainty.

This ruling attempts to recalibrate the balance by signaling that once capital is deployed, the system will not permit reversal except in extreme circumstances.

Lessons for Future Resolution Applicants

The ruling offers clear lessons for companies and funds participating in the insolvency process:

• Diligence is Critical: Early disputes should be anticipated and addressed before committing capital.

• Substantial Performance is Protection: Once a plan is executed and investments made, the Court is unlikely to undo it.

• Expect Greater Certainty: Future resolution applicants can bank on the sanctity of approved plans, making India’s distressed-asset market more attractive.

Critics’ Concerns

While widely welcomed, the decision is not without critics. Some argue that:

• Judicial Reversals Undermine Stability: The need for a reversal suggests flaws in judicial consistency.

• Commercial Wisdom as a Shield: Excessive deference to CoC may sometimes overlook legitimate grievances of minority stakeholders or operational creditors.

• Transparency Gaps: Critics warn that speed and finality should not override accountability in how plans are evaluated and approved.

Nonetheless, most observers see the judgment as a net positive for India’s insolvency ecosystem.

Conclusion: A Strong Signal for India’s Insolvency Regime

By upholding JSW Steel’s ₹19,700 crore resolution plan for BPSL, the Supreme Court has sent a clear message: the insolvency process is about certainty, finality, and commercial logic—not endless litigation.

The judgment restores confidence among investors, reassures creditors, and reinforces the IBC’s design as a time-bound mechanism for corporate revival. Most importantly, it underscores that economic realities cannot be ignored in the interpretation of insolvency law.

In the long term, this decision may prove a turning point, positioning India’s insolvency market as a more stable and attractive destination for global and domestic capital.