Supreme Court Recalls JSW’s Resolution Plan for Bhushan Power Under Article 142

Introduction

On 31 July 2025, the Supreme Court of India, led by Chief Justice B R Gavai and Justice Satish Chandra Sharma, exercised its plenary constitutional power under Article 142 to recall its earlier May 2, 2025 judgment that had rejected JSW Steel’s ₹19,300 crore resolution plan for Bhushan Power & Steel Ltd (BPSL). The earlier ruling had quashed the National Company Law Appellate Tribunal (NCLAT) order approving the plan and directed liquidation under Chapter III of the Insolvency and Bankruptcy Code, 2016 (IBC), citing violations of the Code’s principles of fair play and equality. The Court’s fresh order opens the matter for rehearing, directing a re-invitation of bids and emphasising the need for constructive stakeholder consultation and valuation accuracy prior to plan approval.

This article offers a comprehensive legal analysis of this unprecedented use of Article 142 in insolvency jurisprudence, the facts surrounding the case, the legal reasoning, and its wider implications on corporate insolvency resolution processes and creditor rights.

Background

Bhushan Power & Steel Ltd, a major steel manufacturing company, underwent insolvency resolution proceedings under the IBC following default and financial distress. JSW Steel emerged as the successful resolution applicant with a significant resolution plan approved by the Committee of Creditors (CoC), NCLT, and subsequently upheld by the NCLAT, reviving BPSL as a viable going concern.

However, several operational creditors, including Kalyani Transco, challenged the plan before the Supreme Court. The May 2, 2025 verdict found multiple lapses:

• JSW Steel and the resolution professional allegedly failed to verify JSW’s eligibility under Section 29A of the IBC (which bars certain persons from submitting resolution plans).

• The resolution plan involved a complex financial structure, including optionally convertible debentures that diluted creditor rights.

• The distribution of upfront payments and operational creditors’ dues was found inconsistent with debt-priority rules under Section 30(2).

• Alleged concealment of a prior joint venture agreement between JSW and BPSL, challenging JSW's eligibility.

• Delay by JSW Steel in making bulk upfront payments, which reportedly affected creditor recovery.

On these bases, the Supreme Court quashed the NCLT and NCLAT approvals, declared the resolution plan null and void, and directed the liquidation of BPSL. The Court cited Article 142 to effectuate complete justice as statutory remedies were deemed inadequate53.

Legal Analysis & Reasoning

Statutory and Constitutional Framework

The IBC provides a structured, time-bound mechanism for insolvency resolution, with Section 31 conferring finality on approved resolution plans: once approved by the CoC and sanctioned by the adjudicating authority, the plan binds all stakeholders. Judicial review on technical grounds is circumscribed to promote commercial certainty.

However, Sections 29A and 30 lay down eligibility criteria and the obligation of the resolution applicant to propose a fair, equitable plan respecting creditors’ priorities. Judicial scrutiny arises where plans are opaque or contravene these provisions.

Article 142 confers on the Supreme Court plenary power to pass any decree or order necessary to do “complete justice” in any cause or matter. Traditionally reserved for exceptional circumstances, its use to override statutory finality under IBC is controversial5.

Arguments Before the Court

• Against JSW Plan: Petitioners argued that JSW’s admission to the resolution process was flawed under Section 29A, citing concealment of prior business ties and procedural irregularities by the resolution professional. The plan’s financial structure disadvantaged operational creditors and contravened IBC’s distributional mandate.

• In Defence of JSW: JSW’s legal team contended the plan underwent commercial and regulatory approvals, had the highest CoC score, and restored BPSL’s viability. Breaches of timelines or technicalities were argued as immaterial to the economic substance and viability of the resolution, especially after five years of operation. They emphasized that plan finality under Section 31 protects reliance interests of creditors, employees, and investors.

• Solicitor General’s Submission: Highlighted the revival of BPSL, the massive funds infused by JSW, and cautioned against “nuclear missile” use of Article 142 to liquidate a successfully revived company over minor or technical lapses43.

Recall of Judgment and Rationale

On July 31, the Supreme Court acknowledged "error apparent" in the May 2 order for failing to correctly consider binding precedents on the finality of approved resolution plans. The Court noted submission that certain arguments were not fairly considered, leading to premature liquidation, an extreme remedy undermining the IBC’s objective.

The recall order emphasizes:

• Re-examination of legal issues, including eligibility under Section 29A, valuation, and internal governance of the resolution plan.

• Reinstatement of stakeholders’ rights to participate in a fair, transparent CIRP process.

• Directing the insolvency professional to re-invite bids, ensuring competitive market discovery of value.

• Article 142 should be invoked cautiously, with the respect for commercial certainty and stakeholder reliance paramount34.

Ratio Decidendi

The Supreme Court’s ratio in recalling its judgment rests on the principle that the finality of an approved resolution plan under IBC is sacrosanct except for grave procedural or legal flaws that justify intervention. Minor or technical non-compliances cannot justify liquidation, especially where the company has been revived successfully. The plenary power under Article 142 should not be used to frustrate the IBC’s objectives or undo years of restructuring except in manifest injustice.

Implications and Significance

Impact on Insolvency Jurisprudence and CIRP Practice

The recall sets a precedent of stringent but balanced judicial scrutiny, emphasizing procedural fairness and stakeholder consultation over radical disruption. It reaffirms Section 31’s finality and the conceptual integrity of IBC’s insolvency resolution framework.

Commercial and Regulatory Certainty

The judgment restores predictability critical for investors and creditors in insolvency cases. The Court’s caution against premature liquidation preserves the incentives for resolution applicants to undertake restructuring without fear of judicial unwinding after years.

Stakeholder Rights and Market Confidence

By promoting a renewed transparent bidding process, the ruling empowers creditors and operational stakeholders to have a meaningful say in resolution value discovery and plan acceptance.

Judicial Use of Article 142

The case underscores the Supreme Court’s cautious approach in wielding Article 142, especially in complex commercial law fields where legislature’s design of specialized mechanisms requires respect. The ruling signals judicial restraint from overreach that disrupts commercial finality.

Potential Future Litigation

The judgment opens the avenue for fresh hearings addressing intricate IBC questions on eligibility, valuation, creditor priority, and the role of the resolution professional. Future litigants must now anticipate a balanced judicial approach prioritizing substance over form.

Conclusion

The Supreme Court’s recall of its May 2, 2025, judgment rejecting JSW Steel’s resolution plan for Bhushan Power & Steel marks a watershed in Indian insolvency law. Exercising Article 142, the apex Court emphasises fairness, comprehensive stakeholder engagement, and respect for commercial finality in insolvency resolution, cautioning against premature liquidation as a panacea for procedural lapses.

This ruling reinforces the IBC’s mandate as a survival-driven, market-based restructuring regime and sets a tone of judicial moderation and procedural rigor in insolvency jurisprudence, vital for India’s economic revival and creditor confidence.