Bhushan Steels Insolvency: Supreme Court Corrects Course

1. Introduction 

The Hon’ble Supreme Court of India, on 26th September 2025 delivered a much awaited judgment in the review petition regarding the corporate insolvency resolution process (‘CIRP’) of Bhushan Power And Steel Limited (‘Corporate Debtor / CD / BPSL’). The Court addressed six appeals filed by various parties, including erstwhile promoters and Operational Creditors (‘OCs’), challenging a National Company Law Appellate Tribunal (‘NCLAT’) decision which had approved the Resolution Plan of the Successful Resolution Applicant (‘SRA’), JSW Steel Limited. 

The Court examined key issues including the locus standi of the former promoters, the Committee of Creditors’ (‘CoC’) continuing existence after the plan's approval, delays in Resolution Plan implementation due to external factors like a Provisional Attachment Order (‘PAO’) by the Directorate of Enforcement, the validity of Compulsorily Convertible Debentures (‘CCDs’) as equity, and the contentious distribution of Earnings Before Interest, Taxes, Depreciation, and Amortization (‘EBITDA’) generated during the CIRP.

2. Timeline of major events

Before delving into the issues decided by the Hon’ble Supreme Court, we note below the timeline of major events in the CIRP of BPSL: 

Date	Event
4th May 2017	The Banking Regulation Act, 1949 was amended, empowering the Reserve Bank of India (‘RBI’) to issue directions to Indian Banks to initiate CIRP against major corporate defaulters.
13th June 2017	The RBI identified 12 large scale corporate defaulters (the "dirty dozen"), including the Corporate Debtor – M/s Bhushan Power and Steel Limited.
26th July 2017	The Company Petition (C.P. No. (IB)-202 (PB) of 2017) under Section 7 of the Insolvency & Bankruptcy Code, 2016 (‘IBC’) was admitted by the National Company Law Tribunal (‘NCLT’), and the CIRP commenced.
21st September 2017	After collating the claims, the Resolution Professional (‘RP’) published an advertisement, leading thirteen Potential Resolution Applicants (‘PRAs’) to submit their Resolution Plan.
14th August 2018	The 18th Meeting of the CoC was held, where Resolution Plans were evaluated, and the plan submitted by JSW Steel Ltd. emerged as the highest evaluated plan.
3rd October 2018	A Consolidated Resolution Plan (‘CRP’) was submitted by JSW Steel Ltd.
7th October 2018	The RP called for a meeting of the CoC for consideration and approval of the CRP.
15th October 2018	After several discussions and meetings, the CoC approved the amended Resolution Plan of JSW Steel Ltd.
11th February 2019	The Successful Resolution Applicant – JSW (‘SRA / JSW’) issued the Proposal Performance Guarantee for Rs. 100 crore and was issued a Letter of Intent by the RP.
14th February 2019	The RP filed the Company Application (No. 254 (PB)/2019) with the NCLT seeking acceptance of the Resolution Plan submitted by the SRA.
5th April 2019	The Central Bureau of Investigation (‘CBI’) registered a First Information Report (‘FIR’) (No. RCBD1/2019/E/0002) against BPSL and its erstwhile management.
25th April 2019	The Directorate of Enforcement (‘ED’) registered a case (No. ECIR/DLZO–I/02/2019) against BPSL for offences under the Prevention of Money Laundering Act, 2002 (‘PMLA’).
5th September 2019	The NCLT passed a common Judgment and Order approving the Resolution Plan of the SRA – JSW subject to certain conditions.
10th October 2019	The ED passed a Provisional Attachment Order (PAO) (No. 11 of 2019) provisionally attaching the assets of BPSL under Section 5 of the PMLA.
14th October 2019	The NCLAT stayed the implementation of the Resolution Plan as well as the PAO via an interim order.
18th December 2019	The Supreme Court stayed the PAO regarding the challenge filed by the CoC.
28th December 2019	Section 32A of the IBC was inserted through an ordinance.
17th February 2020	The NCLAT passed the common impugned judgment, modifying some NCLT conditions and dismissing other appeals.
6th March 2020	Appeals were filed by various parties against the judgment of NCLAT and the Supreme Court admitted the appeals.
4th July 2020	Lenders of BPSL convened a meeting and decided that the EBITDA generated during the CIRP may remain with the company, as the Request for Resolution Plan (‘RfRP’) was silent on its distribution.
26th February 2021	The CoC passed a resolution (by a majority of 97.25% voters) to extend the date of implementation of the Resolution Plan to 31st March 2021.
26th March 2021	The Resolution Plan was implemented by the SRA – JSW, with the payment of Rs. 19,350 crore made to the Financial Creditors (‘FCs’).
11th December 2024	The Supreme Court disposed of the appeals filed by the ED and the CoC regarding the PAO, directing the ED to hand over control of the properties to the SRA – JSW.
3rd February 2025	Clauses (4) and (5) of Regulation 38 of the IBBI (CIRP) Regulations were substituted, making it mandatory for the CoC to consider setting up a monitoring committee.
2nd May 2025	The Supreme Court issued a common final judgment (in the first hearing), quashing the NCLT and NCLAT judgments and directing the NCLT to initiate Liquidation Proceedings against BPSL.
29th July 2025	Being aggrieved, Review Petitions were filed by aggrieved parties seeking recall of the final judgment dated 2nd May 2025. Notice was issued by the Supreme Court in the Review Petitions.
31st July 2025	The Supreme Court passed an order recalling the judgment dated 2nd May 2025, allowing the review petitions and deciding to reconsider the matter afresh.
26th September 2025	The final Supreme Court Judgment was delivered and the judgment dated 2nd May 2025 was reversed.

3. Contentions of Parties before the Supreme Court

   1. Erstwhile Promoters

      1. Locus Standi: The promoters are personal guarantors and fall within the ambit of "persons aggrieved" under Section 61 of the IBC, giving them clear locus to file appeals, a position supported by precedents like Vijay Kumar Jain vs. Standard Chartered Bank and Others, (2019) 20 SCC 455. The term "persons aggrieved" must be given a broad and purposive interpretation. The appeals raise pure questions of law falling under Section 61(3) of the IBC. 

      2. Resolution Plan Compliance: The Resolution Plan, allowing effective change in the date of implementation, made the Plan indeterminate, contravening the IBC framework by permitting post-approval modifications. 

      3. CoC Status: The concept of an "erstwhile CoC" is not recognised by the IBC, and the CoC's powers cease upon the approval of the Resolution Plan. 

      4. Priority Payments: The SRA-JSW violated Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations by paying FCs before paying the OCs. 

      5. Implementation Delay: The delay in implementation (approved on 5th September 2019, partially implemented 540 days later, OCs paid 900+ days later) was unjustified. The delay was driven by SRA-JSW's market opportunism relating to the sharp rise in steel prices, not the Provisional Attachment Order (PAO), and the SRA-JSW must pay interest for the delay. 

      6. EBITDA Distribution: Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) represents the operating profits and is generated from the Corporate Debtor's pre-CIRP funds and creditor funds, making it part of the company’s assets that should be distributed. The CoC had consistently maintained that EBITDA should be distributed to creditors. The NCLAT erred in reversing the NCLT’s direction, and the case is distinguishable from Supreme Court’s decision in  Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta and Others, (2020) 8 SCC 531 (‘Supreme Court Essar’) because the present Resolution Plan was silent on EBITDA. 

      7. Fund Infusion: SRA-JSW failed to infuse the committed amount of Rs. 26,550 crore. The Compulsorily Convertible Debentures (CCDs) submitted to satisfy the commitment should not be treated as "pure equity" as required by the CoC. 

         
         

   2. Resolved Entity - BPSL

      1. The company has been successfully revived post-resolution. Supported the submissions of the SRA-JSW. 

         
         

   3. Committee of Creditors (CoC)

      1. Locus Standi: The erstwhile promoters lacked locus under Sections 61 and 62 of the IBC as they ceased to have any relationship with the Corporate Debtor upon initiation of the CIRP. The grounds raised by them do not fall within the narrow scope of Section 61(3) or Section 62 of the IBC. 

      2. Commercial Wisdom: The CoC’s "Commercial Wisdom" is not subject to judicial review. 

      3. CoC Existence: The CoC does not become functus officio after NCLT approval but continues to operate until the Plan is fully implemented or any challenge attains finality. Statutory provisions (Sections 21, 23, 28, and Regulation 38) support the continued existence of the CoC and the authority of the Monitoring Committee. 

      4. EBITDA Distribution: The CoC held a meeting on 6th August 2025 and passed a resolution to allocate the EBITDA and interest for delayed implementation to FCs. The SRA-JSW has no rightful claim over the EBITDA as it did not contribute to it. 

      5. Extension of implementation period: The clause allowing the CoC to extend the implementation period by a 66% majority was a valid exercise of commercial wisdom, intended to ensure successful implementation. 

         
         

   4. Resolution Professional

      1. Plan Compliance: The Resolution Plan was in compliance with the IBC and regulations. 

      2. Priority Payments: Since the liquidation value was nil, payments to OCs were considered ex gratia and were not required to be made in priority over FCs under the law applicable when the NCLT approved the Plan (pre-27th November 2019 amendment). 

      3. Jaldhi Claim: The RP admitted Jaldhi’s claim as an OC, but the SRA reclassified it as a "Contingent Creditor" due to the pendency of international arbitral award proceedings, a matter in which the RP had no direct role beyond ensuring Plan completeness. 

      4. Medi/Darcl Claims: No pre-CIRP dues were disbursed by the RP. Payments of Rs. 40.77 crore were made only to honour post-dated cheques to avoid criminal liability. The reflection of these as pre–CIRP payments was an inadvertent mistake by an accounting clerk, which was later rectified and adjusted against CIRP-period dues. 

         
         

   5. Successful Resolution Applicant (SRA) - JSW

      1. Locus Standi: The erstwhile promoters lacked locus standi and their appeals are frivolous attempts to derail the process, relying on precedents requiring related parties to be kept out of the CIRP. 

      2. Implementation Delay: The delay was caused by external factors beyond SRA-JSW's control, including the NCLT's unilateral modifications, the PAO issued by the ED, and the NCLAT stay on implementation. SRA was entitled to protection under Section 32A of the IBC. SRA needed unencumbered, clean assets to implement the Plan, which was only achieved after court intervention (December 2024). 

      3. Fund Infusion: SRA-JSW fulfilled all obligations, infusing Rs. 100 crore as equity and the balance via CCDs, which qualify as equity instruments as per precedent (IFCI Limited vs. Sutanu Sinha and Others 2023 SCC OnLine SC 1529). 

      4. Priority Payments: SRA offered an ex gratia payment to OCs as their liquidation value was nil. The Resolution Plan was compliant with the law existing at the time of approval, and subsequent amendments (27th November 2019) do not apply retrospectively. 

      5. EBITDA Distribution: EBITDA is merely an "accounting term" and after deductions, the Corporate Debtor incurred losses of Rs. 16,616 crore during CIRP. Distribution is impermissible because neither the RfRP nor the Resolution Plan provided for it, and accepting this claim would violate the finality of the approved Resolution Plan (per Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited (2021) 9 SCC 657). The CoC's resolution claiming EBITDA is ultra vires. The CoC itself resolved in July 2020 that EBITDA should remain with the Corporate Debtor. 

      6. Jaldhi Claim: Jaldhi was correctly classified as a contingent creditor. The IBC permits sub-classification of OCs (contingent/crystallized). Jaldhi's claims, based on foreign arbitral awards, remained contingent as they were not automatically binding under Indian law, and Jaldhi had withdrawn enforcement proceedings. 

         
         

   6. Jaldhi Overseas Pte. Limited (‘Jaldhi’)

      1. Jaldhi’s claims, based on international arbitral awards, were initially admitted as Operational Debts but were arbitrarily reclassified as contingent debts by the SRA–JSW. This arbitrary reclassification is unjust, and Jaldhi should be treated at par with other OCs and paid interest for the inordinate delay

         
         

4. Issues before the Supreme Court

   1. Locus standi of the erstwhile promoters

      The Supreme Court held that the appeals filed by the erstwhile promoters (who were personal guarantors) were maintainable. Relying on precedent (Vijay Kumar Jain), the Court noted that since the Resolution Plan affects the rights of guarantors, they fall within the ambit of "persons aggrieved" under the IBC. However, the Court also noted the promoters' "desperate and frustrated" conduct in attempting to thwart the CIRP and cause delays.

   2. Existence of the Committee of Creditors (CoC) after approval of the Resolution Plan

      The Court rejected the contention that the CoC becomes functus officio after the NCLT approves the Resolution Plan. The CoC continues to exist until the Resolution Plan is fully implemented or an order for liquidation is passed under Section 33 of the IBC. This is supported by legislative intent, particularly the empowerment of the CoC to establish a Monitoring Committee (Regulation 38) to oversee implementation. 

      
      

   3. Legality of the clause permitting the CoC to extend the implementation period of the Resolution Plan

      The Court upheld the legality of the clause in the Resolution Plan permitting the CoC to extend the date of implementation by a 66% majority. This clause was deemed a permissible exercise of commercial wisdom, intended to manage exigencies that prevent timely implementation. It did not provide for modification or withdrawal of the plan, thus distinguishing it from rejected plans in other precedents.

      
      

   4. Delay in implementation of the Resolution Plan by the Successful Resolution Applicant (SRA)

      The Court found the delay (from September 2019 to March 2021) was not attributable to the SRA-JSW or the CoC. The implementation was jeopardised by various external factors, including the unilateral modifications imposed by the NCLT, the PAO issued by the ED, the stay on implementation by the NCLAT, and the uncertainty regarding protection from criminal proceedings despite the insertion of Section 32A of the IBC. Both the SRA and CoC made consistent efforts to implement the plan. 

      
      

   5. Alleged contravention of law regarding priority payments to Operational Creditors (OCs)

      The Court held that the payments made to FCs before OCs was not in contravention of the law applicable at the time of the NCLT's approval (5th September 2019). As the liquidation value due to OCs was nil, the payment offered by the SRA-JSW was deemed an ex gratia payment. The subsequent amendment (27th November 2019) requiring priority payment of any amount payable to OCs was held not to apply retrospectively. 

      
      

   6. Upfront infusion of funds by the SRA–JSW (whether Compulsorily Convertible Debentures (CCDs) qualify as equity)

      The Court held that the SRA-JSW complied with its obligation to infuse equity. Following established precedent, the Court ruled that CCDs must be treated the same as equity instruments because they involve no debt repayment obligation and are mandated to be converted into equity shares at maturity. The CoC confirmed that the issuance of CCDs satisfied the commitment.

      
      

   7. Distribution of Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) generated during CIRP

      The Court rejected the claim for EBITDA distribution raised by the erstwhile promoters and the CoC. Relying on Supreme Court Essar, the Court reasoned that since neither the Request for Resolution Plan (RfRP) nor the Resolution Plan provided for EBITDA distribution, such a claim was impermissible as it would violate the finality of the approved Resolution Plan. Furthermore, the CoC’s attempt to claim entitlement to EBITDA via a subsequent resolution was deemed a volte face, as they had previously agreed that EBITDA should remain with the Corporate Debtor.

      
      

   8. Contingent claim of Jaldhi Overseas Pte. Limited (classification as a contingent creditor)

      The Court upheld Jaldhi's classification as a contingent creditor. Jaldhi's claims, based on international arbitral awards, were not automatically enforceable in India (per Section 49 of the Arbitration Act), and Jaldhi had withdrawn enforcement proceedings, indicating the claims were not crystallized. The CoC's decision to approve the plan classifying Jaldhi as contingent fell under the non-justiciable commercial wisdom of the CoC.

5. Analysis

   1. While the Supreme Court has recognised that erstwhile promoters and guarantors may qualify as “persons aggrieved” under Sections 61 and 62 of the IBC, the practical effect of extending locus to them is problematic. In most cases, promoters’ interventions are driven by an intent to obstruct or delay the CIRP, enabling repeated challenges at every stage and undermining the Code’s core objective of timely resolution.

   2. The Court’s affirmation that the Committee of Creditors continues to exist even after approval of the resolution plan reflects a pragmatic recognition of ground realities. Since implementation often encounters challenges, the CoC’s monitoring role ensures continuity and creditor oversight.

   3. The Supreme Court has strongly reaffirmed the paramountcy of the CoC’s commercial wisdom and the "clean slate" principle afforded to the Successful Resolution Applicant (SRA). By dismissing the challenges raised by the erstwhile promoters, the Court prioritized the finality and integrity of the Resolution Plan, emphasizing the Insolvency and Bankruptcy Code’s (IBC) core objective of maximizing asset value and ensuring the corporate debtor (BPSL) continues as a going concern. 

   4. Furthermore, the Court meticulously addressed the complex issue of implementation delay, finding it largely attributable to external factors, specifically the uncertainty surrounding the Directorate of Enforcement’s (ED) Provisional Attachment Order (PAO), thereby excusing the SRA–JSW from liability for the delay. 

   5. This judgment solidified the doctrine that claims not explicitly part of the Request for Resolution Plan (RfRP) or the Resolution Plan itself, such as demands for EBITDA, are extinguished upon approval, preventing the undesirable scenario of "hydra heads popping up" post-resolution. 

6. Conclusion

   In conclusion, the Supreme Court’s comprehensive decision serves as a crucial reinforcement of the fundamental pillars of the IBC regime. By upholding the Resolution Plan, the judgment validates the successful revival of the Corporate Debtor, which was transformed from a loss-making entity into one generating substantial profits and sustaining thousands of livelihoods. The ruling decisively rejects the persistent attempts by excluded stakeholders, particularly the erstwhile promoters, to disrupt the process on the basis of technical or previously settled grounds. Crucially, the Court’s clarity on issues ranging from the non-justiciability of the CoC’s financial decisions to the treatment of contingent claims and CIRP-period profits (EBITDA) guarantees the sanctity and finality of approved Resolution Plans. This outcome ensures that the legal certainty required by resolution applicants for major financial commitments is maintained, thereby reinforcing the efficacy of the IBC framework in achieving its primary purpose: the expeditious reorganisation of corporate debtors and the balancing of stakeholder interests in a time-bound manner.

Authors: Abhinav Goyal, Kushank Sindhu, Anmol Singh and Gazal Ghai

Readers can direct their queries or comments to the authors.