Despite completing the purchase and operating the business since 2021, JSW Steel now faces the possibility of unwinding the Rs 19,350 crore deal, raising larger queries about the credibility and finality of the Insolvency and Bankruptcy Code (IBC) process.
Verdict Sparks Legal Uncertainty Over Completed Rs 19,350 Crore Acquisition
In a ruling that has thrown one of India’s largest insolvency resolutions into turmoil, the Supreme Court on May 2 ordered the liquidation of Bhushan Power and Steel (BPSL)—four years after JSW Steel completed its acquisition. The verdict has shaken investor confidence, with JSW Steel’s stock closing nearly 6% lower in the immediate aftermath.
Court Rules Resolution Plan Violated Insolvency Code
The apex court found JSW Steel’s resolution plan illegal on two grounds:
- Improper Financing Structure: The use of a combination of equity and optionally convertible debentures (OCDs) in the resolution plan violated provisions of the Insolvency and Bankruptcy Code (IBC), which the court interpreted as permitting only equity-based infusions.
- Timeline Breach: The court also ruled that the resolution plan exceeded the statutory deadlines mandated under the IBC for completing insolvency proceedings.
Despite prior approvals from the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) in 2019, the court declared the resolution plan void.
JSW Steel Faces Legal and Financial Setback
JSW Steel had taken control of BPSL in 2021 through subsidiary Piombino Steel Ltd (PSL), which injected Rs 8,550 crore via a special purpose vehicle, Makler Pvt Ltd. This vehicle was later merged with BPSL, forming a consolidated entity now under JSW Steel’s control, which currently owns 83.3% of BPSL.
The deal was structured with a mix of equity, OCDs, and debt, reportedly under conditions set by lenders, who restricted co-investors during the Expression of Interest (EoI) phase. JSW had outbid Tata Steel in a long-drawn contest to secure the distressed asset.
Implications for Insolvency Law and Business Certainty
Experts warn that this verdict raises serious questions about the predictability and finality of India’s insolvency framework. The ruling could undermine confidence in the IBC process, especially in cases where a resolution plan has been fully implemented, and operations have been running under new ownership for years.
With the liquidation now mandated, JSW Steel may be forced to unwind a multi-billion rupee acquisition, potentially setting a legal precedent that could deter future bidders in high-stakes insolvency cases.
