Preliminary (Quiz) Notes:
This is a two-part series on the Bhushan Steel saga. In Part-I, I discuss the Supreme Court’s – now recalled – first judgment where it decided to liquidate Bhushan Power and Steel. In Part-II, I discuss the Supreme Court’s subsequent decision to rescue Bhushan Power and Steel.
I’ve created two accompanying quizzes:
Quiz-1 is aligned to Part-I – Bhushan Steel (Recalled) Judgment – Fill in form and,
Quiz-2, aligned to Part-II – Quiz-2: Bhushan Steel (Subsequent) Judgment – Fill in form
Use these quizzes to self-assess your knowledge about these cases. Admittedly, some of the quiz questions go beyond what is discussed in the articles. Choose, whether you want to attempt the quizzes before or after reading the articles!
Introduction
In September 2025, a three-judge bench of the Supreme Court in Kalyani Transco v M/S Bhushan Power and Steel Limited and Others (‘Bhushan Steel-II case’) dismissed appeals filed by ex-promoters and operational creditors against judgment of the National Company Law Tribunal (‘NCLT’). The NCLT had approved resolution plan, but validity of the resolution plan, and delay in implementation of the resolution plan were challenged in the appeals. As elaborated on Part-I, the Supreme Court had in the first instance found various irregularities in the Corporate Insolvency Resolution Process (‘CIRP’). The Supreme Court’s approach in Bhushan Steel-II case and its line of inquiry was significantly different and led to an opposite result: rescue of the corporate debtor, i.e., Bhushan Steel and not its liquidation.
In this article, I proceed as follows: in Part A, I provide an overview of the judgment and summarize crucial factors that the Supreme Court relied on to rescue the corporate debtor; in Part B, I discuss I compare the different approaches of the Supreme Court in Bhushan Steel-I case and Bhushan Steel-II case; and what is reveals and does not reveal about the entire Bhushan Steel saga.
Part A: An Overview of the Judgment
I. Right of Appeal
The successful resolution applicant – JSW- and the Committee of Creditors (‘CoC’) argued that erstwhile promoters of Bhushan Steel did not have a right to file an appeal. While the erstwhile promoters argued that were personal guarantors of loans disbursed to Bhushan Steel and thus were within the ambit of ‘persons aggrieved’. The Supreme Court observed that under Section 62 of the IBC ‘any person aggrieved’ has a right to file an appeal against the National Company Law Appellate Tribunal’s (‘NCLAT’) decision. And the term ‘person aggrieved’ has not been limited or defined. Acknowledging that CIRP and a resolution plan may also impact rights of a guarantor and thereby the erstwhile promoters, the Supreme Court held that JSW and the CoC were not correct in submitting that the erstwhile promoters have no right of appeal.
However, the Supreme Court highlighted conduct of the erstwhile promoters as well as the fact that they had filed various applications in the NCLT after it had heard the matter in detail. And the NCLT had held that the promoters were causing delays in CIRP and imposed a cost of Rs 1 lakhs for causing the delays. Thus, while the Supreme Court acknowledged the right of erstwhile promoters to file an appeal, it also highlighted that they had not played a constructive role in CIRP.
Finally, the Supreme Court added that an appeal to the NCLAT was only available on the grounds mentioned in Section 61. And none of the grounds specified were met the criteria in the impugned case. Notably, this was the only point of convergence in the Supreme Court’s observations in Bhushan Steel-I case and Bhushan Steel-II case.
Further, an appeal before the Supreme Court was not tenable on conjoint reading of Sections 61 and 62. The Supreme Court clarified that apart from the issue of EBITA, findings of the NCLT and the NCLAT were concurrent on all issues. Thus, the erstwhile promoters could have been ‘non-suited’ when concurrent findings by authorities – NCLT and NCLAT – are recorded under a special statute such as the IBC. And in such cases, an interference by the Supreme Court is not warranted unless the findings are ex-facie arbitrary or illegal.
While the Supreme Court could have non-suited the erstwhile promoters and only engaged with the issue of EBITDA, on which NCLT and NCLAT gave contradictory findings, it chose to engage with the contentions on merits.
II. The CoC: Continues to Exist after NCLT’s Approval of the Resolution Plan
A core finding of the Supreme Court in Bhushan Steel-II case was that the CoC does not cease to exist after the NCLT’s approval of the resolution plan. The argument of erstwhile promoters was that the CoC becomes functus officio after approval of the resolution plan by the NCLT. An argument that the Supreme Court accepted but did not provide accompanying reasons. In Bhushan Steel-II case, the Supreme Court though held that a conjoint reading of various provisions of the IBC made it clear that the CoC remains in existence until the resolution plan is implemented. The Supreme Court was of the view that under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) – Regulation 38 – it was mandatory for the CoC to setup a monitoring committee for supervising implementation of the resolution plan. And the CoC can nominate representatives to the committee. Based on this mandatory requirement, the Supreme Court held that:
It can thus be seen that the legislative intent is to empower the CoC to monitor and supervise the implementation of the resolution plan through the monitoring committee. (para 77)
The Supreme Court then added that in certain cases the resolution plan may not be implemented. Thus, if the CoC ceases to exist after the NCLT’s approval of the resolution plan it may lead to an anomalous situation. The creditors will be left ‘high and dry’ and would not be able to take any steps that are found necessary for realizing its dues from the corporate debtor. And thus, since the CoC has a vital interest in implementation of the resolution plan:
… the CoC continues to exist till the Resolution Plan is implemented or an order of liquidation is passed under Section 33 of the IBC. It will not be out of place to mention that the cloud of uncertainty exists till a finality is given by this Court in the proceedings under Section 62 of the IBC. (para 85)
On a related note, the Supreme Court also addressed the CoC’s power to extend implementation of the resolution plan. The Supreme Court held that the fact that the CoC could extend time for implementation did not mean that the resolution plan was open-ended and contrary to law. Thus, underlining that the CoC had a role to play in implementation of the resolution plan and does not cease to exist and function after the NCLT’s approval.
III. Delay in Implementation of the Resolution Plan
The contentious issue of delay in implementation of the resolution plan was viewed differently by the Supreme Court in Bhushan Steel-II case. In Bhushan Steel-I case, the Supreme Court’s view was that the delay was attributable to the conduct of JSW. While in Bhushan Steel-II case the Supreme Court held that the delay of one and a half years- between the NCLT’s approval of the resolution plan and its implementation was not entirely attributable to JSW. The NCLT’s directions on distribution of EBITDA, and attachment of property by Directorate of Enforcement (‘ED’) under PMLA, 2002, and introduction of Section 32A contributed to the delay. I’ve elaborated on the EBIDTA issue in sub-section IV below, let me address the other issues in this section.
The ED’s order for attachment of property was issued after the NCLT’s approval of the resolution plan. The NCLAT in appeal first stayed and eventually vacated the attachment order. And appeal had been filed in the Supreme Court against the NCLAT’s order. However, the ED continued with PMLA proceedings and argued that the proceedings were for offences committed by erstwhile management of the corporate debtor. Meanwhile JSW insisted on handover of unencumbered assets. The CoC passed a resolution and approved a delayed implementation of the resolution plan. While on account of pendency of proceedings the CoC was not able to handover unencumbered assets to JSW as required under the resolution plan.
In the interim an ordinance was promulgated to introduce Section 32A in the IBC. One of its purposes was to provide immunity against prosecution of the corporate debtor and to prevent action against property of such corporate debtor. But the ED insisted on continuing proceedings against the corporate debtor by insisting that Section 32A did not have a retrospective effect. Scope of the ED’s jurisdiction and effect of Section 32A was clarified by a previous order of the Supreme Court only in December 2024 where it directed the ED to handover unencumbered assets of the corporate debtor. Based on the above assessment of facts, the Supreme Court held that:
It can thus be seen that the delay is neither attributable to the CoC nor to the SRA – JSW. As a matter of fact, both the SRA-JSW and the CoC were making consistent efforts to get the matter sorted out before this Court so as to ensure the expeditious implementation of the Resolution Plan. (para 126)
Thus, the Supreme Court refused to set aside the resolution plan on ground of delay by JSW. The Supreme Court distinguished Bhushan Steel-II case from Jet Airways case where the delay in implementation of the resolution plan was caused by the applicant itself. While JSW was not responsible for delay in implementation of the resolution plan, the surrounding factors, and lack of clarity in the law contributed to the delays.
IV. The EBITDA Question
The Supreme Court had to address the question of who was entitled to EBITDA: creditors or the corporate debtor? The NCLT while approving the resolution plan had held that creditors were entitled to EBITDA. However, NCLAT directed the monitoring committee and resolution professional to make distribution of EBITDA based on Supreme Court’s judgment in CoC of Essar Steel Ltd v Satish Kumar Gupta & Ors (‘Essar Steel case’). The Essar Steel case was pronounced after the NCLT’s but before the NCLAT’s judgment. In the Essar Steel case, the Supreme Court had clarified that EBITDA should be distributed as per terms of the resolution plan.
The Supreme Court noted that the CoC filed an affidavit that EBIDTA should be distributed among the creditors. However, the CoC had taken a contrary stand before the NCLAT. The Supreme Court rejected the CoC’s plea for giving EBITDA to creditors. Firstly, the Supreme Court noted that accepting the CoC’s argument would amount to contravention of Section 31(1) wherein once a resolution plan is approved by the NCLT all claims stand frozen and are binding on all stakeholders. Secondly, the Supreme Court – relying on the Essar Steel case – observed that:
We are of the considered view that unless there is specific provision with regard to distribution of EBIDTA in the RfRP, permitting the CoC to raise a new stand at this stage will be totally inconsistent with the avowed object for which the IBC was incorporated. (para 168)
Due to conflicting decisions of the NCLT and NCLAT on EBITDA, and the CoC’s own contradictory stances there was no clarity on who was entitled to retain EBIDTA. And this the Supreme Court correctly accepted as one of the reasons for delay in implementation of the resolution plan. The question of entitlement over EBIDTA was a crucial one as it affected rights of the resolution applicant, creditors, and, to some extent the validity of resolution plan itself. Clarity on who has a rightful claim over profits generated by the corporate debtor during CIRP could financially impact all the stakeholders. As the Supreme Court concluded:
If we permit the claim not be part of the Resolution Plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a Pandora’s Box and the very purpose of the IBC providing sanctity to the finality of the Resolution Plan duly approved would stand vitiated. (para 187)
Part B: A Brief Comparison of Two Judgments
On a standalone basis, Bhushan Steel-II case is a more considered judgment. And this is not because it resulted in rescue of Bhushan Steel and avoided its liquidation. This is because in Bhushan Steel-II case the Supreme Court applied the law to facts more precisely. In Bhushan Steel-II case, the Supreme Court engaged with the issue of making priority payments to operational creditors under a resolution plan. As per applicable CIRP Regulations, the amount due to operational creditors was nil due to claims of financial creditors. And ex-gratia payments were being made by JSW to operational creditors. In Bhushan Steel case-I, the Supreme Court accepted the contention on face value, held that no priority payment to operational creditors violated the IBC. There was no determination of amounts due to the operational creditors and applicability of CIRP Regulations. But in Bhushan Steel-II case the Supreme Court examined the issue closely and correctly held that operational creditors were being paid ex-gratia.
Equally, JSW was required to infuse upfront equity of Rs 8,550 crores. While in Bhushan Steel-I case the Supreme Court held that JSW did not fulfil its commitment, and no record was brought to its notice. In Bhushan Steel-II case the Supreme Court acknowledged JSW’s argument that commitment was fulfilled by way of Compulsorily Convertible Debentures (‘CCDs’) which are equity instruments. The Supreme Court cited relevant precedents that have held that CCDs are equity instruments. While in Bhushan Steel-I case this entire issue was dismissed in a curt fashion on grounds of evidence.
However, a comparison of both judgments prompts some obvious questions that should be asked. Even if they remain unanswered. For example, in Bhushan Steel-II case the Supreme Court does not even refer to Section 29A. But based on the limited enumeration of facts in Bhushan Steel-I case, prima facie JSW was ineligible to be a resolution applicant, and the resolution professional failed in its duty to ascertain the eligibility. Equally, in Bhushan Steel-I case the Supreme Court took exception to the breach of timelines by the resolution professional and the CoC. The Supreme Court noted that the NCLT should not have entertained the application for approval of the resolution plan once time prescribed under the IBC was breached. In Bhushan Steel-II case, there was no mention of legal implications of breach of time prescribed under the IBC.
In Bhushan Steel-II case, the Supreme Court casts the CoC in a positive light. And underlines its role as an entity that was working to implement the resolution plan by negotiating with JSW. While in Bhushan Steel-I case, the Supreme Court held that the CoC and JSW were colluding, and they timed the implementation of resolution plan to benefit the latter. The delay in Bhushan Steel-II case was attributed to ED’s attachment order, uncertainty about EBITDA, and introduction of Section 32A. How did the CoC’s role transform from colluding with JSW to making bona fide attempts to implement resolution plan is not fully understandable on reading both judgments. Nor did the Supreme Court in Bhushan Steel-II case mention NCLAT’s scope of jurisdiction and interface of IBC with public law. Specifically, if NCLAT had power to vacate an attachment order issued by the ED. This was especially since the ED’s attachment order was a crucial cause of delay in implementation of the resolution plan.
All the above issues, that were central to Bhushan Steel-I case are missing from Bhushan Steel-II case. Reason for such different approaches? It cannot be solely attributable to differing styles of judges involved. Or a different interpretive approach. Especially when issues that were central in the previous judgment do not even find mention in the subsequent judgment. While deciding the review petition, the Supreme Court had mentioned that in Bhushan Steel-I case, arguments which were not advanced were considered. And incorrect factual aspects were also considered. Perhaps, we can attribute the diametrically opposite approaches to differing facts and arguments. But it still does not answer some crucial questions. One of them being: Was JSW eligible to submit a resolution plan?
Conclusion
The Bhushan Steel saga – consisting of multiple judgments, delays, an imminent liquidation that eventually did not materialize provides ample room and grounds to consider and evaluate the IBC’s working. I’ve highlighted some of the learnings in Part-I of this series. Additionally, we also witnessed how elimination of certain facts changed the complexion and nature of issues and the eventual decision. Facts that were central in Bhushan Steel-I case, did not even find mention in Bhushan Steel-II case. The accurate truth as to what transpired is difficult to ascertain due to the hide and seek nature of facts themselves. Clearly, the emphasis and ignorance of same facts cannot be merely about arguments advanced in the Supreme Court. And if the divergent results were influenced by taking the wrong facts into consideration, it speaks a lot about the caliber of not only the judges involved but also the lawyers. Nonetheless, searching for the accurate truth of Bhushan Steel saga may prove to be an unending chase.
