Bhushan Steel

Bhushan Steel-II Case | Understanding the Supreme Court’s Change of Heart

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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.        

Bhushan Steel – I Case | Understanding the Supreme Court’s Liquidation Order

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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 Steel. In Part-II, I discuss the Supreme Court’s subsequent decision to rescue Bhushan Steel.   

I’ve created two accompanying quizzes: 

Quiz-1, 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

On 2nd May 2025, the Supreme Court in Kalyani Transco v M/S Bhushan Power and Steel Ltd & Ors (‘Bhushan Steel-I case’) directed the National Company Law Tribunal (‘NCLT’) to initiate liquidation proceedings against the corporate debtor, i.e., Bhushan Steel. Supreme Court’s decision was based on multiple factors that had a common theme: disrespect and violation of the procedures and timelines prescribed under the Insolvency and Bankruptcy Code, 2016 (‘IBC’). And almost all entities involved in the Corporate Insolvency Resolution Process (‘CIRP’) were, as per the Supreme Court, guilty of disregarding their statutory duties: the resolution professional, the Committee of Creditors (‘CoC’), successful resolution applicant, the NCLT and the National Company Law Appellate Tribunal (‘NCLAT’). 

In this article, I proceed as follows: in Part A, I provide an overview of the judgment and summarize five parameters that the Supreme Court relied on to liquidate the corporate debtor; in Part B, I discuss a few implications of the judgment and the lessons it offers us even if it has been recalled; and, finally in Part C, I mention the Supreme Court’s reason to accept the review petition and recall the judgment.   

Part A: An Overview of the Judgment 

I. Suppression of Facts about Disqualification under Section 29A

To begin with, the Supreme Court pointed out that the resolution professional – and thereafter the CoC and the NCLAT – did not discharge their duty of verifying that JSW, the successful resolution applicant, was eligible to submit a resolution plan under Section 29A. Regulation 39(1), Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) requires a resolution applicant to submit a resolution plan along with an affidavit stating that it is eligible to submit a resolution plan under Section 29A. The resolution professional is required to certify that the resolution applicant has filed such an affidavit and submit a compliance certificate in ‘Form H’. The Supreme Court noted that the resolution professional did not complete this obligation. Also, the resolution professional did not submit the certificate or produce any statement about eligibility of the resolution applicant. The omission of compliance certificate, as per the Supreme Court, raised serious doubts about eligibility of JSW to submit a resolution plan. What added to the Supreme Court’s doubt was that the NCLAT ‘encouraged suppression of facts’ about JSW’s ineligibility to submit a resolution plan under Section 29A. The ineligibility had apparently arisen due to a prior joint venture agreement between JSW, Bhushan Steel, and Jai Balaji. Which evidently made JSW a ‘related party’ to Bhushan Steel and ineligible to submit a resolution plan under Section 29A. But the Supreme Court said that the NCLAT sought to justify suppression of facts by JSW about its ineligibility thereby contravening the IBC. But the Supreme Court did not specify how exactly the NCLAT encouraged suppression of facts about the ineligibility.      

II. Right of Appeal Only on Limited Grounds 

Section 61 of the IBC grants a right to ‘any person aggrieved’ by the NCLT’s order to file an appeal to the NCLAT. And Section 62 uses the same expression for an appeal to the Supreme Court against an order of the NCLAT. Thus, there is no rigid locus requirement to institute an appeal to the NCLAT or to the Supreme Court. The Supreme Court in Bhushan Steel-I case held that CIRP proceedings are in rem and all stakeholders are permitted to file an appeal before the NCLAT or the Supreme Court. And erstwhile promoters and successful resolution applicants are stakeholders in a CIRP. To this effect, the Supreme Court relied on a similar interpretation adopted in GLAS Trust Company LLC v BYJU Raveendran & Ors.  However, the Supreme Court pointed out that an appeal can be filed only on the grounds specified in Section 61 or Section 62, whichever is applicable.  

In the impugned case, the NCLT had approved the resolution plan of JSW, but subject to certain conditions. JSW, despite its plan being approved, filed an appeal in the NCLAT against the NCLT’s decision. This was unusual and the Supreme Court disapproved the NCLAT hearing this appeal for three reasons. 

Firstly, the Supreme Court noted that since the NCLT approved JSW’s resolution plan:

‘Hence, JSW as such, could not be said to be the “person aggrieved” by the order of NCLT approving the Resolution Plan of JSW itself.’ (para 14)       

But JSW was aggrieved by some conditions imposed by the NCLT while approving the resolution plan. Thus, we can make an argument that JSW could legitimately claim status of an aggrieved person despite being the successful resolution applicant. 

Secondly, the Supreme Court noted that none of the grounds for appeal enlisted in Section 61(3) existed. Thus, JSW could not have filed an appeal before the NCLAT. 

Thirdly, the Supreme Court added that the NCLAT erred in admitting JSW’s appeal which was not legally maintainable. And the NCLAT then compounded this error by modifying conditions in the resolution plan as requested by JSW. The Supreme Court particularly failed to understand the NCLAT’s directions where it declassified Bhushan Steel as a promoter of another company – Nova Iron Steel. The NCLAT noted whether Bhushan Steel has 25.6% shareholding in Nova Iron Steel is a question of fact. But ‘if there is any such share’ Bhushan Steel on approval of the resolution plan declassified as a promoter. The NCLAT’s power to issue such an order declassifying promoter and the rationale for the order were correctly questioned by the Supreme Court. 

III. Vacation of Attachment Order Nullified  

Five days after the NCLT approved the resolution plan of JSW, Directorate of Enforcement provisionally attached assets of Bhushan Steel under Section 5 of The Prevention of Money-Laundering Act, 2002 (‘PMLA’). The NCLAT declared the attachment as illegal and without jurisdiction. The Supreme Court held that it was the NCLAT instead that did not have jurisdiction to vacate an attachment imposed under a public law such as the PMLA. 

The Supreme Court observed that the NCLT and the NCLAT were creatures of the statute, i.e. Companies Act, 2013. And jurisdiction of both bodies is circumscribed under Section 31 and Section 60 of the IBC. And neither of the two entities have powers of judicial review over decision taken by a statutory authority in the realm of public law. In this respect the Supreme Court relied on M/S Embassy Property Developments Private Limited v State of Karnataka & Ors (‘Embassy Property case’). In Embassy Property case, the Supreme Court had interpreted scope of Section 60(5) which provides jurisdiction to the NCLT on any question of law or facts ‘arising out of or in relation to the insolvency resolution …’. The Supreme Court held that a decision by a statutory authority in the realm of public law cannot be brought within the fold of ‘arising out of or in relation to the insolvency resolution’. And, if the corporate debtor must exercise a right that falls outside the purview of IBC, they cannot go to the NCLT for enforcement of such a right. Only the relevant public law framework must determine the rights and not the IBC. 

Based on ratio of the Embassy Property case and scope of Section 60(5), the Supreme Court held that: 

The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA. (para 30)

The Supreme Court thus declared the NCLAT’s order of vacating the attachment as without any authority of law and without jurisdiction. Also, the attachment order issued under the PMLA was subject matter of challenge before the Supreme Court in the Special Leave Petitions filed by the CoC. The Supreme Court had stayed the attachment order. But, despite that the NCLAT went ahead and reviewed orders of attachment and recorded findings on Section 32A. The Supreme Court frowned upon the NCLAT’s approach where it did not defer to the Supreme Court and did not wait for it to pass its final decision on the issue.     

IV. The CoC’s Role and Conduct 

The CoC, as per the Supreme Court performed a questionable role in CIRP on three counts: approving a resolution plan that did not incorporate mandatory conditions prescribed by the IBC, a handful of financial creditors granting extensions to JSW during implementation of the resolution plan, and a change in its stance about the resolution applicant’s conduct especially delays in implementing the resolution plan.  

The Supreme Court examined the resolution plan and held that it contravened a mandatory condition under Section 30(2)(b) of the IBC, i.e., the operational creditors must be paid on priority. And despite the resolution plan not providing for priority payments to operational creditors the resolution professional and the CoC approved it. Equally, the Supreme Court emphasized other mandatory requirements: completing CIRP within the time prescribed under Section 12, ensuring compliance of Section 29A, ensuring that the resolution plan is feasible and viable, and that the resolution applicant had capability to implement the resolution plan within the time limit are mandatory requirements under the IBC read with relevant CIRP Regulations. But the Supreme Court questioned if the CoC had exercised its commercial wisdom in approving the resolution plan which was in violation of various mandatory conditions and held that: 

If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan. (para 73)  

While commercial wisdom of the CoC is non-justiciable but if the CoC’s decisions are in contravention of the IBC, courts can and should intervene. And the Supreme Court in Bhushan Steel-I case justified its review of the CoC’s decision by pointing at various violations of the IBC. 

The Supreme Court also questioned the CoC’s role during the implementation phase of the resolution plan. The CoC its affidavit had levied multiple allegations against the JSW and its conduct including but not limited to delay in upfront payments, willful breach of the resolution plan, misuse of the legal process, and CIRP taking more than 35 months in a high-stake corporate insolvency case. However, when JSW, at a belated stage – after almost two and a half years – offered the upfront amount, the CoC accepted it without any demurrer. Even though the effective date for implementation of the resolution plan had expired. The Supreme Court taking note of the CoC’s change in stance concluded that it lacked bona fide, had played foul and not exercised its commercial wisdom in the interest of creditors. And the Supreme Court concluded that JSW also delayed implementation of the resolution plan, unjustly enriched itself and thereafter when the market conditions were suitable, it complied with the resolution plan by colluding with the CoC and the resolution professional.  

Finally, under the resolution plan, JSW had agreed to infuse equity for an amount of Rs 8550 crores in the corporate debtor on the effective date. However, the Supreme Court noted that apart from averments of the advocates, there was no material to show that the resolution applicant had fulfilled the condition of infusing equity. And, if the effective date for equity infusion was extended, the Supreme Court questioned as to who approved the extension. The reason for this question was that as per the Supreme Court the CoC had become functus officio on the NCLT’s approval of resolution plan. Thus, some financial creditors claiming to be part of the CoC had no authority to grant an extension after the NCLT’s approval. This was despite there being clarity that the resolution plan permitted the CoC to grant time extension to the successful resolution applicant. But the Supreme Court was convinced that the CoC becomes functus officio on the NCLT’s approval of the resolution plan. But it did not elaborate as to why and as per which provisions of the IBC did the CoC become functus officio.  

V. Failure of Resolution Professional and Breach of Timelines

The resolution professional’s various omissions are mentioned in significant detail in the judgment. I’ve referred to the oversight in ensuring eligibility of the resolution applicant in sub-section I above. But fatal omission of the resolution professional, as per the Supreme Court, was not obeying timelines prescribed in the IBC and not following the prescribed procedures. For example, the resolution professional did not seek an extension from the NCLT when CIRP was not completed within the time prescribed under Section 12. Further, the resolution professional provided no justification as to why once the CoC had approved the resolution plan; it waited for four months to seek the NCLT’s approval. Especially since the maximum period for completing CIRP had expired when application for the NCLT’s approval was filed. Taking the view that completion of CIRP within the prescribed time is mandatory, the Supreme Court held that: 

In that view of the matter, we have no hesitation in holding that the Application submitted by the Resolution Professional seeking approval of the Resolution Plan of JSW under Section 31 being hit by Section 12 of IBC, the NCLT had committed grave error of law in approving the said plan … (para 57)   

Based on all the aforementioned factors, the Supreme Court rejected the resolution plan submitted by JSW. And directed the NCLT to initiate liquidation proceedings against the corporate debtor under Section 33 of the IBC. 

Part B: Implications of Bhushan Steel-I Case 

I. Entire IBC Ecosystem under the Scanner 

The Supreme Court in Bhushan Steel-I case revealed various flaws in the IBC’s ecosystem. The CoC and the resolution professional seemed to have acted in contravention of or at least were casual in fulfilling their statutory duties. One reason for this was lack of any meaningful oversight from the judicial authorities. The NCLT and the NCLAT did not properly scrutinize their actions on the touchstone of legality. The judgment also revealed the lack of clear duties and roles during implementation of the resolution plan. The CoC, as per the Supreme Court ceased to exist once the NCLT approved a resolution plan. Thus, leaving no meaningful entity to oversee implementation and compliance with the resolution plan. In several paragraphs of the judgment there are various grains of truth that should have and still should be fruit of contemplation for the policy makers and the Insolvency and Bankruptcy Board of India (‘IBBI’). Though there have been some changes in regards to implementation of the resolution plan.    

II. Timelines Overpower the IBC 

Breach of the IBC’s prescribed timelines is stale news and reasons for delay may not have an immediate cure. But it is worth contemplating to what extent should the breach of timelines be judicially tolerated and what should be consequence of the breach. Which is better: timely liquidation or a prolonged attempt at rescuing the corporate debtor? The Supreme Court in Bhushan Steel-I case preferred liquidation. The IBC’s design has been recently altered to restore CIRP and delay liquidation if rescue of the corporate debtor is possible. But it may not be ideal as I’ve previously argued elsewhere. While the Supreme Court in various judgments has exhorted importance of time in the IBC, what should be the ideal judicial approach if timelines are breached is still a big unknown. In Bhushan Steel-I case, the Supreme Court preferred liquidation due misconduct of all entities involved and because it took the view that timelines under the IBC are mandatory and not directory. Also, because JSW tried to present a fait accompli by delaying implementation of the resolution plan.     

III. Conduct of the CoC and the Resolution Professional Needs Guardrails 

The Supreme Court in Bhushan Steel-I case also revealed that while the resolution professional and the CoC have crucial roles in the IBC, the guardrails for ensuring that they perform their duties adequately are missing. Ideally, the NCLT and the NCLAT should act as a check on any tendency to derelict duty, but that did not happen in this case. The IBBI can initiate disciplinary proceedings against the resolution professional, but it may prove to be ineffective unless it takes place in a timely fashion and has a deterrent effect.  Equally, while there has been some attempt to bring more transparency in working of the CoC by mandating it to record reasons for its approval. But there has been a simultaneous expansion of its responsibilities that inter alia involve overseeing liquidation. Encouraging transparency though is likely to infuse more confidence in the integrity of CIRP. But it comes with the danger of more challenges and judicial authorities slipping into the territory of reviewing commercial wisdom of the CoC. 

IV. Checking Bona Fides of the Resolution Applicant 

Finally, the challenge of holding the successful resolution applicant accountable was also revealed by the Bhushan Steel-I case. While the IBC has been recently amended to allow for a more structured supervision of the resolution plan. And by extension conduct of the successful resolution applicant. However, it is undeniable that delays in implementation of the resolution plan due to a recalcitrant resolution applicant can upturn the entire CIRP. Thus, ensuring bona fides of the resolution applicant and their capacity to implement the resolution plan ex ante is crucial instead of sacrificing the corporate debtor at the altar of liquidation due to failure in implementing the resolution plan. It was partly due to oversight in ex ante verification of the resolution applicant’s bona fide that the implementation of resolution plan was delayed which prompted the Supreme Court to order liquidation. While there are adequate safeguards in the IBC in this respect – especially Section 29A – ensuring compliance with its mandate needs to be insisted without fault.          

Caveat: The caveat for the entire set of comments above is, of course, that the judgment was recalled. Though, in my view, an academic purpose is still served by commenting on a recalled judgment. 

Part C: Recall of the Judgment   

Approximately three months after the judgment in Bhushan Steel-I case, the Supreme Court accepted the review petitionwhich challenged correctness of the judgment. The Supreme Court found that it was a ‘fit case for recalling the judgment under review and reconsidering the matter afresh.’ The Supreme Court, in its brief order, mentioned that in Bhushan Steel-I case: (a) various incorrect factual aspects were taken into consideration; and (b) arguments which were not advanced were considered while delivering the judgment.  

The judgment in Bhushan Steel-I case had already been stayed, but acceptance of the review petition was a final nail in the coffin. And recall of the judgment ensured that all questions of law remained open for both parties to argue at the stage of final hearing.

Which brings us to Part-II and the Supreme Court’s judgment where it rescued Bhushan Steel instead of liquidating it.  

IBC (Amendment), 2026 Series – II | CoC’s Role in the IBC: A Case for Greater Legislative Clarity

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The Insolvency and Bankruptcy Code, 2016 (‘IBC’) provides the Committee of Creditors (‘CoC’) a central role in corporate insolvency resolution proceedings (‘CIRP’). The IBC prescribes the CoC’s role in broad terms and specific boundaries are still being delineated through judicial decisions. For example, while courts have consistently endorsed that commercial wisdom of the CoC is non-justiciable, precise extent of judicial oversight over the CoC’s decisions remains uncertain. This article focuses on two aspects of the CoC’s working that have emerged exclusively by judicial innovation and examines whether The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) succeeds in its attempt to provide them a statutory basis. 

Firstly, the IBC did not expressly confer authority on the NCLT to refer resolution plans back to the CoC for reconsideration. Previously, Section 31 of the IBC provided a binary option to the NCLT: approve or reject a resolution plan. Equally, neither Section 61 nor Section 62 of the IBC envisaged that the NCLAT or the Supreme Court can mandate the CoC to reconsider resolution plans. And yet resolution plans were often sent to the CoC for re-examination on various grounds enunciated by the Supreme Court. The IBC Act, 2026 amends the IBC to empower the NCLT to return a resolution plan. The IBC Act, 2026 has inserted a proviso to Section 31(2) and empowered the NCLT to give notice to the CoC ‘to rectify any defects in the resolution plan’ before rejecting the resolution plan. Notes on clauses to the IBC Bill, 2025 – which is pari materia to the IBC Act, 2026 – clarified that the NCLT should provide an opportunity to the CoC when defects are ‘procedural, non-material’ and can be rectified by the CoC. But use of ‘any’ in the proviso, prima facie, provides the NCLT broad powers contrary to intent expressed in notes on clauses.  

Secondly, the IBC’s silence ‘as regards the phase of implementation’ of the resolution plan was noted by the Supreme Court in SBI v The Consortium of Mr. Murari Lal Jalan (‘Jet Airways case’). To overcome the IBC’s silence, the Supreme Court in Kalyani Transco v M/S Bhushan Power and Steel Ltd and Others (‘Bhushan Steel case’) held that the CoC is not functus officio after the NCLT approves the resolution plan. The Supreme Court added that since the CoC has a vital interest in implementation of the resolution plan it will continue to exist until the resolution plan is implemented, or an order of liquidation is passed by the NCLT. The IBC Act, 2026 – to correct statutory oversight on implementation of the resolution plan – proposes to replace Section 30(2)(d) to state that every resolution plan must necessarily provide for constitution of a committee to implement and supervise the resolution plan. I suggest that the IBC Act, 2026 should have ideally clarified role of the CoC vis-à-vis implementation committee. And only left other procedural details for the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’). Else, implementation phase of the resolution plan may face further uncertainties about role of the CoC. Supreme Court’s judgment in Bhushan Steel case and the IBC Act, 2026 together ensure that the CoC and the implementation committee will co-exist during implementation of the resolution plan. How will the two entities interact? Will the implementation committee operate under supervision of the CoC? Clarity on these procedural aspects may emerge from the CIRP Regulations. But it was vital that the statute provided, in clear terms, the CoC’s role during implementation of the resolution plan. 

The IBC Act, 2026 has missed an opportunity to provide legislative clarity on both the above aspects. And leaves ample room for ad hoc judicial solutions that may hamper timely completion of CIRP.   

Reconsideration of a Resolution Plan by the CoC 

The Supreme Court in CoC of Essar Steel India Ltd v Satish Kumar Gupta & Ors (‘Essar case’) correctly held that while the NCLT cannot interfere with commercial decision of the CoC, it can exercise judicial review if the CoC has not taken into account key features of the IBC. For example, the NCLT is permitted to examine if a resolution plan approved by the CoC maximises the value of corporate debtor’s assets and balances the interests of all stakeholders. However, the Supreme Courts’ conclusion that the NCLT can send back a resolution plan to the CoC if key features of the IBC are amiss in a resolution plan is not supported by a plain reading of Section 31 of the IBC.   

Section 31(1) of the IBC states that the NCLT, ‘shall’ by order approve the resolution plan if it is satisfied that the resolution plan approved by the CoC meets requirements enlisted in Section 30(2). And if the resolution plan does not conform  to above stated requirements, the NCLT under Section 31(2) ‘may’ by an order reject the resolution plan. I suggest that interpreting may as directory in this context defeats the IBC’s objective of completing CIRP in a time bound manner. Under Section 31, the NCLT must determine if the resolution plan approved by the CoC satisfies the requirements enlisted under Section 30(2). If the answer is in affirmative, the NCLT must approve the resolution plan or else reject it. The NCLT directing the CoC to reconsider the resolution plan instead of rejecting it, expands time required for CIRP and defeats the aim of maximising the value of corporate debtor’s assets. One can argue that if the prescribed time limit for CIRP has not expired, the NCLT can send the resolution plan to the CoC for reconsideration. But, silence of Section 31 about grounds on which the NCLT ‘may’ send the resolution plan to the CoC for reconsideration suggests that such a possibility was not contemplated by the legislature. The Supreme Court, instead of paying attention to silence of Section 31 on powers of the NCLT to send back resolution plan has created its own parameters to permit reconsideration by the CoC. A legal position that suffers from multiple frailties.   

The Supreme Court has bifurcated judicial role vis-à-vis the CoC in two spheres: commercial decisions of the CoC and legality of resolution plans under the IBC. In Essar case and later in Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd. the Supreme Court reiterated that the NCLT’s jurisdiction in approving the resolution plan cannot extend to altering commercial terms of the resolution plan. But in both cases, the Supreme Court observed that the NCLT can send the resolution plan back to the CoC for re-submission if key parameters of the IBC were amiss – such as those listed in Section 30(2) of the IBC. In both cases, flaw in the Supreme Court’s approach was in equating the NCLT’s power to review legality of the resolution plan with the power to send back resolution plan to the CoC. Section 31 empowers the NCLT with only the former and envisages a rejection of the resolution plan on failure to meet the parameters of Section 30(2). The Supreme Court by equating scope of the NCLT’s judicial review with power to send back resolution plan committed judicial overreach and introduced an additional step in CIRP which contributes to delay in its timely completion.          

Equally, the Supreme Court has not canalized the grounds on which the NCLT can send back the resolution plan. The NCLAT and the Supreme Court – have sent resolution plans for reconsideration on various grounds. Resolution plans have been returned for not providing that dissenting financial creditors must be paid in cash, the resolution professional wrongly rejecting the claim of financial creditor, and that dissenting financial creditors were paid less than stipulated under Section 30(2)(b).  The various grounds have emerged from fact situations and are not framed within any judicial doctrine on the NCLT’s powers of approval of the resolution plan. The NCLT/NCLAT/Supreme Court while sending back resolution plans have reasoned that only the CoC can amend commercial aspects of the resolution plan but have overlooked if they possess the power to send back the resolution plan. In fact, common link in the above-mentioned decisions is that in none of them any judicial forum has examined the legislative intent or text of Section 31 to determine if it permits the CoC to reconsider an approved resolution plan. The IBC Act, 2026 attempts to alter the legislative intent underlying Section 31 to this end but suffers from shortcomings. 

Notes on clauses to the IBC Bill, 2025 indicate that the NCLT must send back resolution plans only if defects are procedural, non-material and can be rectified by the CoC. To begin with, there is an erroneous presumption that substantive and procedural defects are neatly distinguishable categories in CIRP. None of the judicial decisions that have mandated reconsideration of resolution plan by the CoC have identified factors to distinguish substantive defect from a procedural defect. Even presuming that a clear categorization is possible, identifying the category of defect will require further judicial exercise, and create another layer of uncertainty about scope of the NCLT’s power. Not to mention that despite the legislative intent being to limit the NCLT’s power to only procedural defects, the proposed proviso mentions ‘any’ defect. An example of legislative drafting – prima facie – betraying the stated legislative intent.   

Further, the change to Section 31 proposed by the IBC Act, 2026 also prevents accountability of the CoC for its decisions. The commercial aspects of a resolution plan are beyond judicial purview because the IBC presumes that it is the CoC that possesses business expertise and not judicial forums. But the CoC, is obligated to make commercial decisions as per the IBC’s mandate. For example, the CoC must vote on the resolution plan after considering the parameters enlisted in Section 30(2) and obey the mandate of Section 30(4). Thus, if the CoC approves the resolution plan that contravenes clearly enlisted parameters in Section 30(2) or Section 30(4); prima facie, the CoC has committed a dereliction of its duty. And if the NCLT simply sends back a resolution plan – previously approved by the CoC – for reconsideration without any penalty or meaningful legal consequence for the CoC, it avoids accountability for its failure to discharge a statutory duty. The Supreme Court, in Jet Airways case, suggested that the Insolvency and Bankruptcy Board of India should explore the enforcement of standards in Guidelines for the CoC instead of making them self-regulatory to ‘prevent any significant lapse in decision making on the part of the CoC.’ The legal mandate must move towards greater accountability for the CoC instead of the opposite direction.  

Finally, the IBC Act, 2026 suffers from a contradiction in so far as it imagines role of the NCLT in CIRP. While the IBC Act, 2026 amends Section 7 to circumscribe the NCLT’s jurisdiction and expedite CIRP, it does the opposite as regards Section 31. The IBC Act, 2026 proposes to add Explanation 1 to Section 7 wherein if the NCLT is satisfied as to the existence of a default, is sure that the application is complete and no disciplinary proceedings are pending against the proposed resolution professional, it shall admit the CIRP application. Else reject it. The NCLT is not required to inquire into any other factor. Narrowing the NCLT’s jurisdiction under Section 7 is to expedite admission of the CIRP application if default by corporate debtor is proved. On the other hand, the NCLT is being permitted to send back the resolution plan by inserting a proviso in Section 31(2) to that effect. Thereby providing statutory basis to a judicial practice that is already contributing to delays in CIRP. The amendment to Section 31 may negate the amendment to Section 7 in so far as expediting CIRP is concerned.    

The CoC’s Uncertain Role in Implementation of the Resolution Plan

The IBC is silent on the CoC’s role in implementation of the resolution plan. This is evident in the IBC not providing any specific role and functions for the CoC once the resolution plan is approved by the NCLT. For example, if the NCLT has approved a resolution plan, then under Section 33(3) of the IBC any person – other than the corporate debtor – aggrieved by contravention of the approved resolution plan may make an application to the NCLT for liquidation. And Section 33(4) states that if the NCLT determines that a corporate debtor has contravened provisions of the resolution plan it may pass an order of liquidation. There is no express requirement of seeking the permission or even opinion of the CoC before passing the liquidation order. The CoC’s approval for liquidation by sixty-six per cent voting share is needed only if the resolution plan has not been confirmed by the NCLT, i.e., before its implementation begins. Section 33(3) read with 33(4) reveal the CoC’s minimal role during implementation of the resolution plan. 

The lack of any specific role for the CoC during implementation of the resolution plan came to fore in Jet Airways case and Bhushan Steel case. In Jet Airways case, the Supreme Court suggested a monitoring committee for implementation of an approved resolution plan. And that it should consist of resolution professional, nominees from the CoC as well as the resolution applicant. In Bhushan Steel case, the Supreme Court identified the CoC as a vital stakeholder in the implementation of the resolution plan and thus held that it continues to exist until the resolution plan is implemented, or an order of liquidation is passed. In Jet Airways the Supreme Court’s suggestion was motivated by a need to ensure that implementation of the resolution plan is overseen by a specific body consisting of all stakeholders. And the NCLT/NCLAT do not approve changes to timelines or conditions in the resolution plan that de facto amends and affects the viability/feasibility of the resolution plan. While in Bhushan Steel case, the Supreme Court extended lifespan of the CoC to prevent an ‘anomalous situation’ wherein if there is failure to implement the resolution plan, creditors will not be able to take any steps for realization of their dues from the corporate debtor.   

The IBC Act, 2026 – taking a cue from the Supreme Court’s recommendation in Jet Airways case – proposes that every resolution plan must mandatorily provide for constitution of an implementation committee. Section 30(2)(d) amended by the IBC Act, 2026 now mentions that a resolution plan must provide for implementation and supervision of the resolution plan and constitution of a committee for this purpose. Section 30(2)(d) envisages that the committee – an implementation committee – shall comprise of a resolution professional or any other insolvency professional, representatives of a class or classes of creditors and the resolution applicant. However, the IBC Act, 2026 should have gone further and also clarified the CoC’s role during implementation of the resolution plan.  This is because while the IBC Act, 2026 mandates the constitution of an implementation committee it does not detract from the Supreme Court’s observation in Bhushan Steel, i.e., the CoC’s continues to exist until the resolution plan is implemented. If the implementation committee and the CoC are to co-exist during implementation phase, the IBC Act, 2026 should ideally and expressly provide specific roles and functions of the CoC during implementation phase. For example, it is unclear if the implementation committee will be a sub-set of the CoC. And if all requests for time extensions or other amendments need to be necessarily pre-approved by the CoC. Will implementation of the resolution plan be supervised by the implementation committee and the CoC will only approve any requests for amendments in the plan? There is no clarity that emerges from the IBC Act, 2026.    

The CIRP Regulations already provide for constitution of an implementation committee. The IBC Act, 2026 aims to provide a statutory basis to the implementation committee and mandates that every resolution plan must necessarily provide for composition of the implementation committee. But the IBC Act, 2026 leaves the issue of overlapping existence of both entities unaddressed. The CoC should certainly be involved in implementation of the resolution plan. And the rationale for its involvement in implementation of the resolution plan is strengthened by the need to preserve viability and feasibility of the resolution plan. Else, NCLT approving changes to the resolution plan without the CoC’s involvement may alter it to such an extent that it dilutes or defeats commercial wisdom of the CoC. Finally, continued role of the CoC during implementation phase is also relevant because the IBC Act, 2026 proposes that it shall ‘supervise the conduct of the liquidation process by the liquidator’. Notes on clauses state that the CoC should supervise liquidation so that it can apply learnings from CIRP to liquidation. I suggest the same reason is equally relevant to keep the CoC involved in implementation of the resolution plan. Not only will the CoC’s role in implementation of the resolution plan ensure continuity, prevent unwarranted changes, but also – if need arises – keep it abreast of developments that may be helpful during liquidation of the corporate debtor. But clarity about nature and extent of the CoC’s involvement in implementation will be welcome. Specifically, its role vis-à-vis the implementation committee which will now exist under each resolution plan.           

Conclusion

To conclude, it is worth mentioning two related but separate judicial observations about the CoC’s tenure: (a) that the CoC does not become functus officio after the NCLT approves a resolution plan; (b) judicial review of the CoC’s commercial wisdom does not preclude sending the resolution plan back for its reconsideration. Ensuring that the CoC continues beyond approval of the resolution plan is defensible for it ensures a smooth implementation. But the CoC’s continued existence also creates an incentive or at least provides an option to the NCLT/NCLAT/Supreme Court to refer resolution plans back to the CoC. Even though the IBC does not expressly contemplate such a reconsideration. And, in fact, the reconsideration proves counterproductive to timely completion of CIRP without attaching any penalties to the CoC for its failure to perform its statutory duties. The proposed proviso to Section 31(2) has the potential to provide sanctity to an unsatisfactory legal situation instead of streamlining the CIRP-related judicial process. At the same time, the IBC Act, 2026 does not clearly delineate the CoC’s role in implementation of the resolution plan leaving room for uncertainty on that aspect. The CoC and the implementation should have, ideally, clearly defined roles via provisions in the IBC itself and only procedural details should have been left for CIRP Regulations.     

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