Liquidation

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

by

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 – VI | An Overview of the CoC’s Evolving (and Expanding) Role

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The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) – inter alia – expands role of the Committee of Creditors (‘CoC’) in the Insolvency and Bankruptcy Code, 2016 (‘IBC’). The most notable expansion is that the CoC will oversee liquidation of the corporate debtor. This is in addition to the CoC’s existing responsibility to oversee the Corporate Insolvency Resolution Process (CIRP). Further, while the IBC Act, 2026 does not add a specific provision to this effect, it also does not detract from the Supreme Court’s observations in Kalyani Transco v M/S Bhushan Power and Steel Ltd and Others (‘Bhushan Steel case’) where it was held that the CoC will continue to exist until the resolution plan is implemented. Thus, the CoC will play a role even at the stage of implementation of a resolution plan.  

The IBC Act, 2026 apart from introducing additional responsibilities for the CoC also introduces one notable obligation. Hereon, the CoC is mandated to record reasons for its approval of the resolution plan under the amended Section 30(4). But curiously, while the CoC has power to recommend liquidation before confirmation of a resolution plan under Section 33(2). This decision to liquidate need not be accompanied by recording of reasons. Parity in both provisions would have been ideal. While recording reasons of approval is not, per se, an onerous obligation it is a step in the right direction. Recorded reasons will ensure transparency in decision making by the CoC. In my view, it will enhance trust in CIRP especially of the unsuccessful resolution applicants. Though courts will have to be careful to not use the recorded reasons to – directly or indirectly – judicially review commercial wisdom of the CoC. Judicial remit must remain limited to examining the CoC’s decisions on the touchstone of legality. 

The CoC – since inception – was envisaged as a central actor in CIRP. The IBC Act, 2026 preserves original design of the IBC, but underlines the CoC’s pre-eminent role by assigning it additional responsibilities. This article examines the CoC’s expanded role after the IBC Act, 2026 and various implications that arise from its expanded role. Given the CoC’s multi-faceted role, there are various strands of its working that can be elaborated on, but in the interest of brevity and coherence I’ve chosen only two strands in this article: firstly, the CoC’s obligation to provide reasons for approval of a resolution plan; secondly, the CoC’s power to oversee liquidation of the corporate debtor. 

Admittedly, the CoC will also decide if CIRP should be restored and will also have a role – though not clearly delineated – in implementation of the resolution plan. But I’ve examined both these aspects separately in my previous post here and here. So, I will steer clear of both these aspects in this article.   

The CoC Must Provide Reasons for Approval of a Resolution Plan 

The IBC Act, 2026 amends Section 30(4) which now states that:

The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, and record reasons for its approval, after considering its feasibility and viability …. (emphasis added)

As emphasized, the IBC Act, 2026 has added the phrase ‘and record reasons for its approval’. This amendment was not proposed in the IBC (Amendment) Bill, 2025 and neither does it find place in Report of the Select Committee on the IBC (Amendment) Bill, 2025 (‘Select Committee Report’). Thus, there are no reasons on record as to why the CoC has been mandated to record reasons for its approval of a resolution plan. One possible deduction is that Section 30(4) was amended to improve transparency in the CoC’s decision making. A normative reason is that the IBC’s design is premised on commercial wisdom of the CoC. The CoC is expected to utilize its commercial expertise and take decisions that secure the collective interest of all stakeholders. Thus, mandating the CoC to record reasons for its decisions ensures that the IBC’s premise and expectations of all stakeholders are met and the CoC does not use commercial wisdom as an opaque curtain to prevent accountability of its decisions.      

The more proximate reason for the above amendment could be some judicial precedents where the CoC has been specifically mandated to record reasons for its decisions. The most notable case in this respect is Elegna Co-op Housing and Commercial Society Ltd v Edelweiss Asset Reconstruction Company (‘Elegna Co-op Housing case’) where the Supreme Court approved the NCLAT’s order directing the CoC to record reasons. The NCLAT had observed that while commercial wisdom of the CoC is not amenable to judicial review, it carries a ‘corresponding duty of responsibility.’ And mandated the CoC to record cogent reasons when it took a non-routine or an extraordinary decision. The NCLAT’s observations were approved by the Supreme Court without any change. While the NCLAT waded into regulatory domain by mandating the CoC to record reasons despite no statutory mandate. However, the NCLAT kept its intrusion limited by mandating recording of reasons only for ‘non-routine’ or ‘extraordinary’ decisions. Amendment to Section 30(4) has created a broader obligation for the CoC to record reasons for its approval and is not limited to only extraordinary decisions.     

The statutory mandate to record reasons under Section 30(4) is certainly reconcilable with the doctrine of commercial wisdom of the CoC. The doctrine of commercial wisdom and non-justiciability of the CoC’s decisions apart from attributing business expertise to the CoC also presumes that it will act in a bona fide manner and not take arbitrary decisions. Mandating the CoC to state the reasons for its decisions is a welcome step especially in wake of some recent developments where unsuccessful resolution applicants have challenged rejection of their resolution plans and cast aspersions on the CoC’s intent and decision making. And without recorded reasons it is difficult to know or hold the CoC accountable lending its entire decision making process an unnecessary mystical quality. Finally, though amendment to Section 30(4) is a welcome step, a note of caution is needed. Courts in scrutinizing reasons for the CoC’s decisions, should be careful to not wade into territory of commercial wisdom of the CoC. While the lines between commercial wisdom of the CoC and legality of its decisions are clear in abstract, wherein only latter are subject to judicial review. However, overlaps between commercial and legal aspects can blur in certain situations. Respecting the distinction while facilitating transparency in CIRP is crucial.   

Supervising Liquidation: Streamlining Process and Ensuring Continuity from CIRP 

The IBC Act, 2026 amends Section 35(2), which now states that:

The committee of creditors shall supervise the conduct of the liquidation process by the liquidator under Chapter III in such manner as may be specified.

The CoC constituted during CIRP will thus now have an extended role in the liquidation process. The CoC will supervise conduct of the liquidator and guide it on all commercial matters. Broadly, the CoC’s role in liquidation is akin to its role vis-à-vis the resolution professional during CIRP but a direct comparison maybe pre-mature as various details about roles of both entities in liquidation are unknown. For now, to strengthen the CoC’s role in the liquidation process and its supervision of the liquidator two crucial changes are worth highlighting: 

Firstly, Section 34(4) states that an insolvency resolution professional appointed as resolution professional for CIRP ‘shall not be appointed’ or replaced as the liquidator for liquidation process of the corporate debtor. Section 34, in its previous draft in the IBC (Amendment) Bill, 2025 envisaged that the resolution professional’s appointment as a liquidator shall not be automatic and needs to be approved by the CoC. However, Section 34(4) as finally amended by the IBC Act, 2026 disqualifies a resolution professional from being appointed as a liquidator altogether. The Select Committee Report suggests that various stakeholders had a valid concern that a resolution professional has a ‘perverse incentive’ to favor liquidation over resolution. Since the liquidator gets a percentage of liquidation estate as the liquidator fee. Thus, the Select Committee recommended amendment of Section 34 to state that a resolution professional will be disqualified from being appointed as a liquidator.    

Secondly, Section 34A empowers the CoC to replace the liquidator by a vote of not less than sixty-six per cent of the voting share. The CoC must believe the liquidator appointed under Section 34 ‘is required to be replaced.’ The CoC need not provide any specific grounds for removal and replacement of the liquidator. It is unclear if the CoC’s decision to replace a liquidator can be challenged in the NCLT or not. Or will it be swept under the doctrine of commercial wisdom. 

Nonetheless, Section 34(4) read with Section 34A ensures that liquidator will be someone who was not involved in CIRP of the corporate debtor. And the liquidator so appointed can be replaced by the CoC if it deems fit. The above changes are to ensure that the liquidator’s incentives are not improperly aligned to secure a higher remuneration. And since the liquidator will be a person not involved in CIRP, it will presumably provide the CoC immense scope and greater leverage to guide the liquidator. And, perhaps, retain the balance of power in its favor.        

The IBC Act, 2026 simultaneously favors continuity and disjuncture in liquidation of the corporate debtor. It favors continuity by empowering the CoC to supervise liquidation, which will allow it to apply the learnings from CIRP to liquidation and hopefully maximize value of the corporate debtor’s assets in the entire process. The IBC Act, 2026 favors disjuncture by requiring that a liquidator shall not be a resolution professional involved in CIRP. And to maintain balance between continuity and disjuncture from CIRP, the IBC Act, 2026 has made some additional changes. For example, the IBC Act, 2026 amends Section 35(1)(a) to state that the liquidator shall maintain an updated list of creditors. While previously, the liquidator was required to ‘verify claims of all the creditors’ which would have involved the liquidator initiating the process of verifying claims; a process already undertaken and completed by the resolution professional during CIRP. As the Select Committee noted, this change:

… involves streamlining the claims process and formally extending the role of the Committee of Creditors (CoC) to supervise the liquidation. This streamlined approach is intended to avoid repetition of activities conducted during CIRP and expedite the liquidation process. (para 23.6)

Thus, amendments to provisions relating to liquidation are a mix of ensuring continuity and mandating the need for fresh personnel. But overall objective seems to be to streamline the entire process and ensure that liquidation and CIRP are not treated completely independent processes. And some work completed during CIRP can be utilized to expedite liquidation with the larger objective of maximizing the corporate debtor’s assets.  

Some stakeholders expressed valid concerns to the Select Committee about the CoC’s powers vis-à-vis the liquidator and that there was uncertainty as to the role of each entity. While Chapter II – dealing with CIRP – delineates the powers and role of the resolution professional in detail especially which decisions require prior approval of the CoC and which can be undertaken by the resolution professional independently. A similar detailed statutory prescription for roles of the liquidator and the CoC is amiss in Chapter III relating to liquidation process despite amendments to Section 34 and insertion of Section 34A. The Select Committee has relied on the assurance of the Ministry of Corporate Affairs that concerns of the stakeholders about the CoC’s powers in relation to liquidator will be addressed, but details – for now – are sparse.  

Finally, Section 33(2) has also been amended. A proviso has been added to provide statutory basis for the CoC’s powers to directly dissolve a corporate debtor without confirmation of a resolution plan. Previously, even though Section 33(2) did not expressly empower the CoC to directly dissolve the corporate debtor, the NCLT in the matter of Synew Steel Private Limited permitted the CoC to take such a decision. The NCLT’s rationale was that since all assets of the corporate debtor had been realized, liquidation will serve no useful purpose, and it is deemed to have been completed. The Proviso though states that the CoC’s decision to dissolve a corporate debtor will have to comply with specified conditions. Presumably, the intent is to include some safeguards to consider the corporate debtor’s interests, and the relevant conditions may be included in the CIRP Regulations. While dissolution typically follows liquidation as per Section 54. However, where there are no meaningful or recoverable assets, empowering the CoC to directly dissolve the corporate debtor is practical as it may prevent a cumbersome CIRP and liquidation process.   

Notably, there is no other change in Section 33(2) wherein the CoC can directly decide to liquidate a corporate debtor before confirmation of a resolution plan. Implying that the CoC is not bound to record reasons for such a decision. While the CoC is – under the amended Section 30(4) – required to record reasons for approval of a resolution plan no similar obligation has been introduced in Section 33(2). This asymmetry is hard to understand. The Supreme Court in Elegna Co-op Housing case approved the NCLAT’s observations which had mandated the CoC to:

Any recommendation for liquidation by the Committee of Creditors shall be accompanied by a reasoned justification recorded in writing, evidencing proper application of mind and due consideration of all viable alternatives, in consonance with the objective of the Code.

While the directions were specific to facts of the case which involved stakes of real estate allottees, need for the CoC to record reasons for liquidation is hard to dispute. Under Section 33(2) where the CoC has been empowered to decide directly in favor of liquidation, recording reasons for it may go a long way in ensuring transparency. And for stakeholders to understand the reasons for not completing CIRP. In fact, a decision to liquidate is at odds with the IBC’s objectives which aims to rescue the corporate debtor. In such a scenario, recorded reasons should reflect as to why the IBC’s stated aims are being sacrificed in favor of liquidation.      

The CoC’s power to directly liquidate a corporate debtor instead of completing CIRP is drastic as it may lead to death of the corporate debtor. And, yet the CoC need not provide reasons for such a decision. It is likely, that the CoC’s decision to liquidate a corporate debtor will be based – almost exclusively – on commercial considerations and will be outside the purview of judicial review. However, mandating the CoC to record its reasons would have been ideal and would have ensured parity in its role in CIRP as well as liquidation.  

CoC – An Independent Entity with Immense Responsibility

NCLAT in CoC of Think and Learn Pvt Ltd v Riju Ravindran held that the CoC possesses legal character of a juristic person. And it can sue and be sued in its own name. NCLAT observed that while the financial creditors in the CoC have a common objective, they do not have an identical interest since each one of them pursues their interest as per the independent contract they signed with the corporate debtor. NCLAT defined the CoC’s role in following words: 

Under the scheme of the IBC, the CoC is conceived as a statutory contrivance, an engine, that runs the entire insolvency resolution process. In another sense CoC is also required to be a statutory conscience keeper, as the responsibility it is enjoined with travels far beyond its preference to protect the financial interest of the members constituting it, since it is also required to secure the interest of every creditor of the corporate debtor besides the corporate debtor itself. (para 8.1) (emphasis added) 

In upholding right of the CoC to litigate in its own name, NCLAT underlined that it was a statutory body assigned to take business decisions founded on ground realities which bind all stakeholders. The IBC Act, 2026 has further highlighted and enhanced centrality of the CoC’s role and wide-ranging impact of its business decisions. And the IBC Act, 2026, contemporaneously, has attempted to enhance transparency in the CoC’s decision-making by mandating it to provide reasons for its decision to approve a resolution plan. It may not be an overstatement to conclude that the CoC’s conduct, and decisions will determine the fate and trajectory of CIRP, and in some cases, a timely liquidation of the corporate debtor. An immense responsibility. Thus, once CIRP is triggered, the CoC will expedite or delay the corporate debtor’s journey to the grave, metaphorically or literally.  

IBC (Amendment), 2026 Series – III | Restoring CIRP under the IBC: A New Portal Opens 

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The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) amends the Insolvency and Bankruptcy Code, 2016 (‘IBC’) and empowers the National Company Law Tribunal (‘NCLT’) to restore Corporate Insolvency Resolution Process (‘CIRP’) before passing an order for liquidation of the corporate debtor. Previously, under Section 31(1) of the IBC, the NCLT could pass an order of liquidation if: (a) it did not receive a resolution plan within the stipulated time; or (b) if the NCLT rejected a resolution plan under Section 31 for failure to meet compliance requirements. Thus, if CIRP failed due to either of two reasons the NCLT’s only option was to order liquidation of the corporate debtor. The IBC Act, 2026 provides for  restoration of CIRP via insertion of sub-section (1A) to Section 33 which states that: 

Notwithstanding anything contained in sub-section (1), where the Adjudicating Authority is satisfied that the grounds mentioned in clause (a) or clause (b) of sub-section (1) of this section exist, it shall, before passing the liquidation order, consider an application made by the committee of creditors, in such manner and subject to such conditions as may be specified, by not less than sixty-six per cent. of the voting share, for restoring the corporate insolvency resolution process… (emphasis added)

The above sub-section substantially alters the IBC’s original design wherein on CIRP’s failure, liquidation of corporate debtor was the sole option. Even though Section 33(1B) states that an order for restoration of CIRP can be passed only once, the option of restoring CIRP accompanies its own set of challenges. Foremost, option of restoring CIRP creates possibility of ‘repeated loops.’ Until now, there is one notable precedent – Chitra Sharma and Ors v Union of India and Ors (‘Chitra Sharma case’) – wherein the Supreme Court restored CIRP in exercise of its powers under Article 142 of the Constitution. While the Chitra Sharma case is not squarely comparable to Section 33(1A), it provides context and reasons as to why in some cases CIRP can be restored.  

Accordingly, this article is divided into two parts: the first part provides relevant details about the Chitra Sharma case and reasons for the Supreme Court’s exceptional order of restoring CIRP; the second part catalogues some of the challenges that accompany introduction of Section 33(1A) and the consequences that may follow from such a legislative choice. This article concludes that while there are some persuasive reasons for restoring CIRP; for example, the corporate debtor retains value or if there is renewed interest from certain investors. However, overall functioning of the IBC – where time limits are frequently breached – does not lend much confidence that restoration of CIRP will meet its intended objectives of rescuing the corporate debtor in a timely fashion. In fact, the option of restoring CIRP may reduce the overall efficacy of CIRP.    

A Notable Instance for Restoring CIRP 

The most notable instance of restoring CIRP was in the Chitra Sharma case. Home buyers, in projects floated by Jaypee Infratech Ltd (‘JIL’), filed a writ petition before the Supreme Court seeking protection of their interests. Home buyers approached the Supreme Court because in CIRP against JIL, they were not allowed to file their claims either as financial or operational creditors. Because the IBC, as it existed then, did not recognize home buyers are stakeholders in CIRP. Home buyers challenged various provisions of the IBC wherein they were not recognized as a stakeholder in CIRP and requested the Supreme Court to protect their interests. 

The Supreme Court encountered a situation wherein no successful resolution applicant was found through CIRP. Thus, as per the IBC only other option was to order liquidation of JIL under Section 33. However, the Supreme Court noted that all stakeholders were of the view that liquidation of JIL will not ‘subserve the interests of the home buyers.’ Thus, the Supreme Court was faced with the task of balancing interests of home buyers and respecting discipline of the IBC. Latter demanded ordering a timely liquidation of JIL since CIRP had not yielded a successful resolution applicant. While serving interests of the home buyers meant opting for a solution which would provide them possession of their intended houses. It was in the backdrop of these facts that the Supreme Court in the Chitra Sharma case ordered that:

… the power under Article 142 should be utilised at the present stage for the limited purpose of recommencing the resolution process afresh from the stage of appointment of IRP by the order dated 9 August 2017 and resultantly renew the period which has been prescribed for the completion of the resolution process. (para 39) 

The Supreme Court’s main reason for restoring CIRP in the Chitra Sharma case was that in initial CIRP, home buyers did not have the status of a financial creditor under the IBC. And were unable to participate in CIRP. While in the intervening period, amendments to the IBC – specifically amendment to Section 5(8) – had accorded home buyers the status of financial creditors. Thus, the Supreme Court ordered restoration of CIRP and reasoned that reconstitution of the Committee of Creditors (CoC) as per amended provisions of the IBC will protect interests of home buyers as they will be able to participate in CIRP in their capacity of financial creditors. Another reason why the Supreme Court chose to restore CIRP was that the other options of providing another opportunity to erstwhile promoters of JIL or the Supreme Court appointing a committee to oversee the resolution process were not found to be viable. Overall, lack of any successful resolution applicant, intent to provide homes to home buyers, and a change in legal position of home buyers under the IBC cumulatively influenced the Supreme Court’s decision to restore CIRP. 

Until now, the Supreme Court’s decision in the Chitra Sharma case remains an exceptional decision because it mandated restoration of CIRP to complete justice. And such a remedy could only be provided by the Supreme Court in exercise of its powers under Article 142 of the Constitution. Neither the NCLT nor the NCLAT possessed the power to order restoration of CIRP under the IBC. Though ironically, the Supreme Court invoked discipline of the IBC to provide this remedy to the home buyers, even though the IBC did not envisage restoration of CIRP. Though this legal position has been altered by the IBC Act, 2026.      

Restoring CIRP: A Catalogue of Challenges and Consequences 

Firstly, Section 33(1A) opens possibility for the NCLT to delve into commercial aspects of CIRP. Under the IBC, the NCLT is expected to perform only a supervisory role while all commercial decisions are the CoC’s remit and non-justiciable. However, Section 33(1A) does not clearly earmark the NCLT’s remit and leaves door ajar for the NCLT to review commercial wisdom of the CoC. Three aspects of Section 33(1A) point towards this possibility: firstly, Section 33(1A) states that the NCLT ‘shall’ consider the CoC’s application for restoration and after its consideration it ‘may’ order restoration of CIRP; secondly, the CoC can only file an application for restoration before the NCLT if it is approved by sixty-six per cent of the votes; thirdly, Section 33(1A) merely states that the NCLT shall order restoration of CIRP in such manner and ‘subject to such conditions as may be specified’. Thus, we currently do not know of the conditions and factors that the NCLT needs to consider before ordering restoration of CIRP. 

The use of both ‘shall’ and ‘may’ at different places in Section 33(1A) indicates that the NCLT is bound to decide the CoC’s application but not obligated to order restoration of CIRP. Thus, if the NCLT rejects the CoC’s application for restoration it can amount to judicial review of commercial wisdom of the CoC. Because the CoC is required to vote in favor of restoration before seeking the NCLT’s approval. The CoC’s decision for restoration of CIRP is likely to be based on commercial considerations such as change in value of the corporate debtor, new market conditions, investor interest and other such similar factors. Even if one accepts that the doctrine of commercial wisdom is applicable to Section 33(1A) it implies that the NCLT shall examine the CoC’s decision of restoration of CIRP on the touchstone of legality. However, no specific parameters are prescribed for judicial review under Section 33(1A). If ‘subject to such conditions as may be prescribed’ implies that substantive parameters will be mentioned in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’), then it is not the ideal way to approach legislative drafting on such crucial issues. And if the CIRP Regulations will only prescribe procedural parameters, then scope for judicial review of commercial wisdom of the CoC remains open. To compare, under Section 31 the NCLT examines the CoC’s approval of a resolution plan, but the touchstone of judicial review is requirements specified in Section 30(2). Not only are those kinds of parameters currently absent from the IBC in relation to Section 33(1A); it is my view that prescribing a list of objective parameters may prove to be difficult in relation to restoration of CIRP. This is because restoration of CIRP is likely to be a fact-based commercial decision with few legalities involved. Perhaps, this is one reason no legal parameters have been included in Section 33(1A) and the Parliament has kicked the onus of identifying the relevant factors into domain of secondary legislation. Thus, once the CoC votes in favor of restoration of CIRP, the NCLT’s review of the CoC’s decision can wade into commercial wisdom and absence of statutory guardrails increases such a possibility.   

Further, Section 33(1A) impliedly endorses the idea that procedural mistakes, failure to meet timelines, and other related omissions during CIRP are curable defects. The mistakes, omissions, and delays are generally attributable to the CoC, resolution professionals, NCLT/NCLAT, and that certain legal aspects of the IBC are unclear. However, permitting restoration of CIRP signals that previous omissions or oversights in following the IBC’s procedures do not lead to the fatal result of liquidation. When there is scope to redo the entire CIRP, it does not incentivize the CoC and/or the resolution professional to adhere to all CIRP procedures and timelines scrupulously. I’ve argued in my previous post that the NCLT sending resolution plans back to the CoC for reconsideration prevents accountability for the latter’s inability to perform its statutory duty. Section 33(1A), in part, reinforces the CoC’s lack of accountability for its failure to meet the statutory obligations in pursuit of the IBC’s aim of rescuing the corporate debtor.  

While the Supreme Court, in CoC of Essar Steel India Ltd v Satish Kumar Gupta & Ors, has held that timelines under the IBC are directory. However, not adhering to timelines defeats the IBC’s purpose of preserving value of corporate debtor’s assets and the endeavor must be to respect the timelines.             By permitting restoration of CIRP under Section 33(1A), the timelines will undoubtedly get extended and corporate debtor’s assets may lose value. Admittedly, the choice for restoration involves a trade-off: rescuing the corporate debtor instead of liquidating it; but the cost of delayed liquidation if the restored CIRP also fails will be much higher as compared to a timely liquidation. The legislative choice seems to be clear: rescue of corporate debtor is preferred over a delay liquidation and probable loss of asset value.      

Further, most CIRPs under the IBC are besieged with the challenge of timely completion. The NCLT admitting a CIRP, approvals by the CoC, and subsequent approvals by the NCLT of a resolution plan, appeals before the NCLAT and the Supreme Court cumulatively add to delays in CIRP since each step is time consuming. And all the steps of CIRP are rarely completed within the one hundred- and eighty-days’ time prescribed under Section 12 of the IBC. In a scenario where delays are commonplace and CIRP continues for an extended time, creating an option for restoration of CIRP hardly invokes confidence that the restored CIRP will be completed in time. Section 33(1A)(b) states that a restored CIRP shall be completed within one hundred and twenty days. It is not far-fetched to presume that if the time under Section 12 is directory, then the time under Section 33(1A)(b) is also directory. And if the time under Section 12 is not respected in various CIRPs, then a similar scene is likely to be witnessed for a restored CIRP. All material factors that contributed to delay in CIRP will also affect the restored CIRP. 

Section 33(1A) also privileges rescue of the corporate debtor over various other aspects of the IBC such as need to complete CIRP in a timely fashion, preservation of assets of the corporate debtor, as well as preventing undue and prolonged uncertainty. Admittedly, the IBC’s aim – as exemplified in its Preamble – is to rescue the corporate debtor and not liquidate it. However, the attempts at rescue need to be defined by time and underlined by certainty. CIRP-related procedures, in so far as possible, should move in a linear direction and any back and forth should be minimal. The discipline of a linear direction makes the relevant entities more mindful of their roles and responsibilities. Creating statutory basis for restoring CIRP opens the possibility of first attempts in CIRP being sub-par. While it is in the CoC’s collective interest to be mindful of CIRP related processes from the beginning, the option of re-attempting leaves room to be lax about the procedural and substantive legal requirements. And that does not bode well for an efficacious CIRP.

Finally, the Select Committee on the IBC (Amendment) Bill, 2025 (‘Select Committee’) seems to have endorsed the idea that restoration of CIRP is also possible if there is failure in implementation of the resolution plan. Technically speaking, failure in implementation of the resolution plan is a failure of CIRP. However, restoring CIRP due to implementation of the resolution plan going off rails implies smoothening a collective failure of the CoC, implementation committee, and the resolution applicant. In SBI v The Consortium of Mr. Murari Lal Jalan, the Supreme Court ordered liquidation when implementation of a resolution plan faced undue delays instead of trying to make another attempt at rescuing the corporate debtor. Restoring CIRP after failure in implementation of the resolution plan has the potential for efforts to rescue the corporate debtor to continue for a duration much beyond originally envisaged in the IBC. On balance, timely liquidation may still lead to better results in terms of releasing stuck capital, providing certainty, and bringing a closure for various stakeholders as opposed to delaying liquidation due to repeated efforts at rescuing the corporate debtor. 

Conclusion

The Select Committee was optimistic that restoration of CIRP will achieve its objective and noted that: 

The Committee find merit in the Ministry’s submission that this provision serves as a final opportunity to rescue the corporate debtor in genuine cases, subject to the commercial wisdom of the Committee of Creditors (66% voting share) and the discretion of the Adjudicating Authority, with a strict timeline of 120 days. (para 20.6.1) 

The Select Committee’s optimism is on three aspects: (a) restoring CIRP will remain confined to genuine cases, and that such cases are easy to detect and distinguish from non-genuine cases; (b) commercial wisdom of the CoC will work seamlessly with the NCLT’s discretion, though deference to the CoC’s wisdom is better respected by providing the NCLT limited discretion; (c) the timeline of one hundred and twenty days for restored CIRP is ‘strict’ and will be followed scrupulously. To conclude succinctly, I do not share the Select Committee’s optimism on all three counts. Section 33(1A) – even if CIRP Regulations enumerate legal parameters for the NCLT to consider – is likely to be another breeding ground of litigation and uncertainty. And both will militate against the IBC’s core objectives.  

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