Bhushan Steel Verdict: Legitimacy – Not Finality – Bedrock of Law
Bhushan Steel Verdict by Supreme Court of India (Image credit official websites)
Due Process Over Expediency: The Supreme Court’s Bhushan Steel Verdict Sets the Record Straight
By P. SESH KUMAR
NEW DELHI, MAY 30, 2025 – In a ruling that has stirred debates in legal and business circles alike, the Supreme Court’s judgment on the Bhushan Power & Steel Ltd (BPSL) insolvency resolution plan has redrawn the boundaries between commercial urgency and constitutional sanctity.
While the verdict may appear to shake investor confidence and elongate timelines under the Insolvency and Bankruptcy Code (IBC), it reaffirms the foundational principle that process is paramount. This is not merely a judicial intervention—it is a sharp reminder that legitimacy, not just finality, is the bedrock of commercial law.
The ruling’s long-term significance may well lie in safeguarding investor confidence through consistency and integrity, not by compromising due process.
The Verdict That Shook the Steel
The Supreme Court of India delivered its judgment in the Bhushan Power & Steel Ltd. (BPSL) insolvency case on May 2, 2025, in the matter titled Kalyani Transco v. M/s Bhushan Power and Steel Ltd., reported as 2025 INSC 621. This decision is documented in Civil Appeal No. 1808 of 2020 and related appeals.
In this landmark ruling, the Court set aside the resolution plan submitted by JSW Steel for the acquisition of BPSL, citing non-compliance with key provisions of the Insolvency and Bankruptcy Code (IBC), including Sections 30(2) and 31(2). The Court also directed the liquidation of BPSL, overturning previous approvals by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT)
When JSW Steel pumped ₹19,000 crore into Bhushan Power & Steel Ltd (BPSL) under an approved resolution plan in 2019, the deal was hailed as a marquee success for the fledgling Insolvency and Bankruptcy Code (IBC). It signalled that large, distressed assets could be resolved cleanly, with credible investors, in time-bound fashion. But lurking behind that seeming success was a storm that would test the very legitimacy of the process.
Shortly after the National Company Law Tribunal (NCLT) gave its nod to the resolution plan, the Enforcement Directorate (ED) swooped in and provisionally attached the company’s assets under the Prevention of Money Laundering Act (PMLA). The reason? The assets were allegedly linked to fraud committed by the company’s former promoters.
The National Company Law Appellate Tribunal (NCLAT) swiftly overruled the ED, citing the newly introduced Section 32A of the IBC, which offered immunity to bona- fide acquirers from past liabilities. With that, the plan seemed secure—until now.
The Supreme Court, revisiting the matter, has ruled that the entire resolution process was compromised by procedural lapses and that the judiciary cannot turn a blind eye to statutory violations in the name of commercial expediency. In short, it reminded all stakeholders that due process is not optional—it is constitutional.
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Crashing Through Guardrails
At the heart of the judgment is a surgical dissection of how the resolution professional, the Committee of Creditors (CoC), and even judicial authorities overlooked critical procedural requirements. Section 30(2) of the IBC, which mandates that resolution plans must comply with all existing laws, was not a box-ticking formality—it was the spine of the process. The Supreme Court observed that material disclosures were suppressed, statutory violations ignored, and the plan was railroaded through under the guise of commercial wisdom.
The Court’s invocation of Article 142—a rarely used constitutional power meant to do “complete justice”—was a signal that when institutional stewardship fails, the judiciary must step in. This was not judicial activism. It was institutional resuscitation.
Investor Sentiment vs. Institutional Integrity
Predictably, there has been a flutter in business circles about the potential fallout. Can finalized deals now be reopened? Will this judgment chill foreign investment? Is India’s resolution regime becoming unpredictable?
These are legitimate concerns—but they miss the deeper point. Investors value stability, yes. But more than that, they crave legal predictability.
A system that rewards transparency and punishes concealment is more attractive than one that sacrifices integrity at the altar of speed. The ₹19,000 crore infused by JSW Steel is not trivial. But nor is the fact that the resolution plan masked illegality.
The verdict does not generalize; it does not say every resolution is vulnerable. What it does say is that non-compliance is not immune to judicial review, even after a plan is implemented. If the cost of legitimacy is that bad actors are unmasked and complicit gatekeepers held to account, it is a price worth paying.
The Section 32A Conundrum
One of the most debated aspects of the verdict is the Court’s refusal to apply Section 32A retrospectively. While NCLAT had treated this section—meant to protect new acquirers from past sins—as clarificatory and thus retroactive, the Supreme Court drew the line. Since the ED’s attachment predated the provision’s enactment, the Court refused to grant it retrospective effect.
Legal purists may debate this. After all, the Supreme Court had previously ruled that Section 238A (on limitation periods) could apply from the inception of the Code despite a later enactment date. Critics argue that denying retrospective protection defeats the very purpose of Section 32A—to insulate genuine buyers from legal overhangs and thus encourage participation in the IBC process.
Yet the Court’s stance is clear: protection under Section 32A is a privilege, not a blanket pardon, and it cannot be claimed when procedural contamination taints the origin of the resolution itself.
Course Correction, Not Judicial Overreach
This judgment is no derailment of the IBC—it is a realignment to its original compass. Far from setting a precedent for judicial activism, it re-establishes that courts are not mere rubber stamps for CoC decisions. Judicial approval under Section 31 is not a bureaucratic formality. It is a critical safeguard, a statutory checkpoint that ensures the resolution process does not become a race to the bottom.
The conduct of the Resolution Professional (RP) and CoC comes under stern scrutiny. Their failure to flag irregularities and their blind approval of a flawed plan amounted to a breach of fiduciary duty. In a regime that demands vigilance, they opted for convenience.
Process Is the Product
In an era where commercial speed is often conflated with success, the Supreme Court has reminded all players—adjudicators, administrators, investors, and resolution professionals—that the process is the product. If the process is broken, the outcome is not just questionable; it is illegitimate.
Rather than destabilizing investor confidence, the verdict may well do the opposite. By asserting that due process is non-negotiable, the Court has bolstered the very credibility of India’s resolution regime. Future investors now know that while India welcomes capital, it does not do business at the cost of the Constitution.
This judgment is a pivot back to first principles. In reaffirming that due process is not a speed bump but the very roadbed of legitimacy, the Supreme Court has ensured that the IBC does not become a casualty of its own success. It has not derailed the Code. It has reminded us what the tracks are made of.
(This is an opinion piece; views expressed solely belong to the author)
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