Overview: India’s Top Court Shakes Up Steel Sector with Landmark Verdict
On May 2, 2025, the Supreme Court of India issued a dramatic ruling invalidating JSW Steel’s ₹19,700 crore acquisition of Bhushan Power & Steel Limited (BPSL). The apex court declared the resolution process flawed, setting a new precedent in India’s insolvency landscape. This is arguably the most high-profile reversal of a National Company Law Tribunal (NCLT)-approved deal under the Insolvency and Bankruptcy Code (IBC), 2016.
Background: JSW Steel’s Acquisition of Bhushan Power
Bhushan Power & Steel, once one of India’s largest steelmakers, was burdened with debts of over ₹47,000 crore and referred under IBC as part of the RBI’s “dirty dozen” in 2017. In 2019, JSW Steel submitted the winning bid of ₹19,700 crore, edging out competitors like Tata Steel and Liberty House. Despite legal battles and enforcement directorate hurdles, JSW eventually took control and integrated BPSL operations.
Supreme Court Verdict: Why the Resolution Plan Was Cancelled
In its detailed judgment, the Supreme Court cited several critical lapses:
- Breach of 330-Day Resolution Deadline without adequate judicial or NCLT extensions.
- Unfair Treatment of Bidders, indicating procedural irregularities by the CoC and Resolution Professional.
- Suppression of Valuation Reports, impacting bid transparency.
The court concluded that the sanctity of IBC timelines and process fairness had been compromised, and ordered liquidation of BPSL instead.
Stock Market Reaction: JSW Steel Shares Fall
Following the verdict, JSW Steel’s stock fell 7%, wiping out more than ₹9,000 crore in investor wealth. Analysts revised target prices citing downside risks from the reversal of asset control and sunk investments in BPSL.
India’s IBC: A Decade in Review – Success or Work in Progress?
The Insolvency and Bankruptcy Code (IBC), enacted in 2016, was introduced to streamline corporate insolvency resolution and reduce India’s longstanding issues with debt recovery. It replaced a patchwork of older legislation (such as SICA, SARFAESI, and BIFR) with a unified and time-bound framework.
Key IBC Statistics (as of December 2024):
- Total cases admitted: Over 7,300
- Resolved cases: ~890
- Liquidated cases: ~2,150
- Average recovery rate: 32% of admitted claims
- Average time taken for resolution: 650 days (versus the 330-day intended timeline)
- Total realisations by financial creditors: ₹3.19 lakh crore
- Average haircut for lenders: 68%
Major Successes under IBC:
| Company | Bidder | Recovery (₹ Cr) | Recovery % |
|---|---|---|---|
| Essar Steel | ArcelorMittal | ₹42,000 Cr | 90.5% |
| Bhushan Steel | Tata Steel | ₹35,571 Cr | 63% |
| Dewan Housing (DHFL) | Piramal Group | ₹34,250 Cr | 46% |
Core Issues That Persist:
- Resolution delays due to frequent litigation
- Inefficient and inconsistent performance by resolution professionals
- Limited bidder participation, especially in mid-sized cases
- Judicial interpretations that often introduce unpredictability into the process
Expert View: What the JSW Verdict Means for IBC’s Future
The Supreme Court’s decision reflects a strict interpretation of IBC’s procedural expectations. While it underlines the importance of adhering to timelines and fairness, it also reopens concerns among investors and resolution applicants.
There are significant implications:
- Erosion of investor confidence: When a deal closed years ago can be reopened, future resolution applicants may hesitate to bid.
- Uncertainty in enforcement: Courts may increasingly intervene in commercial judgments made by creditors.
- Risk to sunk investments: The buyer’s operational and financial investments post-resolution may be written off, as in JSW’s case.
However, it’s important to note that the IBC remains a landmark economic reform, far superior to earlier mechanisms like SARFAESI and BIFR. It has delivered substantial recoveries and improved the credit culture in India.
What the code needs now is targeted reform, not abandonment. Some priorities include:
- Introduction of a safe harbor provision for bona fide resolution applicants after deal approval
- Clearer accountability guidelines for Committee of Creditors (CoC) and Resolution Professionals (RPs)
- A hard cap on litigation-linked delays post CoC approval
- Enhanced institutional capacity at NCLTs to process cases efficiently
What Happens Next: Key Developments to Track
- JSW’s Legal Strategy: Will the company file a review petition or claim damages from CoC/government?
- Government and Regulator Response: Potential amendments to the IBC framework in the upcoming monsoon session
- Investor Sentiment: Foreign and domestic strategic players may pause distressed asset investments pending more clarity
- BPSL Liquidation Process: It remains to be seen whether a new bidder will emerge or if asset value will be destroyed in liquidation
Conclusion: IBC Must Adapt to Retain Credibility
The JSW-BPSL judgment is not just about one corporate acquisition—it is a stress test of India’s bankruptcy law. It challenges policymakers, courts, and stakeholders to reflect on whether we are upholding the letter of the law at the cost of its spirit.
For India to continue attracting distressed asset investments, it must ensure that resolution certainty follows resolution approval. The IBC’s journey so far shows immense promise, but to move forward, it needs institutional strengthening, disciplined enforcement, and most importantly—trust from those participating in its processes.
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