The Supreme Court on Friday ordered the JSW Steel Samadhan Yojana for Bhushan Power and Steel to be declared illegal and the company's liquidation. This has shocked the lenders. Bankers told the business standard that banks will have to make provisions for the first amount recovered as this amount will now be withdrawn.
According to IBC lawyers, financial lenders usually give an affidavit to the corporate debtors to the professional. Under this, if there is any disturbance in the solution scheme later, then it is agreed to refund any recovery done by the solution process.
A senior official of a government bank who has collected funds under the Samadhan Yojana from Bhushan Power and Steel said, “If this is the final order, the bank will have to start a new provision for this from this quarter due to withdrawal of funds. This will definitely affect the bank's profit and loss book account. We are waiting for more clarity of the order from the court about this. He said that it is difficult to assess the impact in this phase. JSW had acquired Bhushan Power and Steel in March 2021 and became the largest steel company in the country.
JSW, a company led by Sajjan Jindal, paid Rs 19,350 crore to the financial creditors of Bhushan Power and Steel. Bhushan Power and Steel owners owned Rs 47,204.51 crore. The major lenders of Bhushan Power and Steel were State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Indian Bank, Canara Bank, Indian Overseas Bank etc. These Reserve Bank of India included the 'poor dozen' companies in the Corporate Insolvency Solution Process (CIRP) under the Insolvency Solution Code (IBC), 2017. Other companies in this list include Electrosteel Steels, JP Infra, Ira Infra, MTech Auto, ABG Shipyard, Jyoti Structures, Monet Ispat, Lanco Infratech, Alok Industries and Essar Steel.
Senior banker of the government bank said that JSW Steel has an option to appeal against the order. If JSW does this, lenders can become a side. At this stage the lenders are waiting for a detailed order. They will then assess its effects and decide on further action.
Another banker said, 'The purpose of the IBC process is the solution. It is an operating company. The solution can only be the option of liquidation only after the option is completed. Therefore, punishment can be given through fine but the company could be allowed to run.
First Published – May 2, 2025 | 11:34 PM IST
