A decision of the Supreme Court has shocked JSW Steel. The apex court termed JSW Steel's Samadhan Yojana for Bhushan Power and Steel as 'illegal' and directed the company's liquidation. The court's verdict came four years after the acquisition of Bhushan Power and Steel by JSW Steel under the Insolvency and Loan Disability Code (IBC).
JSW Steel's stock fell 5.46 per cent to close at Rs 972.15 with this decision of the court.
While ordering the liquidation of Bhushan Power and Steel, a bench of Justice Bela M Trivedi and Justice Satish Chandra Sharma said that Samadhan Yojana is 'illegal' and 'opposite' of the provisions of IBC.
The court said, “JSW Steel's Samadhan Yojana approved by the lenders' Committee did not suit the requirements of Section 30 (2) of IBC and it was a clear violation of the provisions of IBC and Corporate Insolvency Solution Process (CIRP) regulations. The said solution scheme should have been rejected prima facie under Section 31 (2) by NCLT. The disputed decision passed by NCLAT is not justified. It should be canceled.
The court made strict comments against Bhushan Power and Steel lenders' committee as well as the national company Vadhi Vidhan (NCLT). The apex court said that the committee of lenders should not have accepted the JSW's resolution scheme and the NCLT should not have approved the scheme. The court further said, 'While approved by the committee of lenders JSW, while approved
Verse was a failure to use Jyk Vivek, which was a severe violation of the compulsory provisions of IBC and CIRP regulations.
The court said, “The committee of lenders failed to protect the creditors' interests by adopting a contradictory stand before the Supreme Court and accepting payment from JSW without any objection.”
The Supreme Court also criticized the solution professional, which was assigned to take care of the steel company after the commencement of the insolvency process. The court said that the solution failed to discharge its legal duties under professional IBC and CIRP regulations.
The court said that JSW deliberately violated the terms of the Samadhan Yojana and did not comply with it for two years, which failed the IBC's purpose and affected the insolvency process of Bhushan Power and Steel. The court quashed the NCLT and National Company Law Appeal Tribunal (NCLAT )'s order on 5 September 2019 and 17 February 2020.
The court said, “JSW's Samadhan Yojana approved by the committee of lenders is rejected as it does not conform to Section 30 (2) of the IBC and Section 31 (2) of the IBC.”
If any equity contribution has been given by JSW to financial creditors and operational creditors in the implementation of payment and solution scheme, it will be subject to the result of the current appeal and will be dealt with by the parties as per the statement made by the lenders as per the order of March 6, 2020.
JSW Steel had a resolution scheme of Rs 19,700 crore which was approved by NCLT in September 2019. In this, financial creditors were to pay Rs 19,350 crore while their claim was Rs 47,157.99 crore.
The Supreme Court also said that JSW obtained the bid by making false earnests before the committee of lenders. JSW did not take any action for two years after the approval of the Samadhan Yojana while no legal hurdle in it Did not
The court's decision has come on a petition filed by operating lender Kalyani Transco, former promoter of Bhushan Power and Steel, Sanjay Singhal, lenders Jaldhi Overseas and CJ Darkle Logistics.
First Published – May 2, 2025 | 10:57 PM IST
