Supreme Court Quashes NCLT/NCLAT Approvals, Rejects Resolution Plan and Directs Liquidation in Bhushan Power Matter

A bench of Justices Bela M. Trivedi and Satish Chandra Sharma heard a batch of appeals arising from the NCLAT judgment dated 17.02.2020 which approved a resolution plan for a corporate debtor and addressed collateral issues including alleged non‑compliance with IBC timelines, the eligibility under Section 29A, the priority of operational creditors, and the effect of provisional attachment under the PMLA. The appeals were brought by erstwhile promoters, several operational creditors, and the State of Odisha; JSW Steel and the Committee of Creditors were principal respondents.

The Court held that the NCLT and NCLAT had erred in approving and in modifying the resolution plan and that multiple statutory and regulatory mandates were not complied with by the Resolution Professional, the CoC and the successful resolution applicant. The Court found the NCLAT’s conclusions on the PMLA attachment to be without jurisdiction and observed serious procedural and substantive lapses in the CIRP, concluding that the approved plan could not stand. The Court, in its reasoning, observed: “In that view of the matter, following order is passed: - (i) The judgments and orders dated 05.09.2019 and 17.02.2020 passed by the NCLT and NCLAT respectively are quashed and set aside. (ii) The Resolution Plan of JSW as approved by the CoC stands rejected, being not in conformity with the provisions contained in sub-section (2) of Section 30, read with sub-section (2) of Section 31. (iii) In view of the provisions contained in sub-section (1) of Section 33, and in exercise of the jurisdiction conferred under Article 142 of the Constitution of India, the Adjudicating Authority i.e. the NCLT is directed to initiate the Liquidation Proceedings against the Corporate Debtor-Bhushan Power and Steel Ltd., under Chapter III of the IBC and in accordance with law.” The Court further recorded that “the Resolution Professional had utterly failed in discharging his statutory duties” and that the CoC had not exercised proper commercial wisdom.

Background The insolvency process was triggered by Punjab National Bank and admitted on 26.07.2017. Multiple prospective resolution applicants (JSW, Tata, Liberty) submitted plans; JSW’s consolidated plan (with an addendum) was voted by CoC members in October 2018 and the Resolution Professional filed for NCLT approval on 14.02.2019. NCLT approved the plan on 05.09.2019 subject to conditions; JSW challenged some conditions before NCLAT and various other parties filed appeals. Meanwhile the Enforcement Directorate issued a provisional attachment order on 10.10.2019 under the PMLA; that order was stayed by the NCLAT and later the Supreme Court in a separate but related hearing directed handover of attached assets to the successful resolution applicant in December 2024 without expressing a view on Section 32A or the ED’s powers.

The Supreme Court examined (i) maintainability of appeals, (ii) whether the Resolution Professional and CoC complied with Section 12 timelines and Regulation 39 procedural requirements, (iii) whether Section 29A disclosures and Form H certification were furnished and verified, (iv) the priority afforded to operational creditors under Regulation 38, and (v) the NCLAT’s competency to adjudicate on PMLA attachment. The Court reproduced and relied on the statutory time mandate, noting that the CIRP “shall be completed within a period of one hundred and eighty days” but that the process must in any event respect the statutory limits. The Bench found that the RP had not sought requisite extensions under Section 12, had not certified eligibility under Section 29A in Form H, and that the CoC and NCLT failed to ensure the plan met mandatory Section 30(2) requirements. The Court recorded misuse of process by the successful applicant in delaying implementation, observed that the plan gave priority to financial over operational creditors contrary to Reg. 38, and held that NCLAT had exceeded jurisdiction in ruling on certain PMLA questions. As consequence, the NCLT and NCLAT orders were quashed, the JSW plan was rejected, and NCLT was directed to commence liquidation under Chapter III. The Court left open the question on EBITDA distribution. The Court also stated that payments already made and any equity infusion would be dealt with according to the undertaking recorded in the Supreme Court order of 06.03.2020.

Case No.: 2025 INSC 621; Civil Appeal No. 1808 of 2020 Case Title: Kalyani Transco v. M/s. Bhushan Power and Steel Ltd. & Ors. Appearances: For the Petitioner(s): Mr. Dhruv Mehta (Senior Advocate) and Mr. Diwakar Maheshwari; Mr. Manu Beri; Mr. Arjun Asthana; Mr. Natraj (ASG) for the State of Odisha (as noted) For the Respondent(s): Dr. Abhishek Manu Singhvi (Senior Advocate) for Committee of Creditors; Mr. Neeraj Kishan Kaul (Senior Advocate) for JSW; Mr. Zoheb Hussain and Mr. Tushar Mehta (Solicitor General/ASG appearances recorded for ED); Mr. Shyam Diwan for the erstwhile Resolution Professional (as recorded in the judgment)