The Supreme Court of India delivered a crucial judgement that upheld the Resolution Plan submitted by JSW Steel Limited for the insolvent company, M/s Bhushan Power and Steel Limited. This decision dismissed all appeals filed by various parties, including the former owners and several Operational Creditors. The ruling brings finality to one of the largest corporate insolvency cases in the country.
Key Issues Settled by the Court
The judgement addressed several important questions related to the corporate insolvency process:
Commercial Wisdom is Key
The Supreme Court heavily relied on the principle that the commercial wisdom of the Committee of Creditors is paramount. It stated that decisions made by the lenders on how to classify claims or structure a plan should not be easily set aside.
No Claim to Surplus Earnings
The Court rejected the claim made by the former promoters and some creditors for the distribution of earnings before interest, taxes, depreciation, and amortisation (EBITDA) generated during the insolvency process. It clarified that since the original request for the Resolution Plan and the final plan itself did not mention distributing these earnings, such a claim could not be allowed later. Granting this would defeat the entire purpose of the law.
Funding Method is Valid
A key part of the challenge was against JSWs plan to fund the company using Compulsorily Convertible Debentures. The Supreme Court ruled that these debentures are equal to equity shares. Since they are required to convert into shares and the money is not returned as debt, they fulfill the requirement of fund infusion under the law.
Processing Delay Was Excused
The court also looked at the delay in the plan implementation. It acknowledged that the primary reason for the delay was a legal issue involving the Enforcement Directorate which had provisionally attached the assets. The court accepted that the delay was reasonable given the circumstances and was not intended to benefit JSW.
Existence of Lenders Group
Finally, the judgement confirmed that the Committee of Creditors continues to exist even after the approval of the Resolution Plan, as long as appeals are pending and the plan has not been fully put into effect.
The Decision
By dismissing all challenges, the Supreme Court upheld the NCLATs judgement and validated JSW Steels takeover of Bhushan Power and Steel. This ruling sends a strong message by reinforcing the finality of an approved Resolution Plan and the authority of the lenders decisions in bringing a resolution process to a successful close.
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