SC recalls verdict on liquidation of Bhushan Power and Steel, says ‘matter needs to be considered afresh’

“We…think that this is a fit case wherein the judgment under review needs to be recalled and the matter needs to be considered afresh. So needless to say that while we are allowing the review, we keep all the questions available to both parties open to be argued at the stage of hearing,” the bench said.

A Supreme Court bench of Justices Bela M Trivedi and S C Sharma had on May 2 quashed and set aside the September 5, 2019, National Company Law Tribunal (NCLT) order and February 17, 2020, National Company Law Appellate Tribunal (NCLAT) order upholding JSW’s resolution plan.

It said, “the Resolution Plan…as approved by the CoC (Committee of Creditors) 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” of the Insolvency and Bankruptcy Code (IBC). Section 30 (2) deals with the resolution professional’s duty to examine the resolution plans. Section 31(2) empowers the adjudicating authority (NCLT) to reject a resolution plan if it does not meet the requirements under IBC.

Deciding a batch of appeals challenging the NCLAT decision, the Supreme Court said it was “without any authority of law and without jurisdiction” and “is perverse, coram non judice and liable to be set aside”. Exercising suo motu powers under Article 142, the court also directed NCLT to initiate liquidation proceedings against BPSL.

Seeking its review, Solicitor General of India Tushar Mehta, appearing for the CoC, submitted that BPSL was in severe financial stress but had become “healthy” after the acquisition and has about 25,000 workers.

The May 2 ruling said that “JSW even after the approval of its Plan by the NCLAT, wilfully contravened and not complied with the terms of the said approved Resolution Plan for a period of about two years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIR proceedings of the Corporate Debtor-BPSL.”

Countering this, Solicitor General Mehta said this timeline, the violation of which was flagged as something serious, is extendable. He wondered, “Suppose for some justifiable reason which cannot be attributed to the parties, the timeline is breached, would the breaking of the timeline be so fatal that a successfully implemented plan can be set aside and a direction be issued under 142 to liquidate a company which has been revived in these 5 years?”

Mehta said the May 2 ruling also concluded that CoC did not exercise its commercial wisdom.

To this, the CJI said, “We have consistently held that it is not open for this court or NCLT or NCLAT to sit in appeal over the wisdom of CoC.”

Senior Advocate N K Kaul, who appeared for JSW, said the judgment “will have a devastating effect on IBC”. Urging the court to recall the order and hear it afresh, he said, “There is clear, glaring, palpable error, statutory provisions and law have been ignored. Wrong facts have been taken into account which should not have been taken into account which were not argued or pleaded.”

CJI Gavai orally remarked that “prima facie, we are inclined to allow the review. We will give a full-fledged hearing, but prima facie it appears that the view is not in consonance with earlier settled decisions.” He added that while hearing it afresh, the court “will not go into any other documents, just the judgment”.

The bench also said it cannot overlook the fact that it involved the livelihood of about 25,000 workers and thousands of crores in investments. “We also have to take into account the ground realities….25,000 people cannot be thrown onto the road. Article 142 has to be utilised to do complete justice, not to do injustice to 25,000 workers…The purpose of IBC is to make a company functional,” CJI Gavai added.