Rejecting JSW Steel’s plan, Supreme Court orders Bhushan Power and Steel liquidation

A bench of Justice Bela Trivedi and Justice Satish Chandra Sharma quashed and set aside the September 5, 2019, National Company Law Tribunal order and February 17, 2020, National Company Law Appellate Tribunal (NCLAT) order upholding JSW’s resolution plan.

JSW shares fell sharply after the Supreme Court order, and closed 5.5 per cent down at Rs 972 on the Bombay Stock Exchange.

In its order, the Supreme Court said, “The Resolution Plan of JSW 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”.

The court said that the “Resolution Professional had utterly failed to discharge his statutory duties contemplated under the IBC (Insolvency and Bankruptcy Code) and the CIRP Regulations during the course of entire CIR proceedings of the Corporate Debtor-BPSL”.

The judgment said: “(The) Committee of Creditors (CoC) had failed to exercise its commercial wisdom while approving the Resolution Plan of the JSW, which was in absolute contravention of the mandatory provisions of IBC and CIRP Regulations. The CoC also had failed to protect the interest of the Creditors by taking contradictory stands before this Court, and accepting the payments from JSW without any demurer, and supporting JSW to implement its ill-motivated plan against the interest of the creditors.”

It said, “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.”

The Supreme Court ruled that “the Resolution Plan of JSW as approved by the CoC did not confirm the requirements referred to in sub-section (2) of Section 30, the same being in flagrant violation and contravention of the expressed provisions of the IBC and the CIRP Regulations. The said Resolution Plan therefore was liable to be rejected by the NCLT… at the very first instance.”

Exercising suo motu powers under Article 142, the court also directed NCLT to initiate liquidation proceedings against the BPSL.

BPSL was among the 12 big accounts — infamously known as the “dirty dozen” constituting about 25 per cent of the total non-performing assets in the country — identified by the Reserve Bank of India for resolution under IBC by a circular dated June 13, 2017.