The Supreme Court said on Friday that JSW Steel’s ₹19,700 crore takeover of Bhushan Power and Steel (BPSL) could go ahead, reversing its own earlier decision to reject the deal.
JSW then filed a request for it to review the rejection.
On Friday, the court said JSW had revived BPSL by investing heavily in modernisation and safeguarded thousands of livelihoods by keeping the company a going concern. The purpose of the Insolvency and Bankruptcy Code — to help transform a loss-making entity into a profit-making one — has been achieved, the court said.
The company said in an exchange filing that the Supreme Court has dismissed appeals filed by the promoters and some operational creditors of BPSL.
The Supreme Court cited major procedural lapses for its decision in May to scrap one of the most successful insolvency deals in India’s history — the takeover of Bhushan Power by the country’s biggest steelmaker in 2019.
Shares of JSW Steel rose as much as 1.6 per cent after the news, but trimmed all gains to trade 1.4 per cent lower amid a broad-based sell-off.
In May, the country’s top court rejected the deal six years after it was first approved, unsettling buyers of other distressed assets and casting a shadow over Indian bankruptcy reforms introduced in 2016.
While the May 2 judgment was delivered by a two-judge bench, Friday’s verdict was passed by a larger three-judge bench comprising Chief Justice B.R. Gavai, Justice, Justice Satish Chandra Sharma and Justice K. Vinod Chandran.
CJI Gavai, who authored the judgment, observed, “The Corporate Debtor (BPSL) in the present case was running into substantial losses which has now become a profit —making the entity earn substantial profits. The SRA (successful resolution applicant) — JSW — invested huge amounts in modernisation and expansion of the entity (corporate debtor).
Not only that but thousands of employees have been earning their livelihood on account of the Corporate Debtor running as an on-going concern due to the Resolution Plan being implemented by the SRA – JSW.”
“As such, the very purpose for which the IBC was enacted—namely, to ensure that the Corporate Debtor continues as a going concern—has not only been achieved, but the Corporate Debtor has been transformed from a loss making to a profit-making entity.”
The Apex court said the batch of appeals filed by the erstwhile promoters of BPSL and some aggrieved creditors cannot be entertained at this stage as it would otherwise prove disastrous for the corporate sector for which the IBC had been enacted.
“Such a belated stage, it could open a Pandora’s Box and the very purpose of the IBC providing sanctity to the finality of the plan duly approved would stand vitiated.
When a plan is approved, the SRA takes over the management of the corporate debtor with the possibilities of turning a loss-making concern into a profit earning concern or the risk of the corporate debtor running into further losses. These decisions fall under the umbrella of ‘commercial wisdom’ of the CoC. Once the plan has been approved by the CoC and the adjudicating authority under Section 31(2), permitting any claims to be reopened which were not a part of the RFRP (request for resolution plan) or resolution plan, in our view, will be doing violence to the provisions of IBC,” the bench added.