Supreme Court Halts Bhushan Power Liquidation

Supreme Court Pauses Liquidation of Bhushan Power & Steel

On May 26, 2025, the Supreme Court of India ordered a status quo on the liquidation proceedings of Bhushan Power and Steel Ltd (BPSL), providing interim relief to JSW Steel Ltd. This decision temporarily halts actions by the National Company Law Tribunal (NCLT) in New Delhi, allowing JSW Steel and BPSL's creditors to file a review petition challenging the Court's earlier ruling that had quashed JSW Steel's ₹19,300 crore acquisition of BPSL and called for the company's liquidation.

Background: Acquisition and Legal Challenges

JSW Steel's acquisition of BPSL was initially approved in 2019 as part of India's Insolvency and Bankruptcy Code (IBC) proceedings. However, on May 2, 2025, the Supreme Court invalidated the acquisition, citing non-compliance with key provisions of the IBC, particularly the failure to adhere strictly to the plan's approved timeline. The Court's decision mandated the liquidation of BPSL and required creditors to return the funds already disbursed under the now-invalidated plan, including equity contributions.

JSW Steel's Response and Strategic Implications

In response to the Supreme Court's May 2 ruling, JSW Steel filed a petition seeking to halt the liquidation proceedings, arguing that such a move could be detrimental to BPSL and its various stakeholders, including lenders and employees. The Supreme Court acknowledged these concerns and ordered the NCLT to maintain the status quo until the review petition is filed and considered.

Despite the legal challenges, JSW Steel remains committed to its strategic growth plans. The company aims to increase its annual steel production capacity to 50 million tonnes by the financial year 2031, with ongoing expansions at existing sites and the development of a new plant in Odisha.

Financial Considerations and Stakeholder Impact

The Supreme Court's decision to invalidate the acquisition has significant financial implications. JSW Steel had availed tax deductions and benefits related to the takeover of BPSL, and the legal scrapping of the acquisition could lead to a reversal of tax gains amounting to approximately ₹7,000 crore. Additionally, the company is evaluating legal options to address the requirement for creditors to repay ₹19,300 crore, the amount JSW had paid for the acquisition.

The Court's decision also affects public sector banks that had received payments to settle BPSL's debts, raising concerns about the reliability of India's legal and regulatory framework regarding corporate acquisitions and the effectiveness of the Insolvency and Bankruptcy Code.

Next Steps

JSW Steel has until June 2, 2025, to file its review petition. The Supreme Court's order to maintain the status quo will remain in effect until the review petition is submitted and considered. The matter is expected to be heard after the Court's summer vacation.