The Hon’ble Supreme Court of India (‘SC’), on September 26, 2025, delivered a significant ruling in Kalyani Transco v. M/S Bhushan Power and Steel Limited (‘SC Judgement’), upholding the approval of JSW Steel Limited’s (‘JSW’) resolution plan for Bhushan Power and Steel Limited (‘BPSL’). The SC had, earlier on May 2, 2025, pursuant to appeals filed by various operational creditors and erstwhile promoters against the approval of the resolution plan, rejected JSW’s resolution plan, and directed the liquidation of BPSL, more than four years after BPSL was successfully resolved under the Insolvency and Bankruptcy Code, 2016 (‘IBC’). Against this judgement, JSW had filed a review petition before the SC; the judgement was recalled by the SC, and fresh hearings were ordered in the appeals filed by the operational creditors and erstwhile promoters.

The key takeaways from the SC Judgement are:

i.    The committee of creditors’ (‘COC’) continues to exist not only until the approval of the resolution plan, but also until the resolution plan is successfully implemented and all proceedings challenging the resolution plan have attained finality. Therefore, the decision taken by the COC to extend the timeline for implementation of BPSL’s resolution plan cannot be invalidated on the basis that the COC was functus officio at the time of such decision;

ii.   any provision in the resolution plan which allows for extension of the implementation period does not render the plan indeterminate, and such provision, by itself, cannot be considered a provision for withdrawal or modification of the resolution plan. Thus, the approval of the resolution plan could not have been assailed by the appellants on this ground;

iii.  the delay in implementation of the resolution plan was due to various extraneous circumstances, such as attachment of BPSL’s assets by the Enforcement Directorate, and National Company Law Tribunal’s (‘NCLT’) decision to distribute the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to the creditors etc. In spite of these circumstances, the resolution plan was finally implemented by JSW in March 2021; the delay cannot be attributed to either JSW or the COC, who undertook their best efforts to implement the plan at the earliest;

iv.   the payments made by JSW to financial creditors in priority to the operational creditors did not fall foul of the law in effect at the time of approval of the resolution plan by the NCLT, as the regulations only mandated that the operational creditors would be paid the amounts ‘due to them’ in priority, and since the amount due to them was nil, any ex gratia payments made to them by JSW could have been made after payments to the financial creditors. However, the SC did not opine on whether the current regulations, which mandates payment of amounts ‘payable under a resolution plan’ to the operational creditors in priority to the financial creditors, would allow ex gratia payments to be made after payments to the financial creditors;

v.    it is well settled through a catena of judgments by the SC that Compulsorily Convertible Debentures (‘CCDs’) are in the nature of equity instruments. Therefore, the infusion of the resolution amount by JSW in the form of CCDs, would be treated as an infusion made by way of equity, and would fulfil their upfront equity infusion commitment; and

vi.   the EBITDA generated during the corporate insolvency resolution process, in the absence of any specific provision on the treatment of such EBITDA in the request for resolution plan (RFRP), cannot be distributed amongst the lenders. In any case, the COC cannot raise a claim for EBITDA at such a later stage, having already taken a contrary stand before, as it would lead to revival of settled claims, and violate the intent of the IBC and settled jurisprudence.

The SC, while concluding, cautioned against the rejection of resolution plans post implementation, noting that BPSL was modernized and turned around into a profit-making company by JSW, and provided employment to thousands of employees, fulfilling the primary objective of IBC, i.e., successful revival of a debt-ridden company. If the contentions of the appellants in this case had been accepted, the very purpose of the IBC would be defeated.

The SC Judgement provides significant relief not only to JSW, but also the entire IBC regime, which was put into significant jeopardy by the earlier judgement, casting doubts over the finality of an implemented resolution plan, and successful turnaround of corporate debtors undergoing insolvency under the IBC. The SC Judgement has reiterated the supremacy of the COC’s commercial wisdom, and restored the trust of various market players, including creditors and prospective resolution applicants, in the IBC process, ensuring that a significant economic reform is not inadvertently undone by the judiciary.

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