SC Liquidation Order on Bhushan Power Shakes JSW Steel, Sparks IBC Concerns

The Supreme Court’s order to liquidate Bhushan Power and Steel Ltd (BPSL) has left JSW Steel in legal and financial limbo, four years since it bought the loss-making company in a ₹19,350 crore transaction. The order has raised fresh industry-wide concerns about the consistency of India’s Insolvency and Bankruptcy Code (IBC) framework.

In a verdict delivered on May 2, the apex court declared JSW Steel’s resolution plan illegal and ordered the liquidation of BPSL, despite the acquisition being completed in 2021 and the asset integrated into JSW’s operations. The news sent JSW Steel’s shares tumbling nearly 6% by the close of trading.

JSW Steel had acquired BPSL through its subsidiary Piombino Steel Ltd after a lengthy bidding war with Tata Steel. The deal, cleared by the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) in 2019, included a funding structure combining equity, optionally convertible debentures (OCDs), and debt. However, the court held that only equity-based plans are permissible under the IBC, rendering the resolution plan non-compliant.

Further, the court cited delays in implementing the plan, beyond the Code’s prescribed timeline, as another reason for invalidating it. As a result, the ‘clean slate’ status granted to JSW under Section 32A of the IBC, which shields new owners from past liabilities, has now come under question.

JSW Steel currently owns 83.3% of BPSL, which includes a key 2.5 MTPA steel plant in Jharsuguda. The plant has become a central part of JSW’s eastern India strategy, helping it surpass Tata Steel’s domestic capacity. With the liquidation order, the future of this asset and any revenue JSW has earned from it is now uncertain and may be subject to recovery or refund.

The decision marks a rare instance where a completed resolution has been overturned, and legal experts warn it could erode investor confidence in the IBC process. JSW’s next move, potentially involving a legal review or appeal, could set new precedents for insolvency cases in India.