The finality of business transactions

Though legally sound, the SC judgment in Bhushan Power is akin to a capital sentence for the company and the IBC

- M S SAHOO

On May 2, the Supreme Court disposed of an appeal filed five years earlier concerning the resolution of Bhushan Power and Steel (BPS) under the Insolvency and Bankruptcy Code, 2016 (IBC). It delivered a detailed, fact-intensive judgment marked by clinical precision. The judgment exposes a series of illegalities and lapses — some deliberate and collusive — including those that occurred after the appeal was admitted, during the approval and implementation of the company's resolution plan.

The judgment documents serious failings on the part of the resolution professional (RP), the successful resolution applicant (RA), the committee of creditors (CoC), the National Company Law Tribunal (NCLT), and the National Company Law Appellate Tribunal (NCLAT). It refrains from issuing any preventive, remedial, or penal directions against any of them, leaving it to the law to catch up with the wrongdoers in due course.

In view of the irregularities that tainted the resolution process, the Court ordered the liquidation of BPS, which had been successfully rescued under the IBC in 2019 with the approval of relevant market participants and layers of state agencies. The order, legally sound but economically hollow, effectively amounts to a capital sentence for the company and the IBC, and poses a setback to legitimate business and the wider economy.

Let bygones be bygones, and let the parties fend for themselves. Public policy, however, must reflect on the implications of this episode and draw appropriate lessons. The corporate insolvency resolution process for BPS began on July 26, 2017. Under the oversight of the RP and the NCLT, market participants submitted the resolution plan for approval on February 14, 2019, roughly six quarters later. From that point onwards, the adjudication machinery (NCLT, NCLAT, and the Supreme Court) took six years to first approve, and then to overturn the plan.