JSW-BPSL saga: Let it be or let it go

Beyond legal infirmities, Supreme Court's recent order raises systemic concerns. The finality and predictability of resolution process will be severely undermined

- BAHRAM N VAKIL

THE RECENT SUPREME Court judgment in the matter of JSW Steel's acquisition of Bhushan Power and Steel Limited (BPSL) has delivered a significant setback to the Insolvency and Bankruptcy Code (IBC).

More than four years ago, JSW acquired BPSL through the IBC process by paying ₹19,700 crore to banks, employees, operational creditors, and statutory authorities. Yet, on appeal by the erstwhile promoters challenging the National Company Law Appellate Tribunal's (NCLAT) order, the Supreme Court overturned JSW's acquisition and directed the liquidation of BPSL.

Notably, the court invoked its extraordinary powers under Article 142 of the Constitution, which empowers it to do "complete justice" between the parties.

The Supreme Court's primary reasons appear to include delays by the Resolution Professional (RP) in completing the statutorily time-bound process; alleged inadequacy of the RP's examination of JSW's eligibility under Section 29A of the IBC; failure to prosecute the erstwhile promoters for suspect transactions preceding insolvency; and the purportedly non-commercial manner in which lenders exercised their discretion.

However, on a close examination of the public record, these grounds appear either legally insufficient, inaccurate, or irrelevant. Indeed, the Supreme Court's order arguably violates several well-established principles of law.

A vital legal principle repeatedly affirmed by the Supreme Court is the primacy of the commercial wisdom of the Committee of Creditors (CoC) in the IBC process.