THE TIPPING POINT

The Supreme Court's C verdict quashing BPSL sale to JSW Steel exposes glaring gaps, but proposed reforms show government's attempts at a reboot

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India’s Insolvency and Bankruptcy Code (IBC), 2016, once celebrated as a revolutionary step toward expeditious debt resolution, now stands at a crossroads. The Supreme Court's rejection on 2nd May ‘25, of the resolution plan submitted by JSW Steel for Bhushan Power and Steel Ltd (BPSL) - an eight-year-long case - has exposed deep-rooted flaws in the resolution process. The verdict, citing serious lapses by the Resolution Professional (RP), Committee of Creditors (CoC), and judicial forums, not only mandates liquidation but also signals a larger structural malaise.

Though the apex court has stayed the liquidation order pending review, the judgment has opened a Pandora's Box of questions about stakeholder accountability, judicial overreach, compliance mechanisms, and the commercial viability of the insolvency framework.

In the wake of this case, policymakers are preparing amendments aimed at transforming the process into a more creditor-driven, time-bound, and transparent mechanism. Yet, while procedural reforms are essential, systemic challenges - delays, poor enforcement, judicial inconsistencies - continue to stifle IBC’s potential.

INSTITUTIONAL FAILURES

At the heart of the BPSL case lies an extraordinary institutional failure. The Supreme Court flagged egregious procedural violations, including the RP’s failure to submit Form H, seek timeline extensions under Section 12, and assess the eligibility of JSW Steel under Section 29A.

Operational creditors were sidelined, as their payments were grossly delayed beyond the 30-day deadline prescribed in the resolution plan. Instead of implementing the plan, JSW appealed against it in the NCLAT, which surprisingly entertained the plea despite JSW not being an aggrieved party. Both the National Company Law Tribunal (NCLT) and the appellate body failed in their oversight roles.