Another Blow To IBC

The SC has rightly punished the guilty but has gone overboard by ordering liquidation

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The Supreme Court’s (SC) rejection of the takeover of Bhushan Power & Steel (BPSL) by JSW Steel, via the insolvency route, is sound on legal grounds. The two-judge Bench was in no doubt that the provisions of both the Insolvency and Bankruptcy Code (IBC) as also the corporate insolvency resolution process were contravened.

In a scathing indictment of JSW Steel, the Committee of Creditors (CoC) and the Resolution Professional (RP), the court charged them with covering up gross violations of the rules at every stage. The National Company Law Tribunal (NCLT) hasn’t been spared either.

In particular, the SC is understood to have flagged the use of convertible debentures to pay for the purchase of the company, which was not part of the resolution plan. The court found no material evidence or affidavit put on record by JSW, to show that the committed equity amount of ₹8,550 crore, as contemplated in the plan, was, in fact, infused.