The JSW-Bhushan ruling impacts the IBC and investor confidence

The Supreme Court's reversal of a high-profile acquisition under India's insolvency code will have adverse spillover effects

- PRADEEP S. MEHTA is secretary general, CUTS International.

Last week, India's Supreme Court decided to annul JSW Steel's ₹19,700-crore acquisition of Bhushan Power & Steel Ltd (BPSL) and ordered its liquidation, causing a storm in the country. This raises four issues: a) The apex court's invocation of Article 142 of the Constitution, which suggests plausible misuse of judicial power; b) the credibility of the Insolvency and Bankruptcy Code (IBC) and National Company Law Appellate Tribunal (NCLAT); c) the long time gap between the takeover and court judgment; and d) India's global economic credibility.

Informed by expert advice and historical precedents, we should express deep concern over the possibility of this ruling's overreach, given how it could destabilize the IBC—a framework designed to ease exit barriers, facilitate business shutdowns and enhance India's ease of doing business.

Further, Article 142, which is meant to ensure "complete justice," is a constitutional safety valve, not a tool to override statutory frameworks like the IBC (bit.ly/4d7S3TF). The court applied a strict interpretation of law. Also, for a consummated takeover, the court's ruling appears to disregard the principle articulated in the case of Delhi State Electricity Board vs BSES Yamuna Power Ltd (2007), which cautioned, "You cannot unscramble a scrambled omelette" by reversing integrated deals after adverse findings. Though this phrase appears in the 2007 judgment, not in the instant case of BPSL's acquisition by JSW Steel, it is relevant: undoing a finalized transaction risks economic disruption. By invoking Article 142, likened by Vice-President Jagdeep Dhankhar to a "nuclear missile," the court has created a precedent that undermines the IBC's finality.