On May 2, 2025, the Supreme Court of India delivered a landmark judgment in the Bhushan Power and Steel Limited (BPSL) insolvency case, significantly redefining the scope and application of the Insolvency and Bankruptcy Code (IBC), 2016. By overturning the 2020 ruling of the National Company Law Appellate Tribunal (NCLAT), the Court set critical precedents on procedural integrity, jurisdictional limits, and stakeholders’ rights in insolvency proceedings.
The case centered on the acquisition of BPSL by JSW Steel, a process fraught with legal controversy, regulatory overlap, and compliance concerns. The apex court’s verdict addresses five pivotal issues with far-reaching implications.
1. Jurisdictional Overreach: NCLAT’s Interference in PMLA Matters
The Supreme Court strongly criticized NCLAT’s intervention in proceedings governed by the Prevention of Money Laundering Act, 2002 (PMLA). In 2019, the Enforcement Directorate (ED) had provisionally attached assets of BPSL worth ₹4,000 crore, citing them as proceeds of crime.
Rather than directing JSW Steel to seek remedy through appropriate PMLA forums, NCLAT ordered the release of these assets under the approved resolution plan — a move the Supreme Court declared “entirely without jurisdiction.”
Key Insight: Insolvency tribunals such as NCLT and NCLAT cannot overstep into matters governed by criminal or regulatory laws like PMLA. The judgment reinforces the precedent from Embassy Property Developments Pvt. Ltd. v. State of Karnataka (2019), emphasizing that such issues fall under the jurisdiction of constitutional courts, not insolvency forums.
2. Section 29A Violations: Due Diligence and Disclosure Failures
The Court identified serious gaps in the evaluation of Section 29A compliance — which bars defaulting promoters and their connected parties from submitting resolution plans.
A 2008 joint venture agreement between JSW Steel and BPSL, unearthed during the ED’s probe, was never disclosed in Form H by the Resolution Professional. This failure hindered judicial scrutiny of JSW Steel’s eligibility under Section 29A(c) and (j).
Key Insight: Complete transparency is non-negotiable. Resolution applicants must disclose all previous and existing associations with the corporate debtor, and Resolution Professionals must apply Section 29A rigorously before plan approval.
3. Expanding Locus Standi: Broad Interpretation of ‘Person Aggrieved’
Contrary to the narrow view taken by NCLAT, the Supreme Court held that the term “any person aggrieved” under Section 61(1) of the IBC should be interpreted broadly. The Court clarified that operational creditors, ex-directors, ex-promoters, and government bodies can challenge a resolution plan if their legal rights are impacted, even if they are not part of the Committee of Creditors (CoC).
Key Insight: The inclusive interpretation of “person aggrieved” strengthens stakeholder protection and aligns with the principle of natural justice within the insolvency framework.
4. Maintainability of Appeals Under Section 61(3)
JSW Steel’s appeal under Section 61(3) challenging conditions of an already approved plan was dismissed. The Court clarified that Section 61(3) allows appeals only on specific, limited grounds, and resolution applicants cannot selectively contest parts of plans they had earlier accepted.
Key Insight: Resolution applicants must exercise caution and cannot revisit approved plans without meeting the strict thresholds of Section 61(3).
5. Judicial Overreach: NCLAT’s Declassification Order Without Jurisdiction
The Supreme Court also struck down NCLAT’s directive to declassify BPSL as a promoter in Nova Iron Steel, where it held a 25.6% stake. This issue was neither part of the original appeal nor addressed in the resolution plan. NCLAT’s unsolicited directive constituted a clear breach of judicial discipline.
Key Insight: Adjudicating bodies must restrict their rulings to matters specifically raised before them. Addressing unrelated or unlitigated issues violates fundamental adjudicatory principles.
Broader Implications for India’s Insolvency Ecosystem
The BPSL ruling is a watershed moment for the Indian insolvency landscape. It sends a clear message to Resolution Professionals, CoCs, adjudicating authorities, and corporate entities: IBC procedures are not mere formalities.
The Supreme Court’s emphasis on:
- Jurisdictional discipline,
- Transparent disclosures,
- Rigorous due diligence, and
- Respect for institutional boundaries
will impact future Corporate Insolvency Resolution Processes (CIRPs), especially where parallel criminal or regulatory proceedings are involved.
Conclusion: A Judicial Wake-Up Call for All Stakeholders
This verdict underscores the need for integrity, transparency, and compliance in insolvency proceedings. As India’s IBC regime evolves, the BPSL judgment acts as a judicial guardrail — ensuring that commercial expediency does not override legal sanctity.
Resolution applicants, insolvency professionals, and regulatory authorities must now navigate the CIRP landscape with greater diligence, as the judiciary strengthens its oversight to uphold both due process and finality.