After reviewing the Supreme Court’s May 2 judgment that declared JSW Steel’s acquisition of Bhushan Power and Steel Ltd (BPSL) illegal, the government believes there are several “errors” in the ruling and is preparing to challenge it.
According to two senior government officials, the committee of creditors (CoC) is expected to file a review petition in the Supreme Court within the next two weeks.
“The intention is to secure a stay on the SC order, as it appears there were mistakes in the judgment. Many of the issues raised by the apex court — such as alleged misconduct by the resolution professional or failures by the NCLT/NCLAT — are not accurate,” an official told Moneycontrol after reviewing the order.
Earlier this week, senior executives from JSW Steel met with officials from the Ministry of Corporate Affairs (MCA), the Insolvency and Bankruptcy Board of India (IBBI), and the Department of Financial Services (DFS) to discuss the implications, sources said.
On Monday, Financial Services Secretary M. Nagaraju confirmed to Moneycontrol that the government is closely examining the ruling and considering all legal avenues. There’s growing concern within the administration that the judgment may negatively affect overall business sentiment.
Background of the Case
On May 2, the Supreme Court annulled JSW Steel’s ₹19,700 crore acquisition of BPSL, ordering the liquidation of the company. JSW had won the bid through the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC), with approval from the National Company Law Tribunal (NCLT) back in 2019.
However, five years later, the apex court voided the resolution plan, pointing to missed deadlines, gaps in creditor supervision, and concerns about promoter-linked structures that were allowed to proceed despite compliance issues.
Out of the total amount approved, ₹19,350 crore was meant for financial creditors and ₹350 crore for operational creditors. With the SC canceling the deal, financial creditors — including major banks like SBI and PNB — will now need to return these funds and move toward liquidating BPSL, sources added.
Did NCLT/NCLAT Overstep?
A key argument in the SC ruling was that neither the NCLT nor the NCLAT has the authority to conduct judicial reviews of decisions made by statutory authorities under the Prevention of Money Laundering Act (PMLA). The apex court emphasized that these bodies are constituted under the Companies Act, 2013 — not the IBC.
Government officials, however, believe that the NCLT/NCLAT stayed well within their authority, especially under Section 32A of the IBC, which protects a corporate debtor from prosecution for offenses committed before the CIRP, once a resolution plan is approved.
For context, in October 2019, the Enforcement Directorate (ED) issued a provisional attachment order (PAO) for BPSL’s assets worth over ₹4,000 crore, citing violations under PMLA by the company’s former promoters. However, this attachment came after the NCLT had already approved JSW’s acquisition in September 2019. JSW challenged the ED’s action before the NCLAT and secured a stay on the attachment.
Officials argue that any punitive action under PMLA should be directed at BPSL’s former promoters, not the company itself. “The May 2 ruling seems to contradict both the letter and spirit of the IBC. It risks setting a precedent that could undermine investor confidence in the IBC framework,” another government official told Moneycontrol.
Expert Opinions
Legal experts note that the “clean slate” principle under Section 32A — upheld by the Supreme Court in landmark cases like Essar Steel and Ghanshyam Mishra in 2021 — is meant to ensure that once a company changes hands via a resolution plan, both the corporate debtor and the new owners are free from past legal liabilities, providing a fresh start.
“The Supreme Court’s May 2 ruling in the JSW Steel case narrows this principle, clarifying that protections under Section 32A don’t apply to proceedings under public law statutes like the PMLA. The liability of former promoters for past offenses remains intact,” explained Kalpit Khandelwal, Partner at Aekom Legal.
Yogendra Aldak, Partner at Lakshmikumaran & Sridharan Attorneys, added that the ruling opens the door to potentially revisiting even long-concluded insolvency cases if procedural missteps are identified later. It also raises questions about whether the commercial wisdom of the CoC can be disregarded, despite the significant economic consequences such actions could bring to all stakeholders.