JSW Steel's BPSL Deal Review Petition - Examining Supreme Court Scrutiny In Insolvency-Driven Acquisitions

Author: LawSphereX

Category: Corporate & Insolvency

Published: 2026-08-23T20:24:34.883554+00:00

Updated: 2026-08-26T17:10:57.265+00:00

JSW STEEL'S BPSL DEAL REVIEW PETITION:

EXAMINING SUPREME COURT SCRUTINY IN

INSOLVENCY-DRIVEN ACQUISITIONS

Harini S, LLB, Sathyabama Institute of Science & Technology, Chennai

ABSTRACT

The Supreme Court's rejection of JSW Steel's ₹19,700 crore resolution plan for Bhushan Power & Steel Limited (BPSL) in May 2025 represents a watershed moment in India's insolvency jurisprudence. This paper examines the legal implications of the Court's decision to prioritize procedural compliance over commercial wisdom, analysing its impact on the Insolvency and Bankruptcy Code's (IBC) objectives of maximizing asset value and ensuring efficient resolution processes. Through comprehensive analysis of the BPSL case and its subsequent review petition, this paper explores the tension between judicial oversight and the commercial discretion of committees of creditors (CoC), evaluating whether the Supreme Court's approach serves the broader interests of India's insolvency framework or creates unnecessary uncertainty for future acquisitions.

Keywords: Insolvency and Bankruptcy Code, Commercial Wisdom, Committee of Creditors, Corporate Insolvency Resolution Process

I. Introduction

The Insolvency and Bankruptcy Code, 2016 (IBC) fundamentally transformed India's approach to corporate distress resolution by establishing a creditor-driven framework prioritizing timebound processes and value maximization1. Central to this framework is the concept of "commercial wisdom" vested in committees of creditors (CoC), which empowers financial creditors to make informed decisions regarding resolution plans based on their assessment of commercial viability and recovery prospects2. However, the Supreme Court's decision in Kalyani Transco v. Bhushan Power and Steel Ltd. has introduced significant complexity to this established paradigm by rejecting an approved resolution plan on procedural grounds, thereby ordering liquidation despite apparent commercial benefits3.

The BPSL case presents a unique intersection of competition law compliance, insolvency procedures, and judicial review that challenges fundamental assumptions about the balance between procedural adherence and commercial outcomes under the IBC. JSW has until June 2 to file a review of the Supreme Court's May 2 judgment, which had rejected its ₹19,700 crore resolution plan and ordered the liquidation of the debt-laden company, creating unprecedented uncertainty in the insolvency ecosystem. This paper examines whether the Supreme Court's approach in BPSL represents necessary procedural rigor or an overcorrection that undermines the IBC's commercial objectives.

Through detailed analysis of the legal framework, case precedents, and broader implications for insolvency-driven acquisitions, this paper contributes to the evolving discourse on judicial oversight in corporate insolvency proceedings.

II. Legal Framework

A. The IBC's Commercial Wisdom Doctrine

The IBC establishes a sophisticated framework wherein financial creditors, possessing superior knowledge of the debtor's business and financial condition, are empowered to make commercial decisions regarding resolution plans4. Section 30(4) of the IBC requires approval

1 Insolvency and Bankruptcy Code, 2016, No. 31 of 2016, Preamble (India).

2 K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150, ¶ 45.

3 Kalyani Transco v. Bhushan Power and Steel Ltd., 2025 SCC OnLine SC 4234.

4 Insolvency and Bankruptcy Code, 2016, § 21, No. 31 of 2016 (India).

by at least 66% of the CoC by value, reflecting the legislature's recognition that creditors are best positioned to evaluate recovery prospects and business viability5. The commercial wisdom doctrine emerged from judicial recognition that courts should not substitute their judgment for that of informed creditors in commercial matters. In K. Sashidhar v. Indian Overseas Bank, the Supreme Court held that the commercial decision of COC for approval of resolution plan is non-justiciable and hence, is required to be sanctioned by the Adjudicating Authority6. This principle was further reinforced in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, where the Court emphasized that commercial decisions of the CoC should not be interfered with unless they violate statutory provisions or are perverse7.

B. Statutory Compliance Requirements

The IBC incorporates various statutory compliance requirements that resolution plans must satisfy before approval. Section 31 of the Code mandates that resolution plans comply with applicable laws, including competition law requirements8. The Supreme Court held that the proviso to Section 31(4) of the IBC clearly mandates that the CCI approval must be obtained before the CoC votes on a resolution plan9. This requirement creates a procedural framework wherein competition law compliance becomes a prerequisite for CoC consideration, rather than a subsequent condition. The statutory interpretation of Section 31(4) thus becomes crucial in determining whether procedural deviations invalidate otherwise commercially sound resolution plans.

C. Judicial Review Standards

The scope of judicial review in insolvency proceedings has evolved through various Supreme Court decisions. While courts generally defer to the commercial wisdom of creditors, they retain jurisdiction to examine statutory compliance and procedural propriety10. The challenge lies in determining the appropriate standard of review when procedural irregularities exist

5 Id. § 30(4).

6 K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150, ¶ 47.

7 Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, ¶ 156.

8 Insolvency and Bankruptcy Code, 2016, § 31, No. 31 of 2016 (India).

9 Kalyani Transco v. Bhushan Power and Steel Ltd., 2025 SCC OnLine SC 4234, ¶ 78.

10 Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, ¶ 234.

alongside substantial commercial benefits. In Binani Industries Ltd. v. Bank of Baroda, the Supreme Court established that courts could interfere with CoC decisions only in exceptional circumstances involving statutory violations or manifest arbitrariness11. However, the BPSL decision appears to expand judicial intervention into areas previously considered within the exclusive domain of commercial creditors.

III. The BPSL Case

A. Background and Transaction Structure

JSW Steel acquired a 49 per cent stake in BPSL through the Insolvency and Bankruptcy Code (IBC) route in 2021, beginning it acquisition journey. The acquisition had added 2.75 million tonnes per annum of steelmaking capacity to JSW's portfolio in Odisha12. The resolution plan, valued at ₹19,700 crores, received approval from the CoC and was sanctioned by the National Company Law Tribunal (NCLT) in September 201913. The transaction proceeded under the assumption that competition law approval could be obtained subsequent to CoC approval, following established market practice. In December 2024, the ED decided not to pursue its appeal before the Supreme Court against JSW Steel's takeover of Bhushan Power and Steel under the IBC. It also returned attached assets valued at ₹4,025 crore to JSW Steel, indicating regulatory acceptance of the transaction's legitimacy14.

B. Supreme Court's Reasoning

The Supreme Court's decision in BPSL centered on the interpretation of Section 31(4) of the IBC and its requirement for prior competition law approval. On May 2, 2025, the Supreme Court had rejected JSW Steel's Rs.19,700 crore resolution plan for BPSL, terming it "illegal." The ruling also directed that Bhushan Power & Steel be liquidated15.

11 Binani Industries Ltd. v. Bank of Baroda, (2018) 17 SCC 1, ¶ 89.

12 Business Standard, SC scraps JSW Steel's Bhushan Power & Steel resolution, orders liquidation, May 2, 2025.

13 Kalyani Transco v. Bhushan Power and Steel Ltd., 2025 SCC OnLine SC 4234, ¶ 23.

14 Bar & Bench, Supreme Court agrees to open court hearing of JSW Steel's review petition against Bhushan Power verdict, July 29, 2025. 15 LawChakra, Big Relief for JSW Steel: Supreme Court Orders Status Quo On Bhushan Power Liquidation, May 26, 2025.

The Court's reasoning prioritized strict procedural compliance over commercial outcomes, holding that the failure to obtain Competition Commission of India (CCI) approval before CoC voting rendered the entire resolution process invalid. This interpretation represents a significant departure from established practice wherein competition approvals were typically obtained as conditions subsequent to resolution plan approval. C. Commercial and Legal Implications

The decision's immediate impact was substantial market disruption and investor uncertainty. The Supreme Court today ordered status quo on the liquidation proceedings for Bhushan Power & Steel Ltd (BPSL) before the National Company Law Tribunal (NCLT), after hearing a petition filed by JSW Steel, providing temporary relief while the review petition remains pending16. The broader implications extend beyond the immediate parties to encompass fundamental questions about the balance between procedural compliance and commercial wisdom in insolvency proceedings. The decision potentially creates precedential value that could affect future insolvency-driven acquisitions involving competition law considerations. IV. Analysis of the Review Petition

A. Grounds for Review

With the presiding judge now retired, the review petition, which was filed in late-June, will come up before a new bench, raising hopes of reconsideration17. The review petition likely challenges the Supreme Court's interpretation of Section 31(4) and argues for a more balanced approach that considers commercial outcomes alongside procedural compliance. The grounds for review may include: (1) error in statutory interpretation regarding the timing of competition law approvals; (2) failure to consider the commercial wisdom doctrine and established market practice; (3) disproportionate impact of liquidation compared to resolution; and (4) procedural irregularities in the original decision-making process. 16 LiveLaw, Supreme Court Orders Status Quo On Liquidation Of Bhushan Steel & Power Ltd, May 27, 2025.

17 Supreme Court Observer, 'Bhushan Steel' Judgement: Commercial wisdom sidelined in favour of narrow procedural view, July 2025.

B. Legal Precedents Supporting Review

Several Supreme Court decisions support a more flexible approach to procedural compliance in insolvency proceedings. In Swiss Ribbons Pvt. Ltd. v. Union of India, the Court emphasized the IBC's objective of maximizing asset value and ensuring efficient resolution processes18. Similarly, ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta established that technical compliance should not override commercial considerations when substantial creditor benefits are evident19. The Supreme Court has set aside an order whereby the National Company Law Tribunal ("NCLT") kept the approval of a resolution plan in abeyance while directing an Official Liquidator to conduct asset revaluation, demonstrating the Court's reluctance to allow technical objections to derail commercial arrangements20. C. Probability of Success

The review petition's success depends on several factors: (1) the composition of the new bench and its approach to commercial wisdom; (2) the strength of legal arguments regarding statutory interpretation; (3) market and stakeholder reactions to the original decision; and (4) broader policy considerations regarding the IBC's effectiveness. The apex court rejected the resolution plan proposed by JSW Steel that had been approved by the CoC, suggesting that procedural concerns outweighed commercial benefits in the Court's analysis21. However, the review petition provides an opportunity to rebalance these considerations. V. Commercial Wisdom vs. Judicial Review

Insolvency frameworks in jurisdictions typically balance procedural requirements with commercial outcomes through flexible enforcement mechanisms. The U.S. Bankruptcy Code's business judgment rule allows courts to defer to creditor decisions unless they are clearly

18 Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, ¶ 123.

19 ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1, ¶ 67.

20 LiveLaw, IBC | No Casual Interference with Commercial Wisdom Of CoC, Nov. 23, 2023.

21 NLIU Law Review, Commercial Wisdom vs Judicial Review: The Supreme Court's BPSL Verdict, June 2025.

contrary to creditor interests22. Similarly, the UK's approach under the Insolvency Act emphasizes practical commercial outcomes while maintaining procedural safeguards23. The BPSL decision's rigid adherence to procedural compliance diverges from these international models by prioritizing technical compliance over commercial benefits. This approach may undermine the IBC's effectiveness in attracting investment and facilitating efficient resolution processes. The economic implications of prioritizing procedural compliance over commercial wisdom extend beyond individual cases to affect systemic confidence in the insolvency framework. When courts reject commercially beneficial resolution plans on technical grounds, they may inadvertently discourage potential resolution applicants and reduce overall recovery rates for creditors.

Research indicates that successful resolution processes under the IBC have generated higher recovery rates compared to liquidation proceedings24. The BPSL decision's preference for liquidation over resolution thus potentially reduces overall creditor recoveries and undermines the Code's primary objectives. The tension between procedural compliance and commercial wisdom reflects broader policy questions about the role of courts in insolvency proceedings. While procedural safeguards are essential for maintaining process integrity, excessive judicial intervention may undermine the creditor-driven model that forms the IBC's foundation. By unravelling an elaborate resolution process under the Insolvency Code, the Supreme Court verdict has created uncertainty among investors, highlighting the systemic implications of judicial approaches to insolvency proceedings25. VI.

Implications for Future Insolvency-Driven Acquisitions

The BPSL decision necessitates significant procedural reforms in insolvency-driven acquisitions involving competition law considerations. Resolution applicants must now ensure

22 11 U.S.C. § 1129(b)(1) (2020).

23 Insolvency Act 1986, c. 45, § 123 (UK).

24 Insolvency and Bankruptcy Board of India, Annual Report 2023-24, at 45-67 (2024).

25 Supreme Court Observer, 'Bhushan Steel' Judgement: Commercial wisdom sidelined, July 2025.

prior competition law clearances before submitting resolution plans, potentially extending timelines and increasing transaction costs. This requirement may be particularly challenging for complex acquisitions involving multiple jurisdictions or novel market definitions. The practical difficulties of obtaining competition clearances before detailed due diligence may discourage potential bidders and reduce competitive dynamics in resolution processes. Corporate acquirers must develop enhanced risk management strategies that account for the Supreme Court's emphasis on procedural compliance. These strategies should include: (1) early engagement with competition authorities; (2) conditional resolution plan structures; (3) comprehensive legal due diligence regarding statutory compliance; and (4) stakeholder engagement to ensure broad-based support.

The increased procedural complexity may favour larger acquirers with sophisticated legal and regulatory capabilities while potentially excluding smaller players who lack resources for comprehensive compliance programs. The BPSL decision's impact on market structure may be particularly significant in concentrated industries where competition concerns are more likely to arise. If potential acquirers face increased uncertainty regarding resolution plan approval, they may demand higher returns or avoid participation entirely, potentially reducing overall market efficiency. The decision may also encourage more conservative resolution plan structures that prioritize procedural compliance over value maximization, potentially reducing overall recovery rates for creditors and stakeholders. VII. Recommendations for Legal and Policy Reform

The BPSL case highlights the need for statutory clarity regarding the timing and sequencing of regulatory approvals in insolvency proceedings. Recommended amendments include: (1) explicit provisions regarding conditional resolution plan approvals; (2) safe harbor provisions for good faith compliance efforts; (3) enhanced coordination mechanisms between insolvency and competition regulators; and (4) appellate procedures that consider commercial impacts alongside procedural compliance.

These amendments should balance procedural integrity with commercial efficiency while maintaining the IBC's core objectives of maximizing asset value and ensuring timely resolution processes. The Supreme Court should consider developing comprehensive guidelines for reviewing resolution plans that balance procedural compliance with commercial wisdom. These guidelines should: (1) establish clear standards for judicial intervention; (2) provide safe harbours’ for technical compliance issues that don't affect commercial substance; (3) require consideration of alternative remedies before ordering liquidation; and (4) ensure consistency in judicial approaches across different benches. Such guidelines would provide greater certainty for market participants while maintaining appropriate judicial oversight of insolvency proceedings.

Enhanced coordination between insolvency and competition regulators could address many of the procedural issues highlighted in the BPSL case. Recommended measures include: (1) fasttrack competition review procedures for insolvency transactions; (2) joint guidelines on timing and sequencing requirements; (3) information sharing protocols to facilitate efficient review processes; and (4) regular stakeholder consultations to address emerging issues. Improved regulatory coordination would reduce transaction costs and timeline uncertainty while maintaining appropriate substantive review standards.

VIII. Conclusion

The Supreme Court's decision in the BPSL case represents a critical juncture in the evolution of India's insolvency jurisprudence. While the Court's emphasis on procedural compliance serves important rule-of-law objectives, its rigid application in circumstances involving substantial commercial benefits raises fundamental questions about the appropriate balance between technical compliance and commercial wisdom. Recently the Supreme Court had ordered status quo in the liquidation proceedings of Bhushan Power & Steel Ltd, currently pending before the National Company Law Tribunal, providing an opportunity for reconsideration through the review petition process26. The outcome of this 26 LawBeat, JSW Steel files review petition before Supreme Court against decision to liquidate BPSL, June 29, 2025.

review will significantly influence the future development of insolvency law and practice in India. The case underscores the need for legal and policy reforms that preserve procedural integrity while maintaining the IBC's commercial objectives. These reforms should include statutory amendments clarifying regulatory approval requirements, judicial guidelines balancing procedural and commercial considerations, and enhanced regulatory coordination mechanisms. Ultimately, the success of India's insolvency framework depends on maintaining confidence among investors, creditors, and other stakeholders in the predictability and efficiency of resolution processes. The BPSL case and its resolution through the review petition process will provide crucial guidance for achieving this balance in future insolvency-driven acquisitions.

The broader implications extend beyond individual transactions to encompass systemic questions about the role of law in facilitating efficient market outcomes. As India continues to develop its insolvency infrastructure, the lessons learned from the BPSL case will prove invaluable in shaping a framework that serves both legal and commercial objectives effectively.