MC EXCLUSIVE CoC likely to join JSW Steel in seeking review of Supreme Court’s Bhushan Steel verdict

Supreme Court

The Committee of creditors (CoC) led by Punjab National Bank is likely to join hands with the JSW Steel in seeking a review of the Supreme Court's verdict in the Bhushan Power and Steel Ltd (BPSL) case, sources have told Moneycontrol.

The lenders are expected to join JSW in filing a review petition after the Supreme Court set aside JSW Steel's acquisition of BPSL under the Insolvency and Bankruptcy Code (IBC), they said.

Since the CoC was not part of the litigation earlier, joining JSW Steel's review plea is the only legal remedy available to lenders.

Banks fear that the scrapping of the resolution plan would have a pronounced impact on their financials and those of other lenders represented by the CoC, which makes it even more important that the top court’s May 2 judgment is revisited.

The court cancelled JSW’s Rs 19,350-crore acquisition of BPSL and ordered its liquidation.

JSW Steel can file a review petition within 30 days of the judgment to seek legal remedy. The bench, which delivered the judgment, will be the one to hear the review petition, unless any of the judge retires in this period.

Typically, review petitions have a low probability of success.

Also read: Bhushan Steel - JSW SC Verdict: CoC, Govt working on likely remedies

The verdict makes it necessary for banks to pay back the money received from JSW Steel in accordance with the resolution plan. If the liquidation amount which banks are likely to receive from the sale of BPSL is less than the monies received from JSW Steel as per the earlier plan, banks will have to set aside more provisions towards the account, a senior PSU banker who didn't want to be named said.

Last week, a Macquarie Capital report said even as the JSW Steel gets the money back from the banks, it is not clear whether the company has any recourse for the amount invested in BPSL between 2021, when it took possession of the firm, and now.

“If it got to keep the EBITDA (earnings before interest, taxes, depreciation and amortization) between 2017 to 2021 despite not owning BPSL, can the court rule that liquidation of BPSL also happens on as is basis. If that happens then the investments done by JSW Steel in BPSL would be at risk,” the note said.

The case reached the Supreme court after BPSL’s operational creditors challenged the CoC’s approval of JSW’s resolution on the ground that their claims were unfairly treated and key procedural lapses had gone unaddressed.

The court’s order highlights procedural and legal lapses in one of the most high-profile takeovers under IBC. It raised questions around missed timelines, inconsistent creditor oversight and the role of promoter-linked structures in resolution plans that were allowed to proceed despite non-compliance on several fronts.