JSW Steel’s 'clean slate' at risk as SC's liquidation order on Bhushan Power and Steel jolts industry

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26 Aug, 2025 12:21

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The Supreme Court’s verdict ordering the liquidation of Bhushan Power and Steel (BPSL) has reignited uncertainty over one of India’s largest insolvency resolutions, dragging the acquirer JSW Steel into potentially a complex legal and financial quagmire, say experts.

The apex court on May 2 rejected JSW Steel's resolution plan to acquire Bhushan Power and Steel, four years after the takeover was completed, ordering liquidation of the debt-ridden firm. Shares of JSW Steel ended the trading session sharply lower by close to six percent, following the verdict.

Despite having successfully completed the acquisition and operated the company since 2021, JSW Steel now faces the prospect of unwinding the Rs 19,350 crore deal, raising larger questions about the credibility and finality of the Insolvency and Bankruptcy Code (IBC) proceedings.

The apex court ruled that JSW Steel’s resolution plan, which had been approved by the Committee of Creditors (CoC) and ratified by the National Company Law Tribunal (NCLT) in 2019, was illegal on two grounds. First, the deal used a mix of equity and optionally convertible debentures (OCDs), whereas the court held that only equity was permitted under the IBC. Second, the implementation of the resolution plan had breached the statutory timelines set by the Code. These two violations, according to the apex court, rendered the plan invalid, despite the deal having already been executed and the asset integrated into JSW’s operations.

Deal Structure Under Spotlight

JSW Steel, which currently holds an 83.3% stake in BPSL, had emerged as the winning bidder after a long contest with Tata Steel, and made the acquisition through subsidiary Piombino Steel Ltd (PSL), which infused Rs 8,550 crore via a special purpose vehicle, Makler Pvt Ltd, that was later merged with BPSL. The deal structure - comprising equity, OCDs, and debt - was shaped under constraints reportedly imposed by lenders, who barred co-investors at the Expression of Interest stage.

With the acquisition complete, BPSL’s 2.5 MTPA Jharsuguda plant became a core component of JSW’s strategy in eastern India. The deal gave JSW the pole position in terms of domestic steelmaking capacity, pushing it ahead of Tata Steel’s India output. Since taking charge, JSW has generated operational revenue from the asset, which could now be subject to recovery, adjustment, or refund - depending on how the liquidation process unfolds.

'Clean Slate' Under Threat

The Supreme Court’s decision comes despite a long chain of legal proceedings that had previously appeared to secure JSW’s position. In 2020, the Enforcement Directorate (ED) had raised an alarm by arguing that since JSW Steel was a joint venture partner of BPSL in a coal mining entity, it was a ‘related party’ and not entitled to protections under Section 32A of the IBC.

This provision, often referred to as the ‘clean slate’ clause, insulates new owners from prosecution for offences committed by the corporate debtor prior to the insolvency process, so long as they were not involved in the company’s past management or ownership.