Apex court’s ruling in JSW-Bhushan Power case casts no aspersions on IBC, say officials

The Bhushan Power case has been among the most high-profile insolvency proceedings under the IBC, with significant implications for large creditors, including public sector banks.

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The Supreme Court’s recent ruling in the Bhushan Power and Steel case does not question the validity of the Insolvency and Bankruptcy Code (IBC) itself, but highlights procedural lapses in the resolution process, senior government officials clarified on May 23.

“The Bhushan Steel case did not cast any aspersions on IBC itself. The Supreme Court said how the process was faulty. But no doubts are emanating on the IBC. The system did not execute the process perfectly,” a government official said, noting that the judgement should not be viewed as a critique of the law.

Earlier this month, the apex court set aside the National Company Law Appellate Tribunal’s (NCLAT) approval of JSW Steel’s resolution plan for Bhushan Power and Steel, citing procedural lapses and violation of the IBC. The court stressed the need for strict adherence to due process, particularly in terms of fair treatment of operational creditors.

The verdict had triggered questions over whether the court's ruling casts a shadow over the broader insolvency regime, which has been a centrepiece of India’s economic reform since its enactment in 2016. However, the government has clarified that the judgment is not a critique of the Code itself, but rather an indictment of flawed implementation in this particular case.

“The government has not made up its mind to put a review petition against the Supreme Court decision,” the official added, suggesting that while the matter is being internally examined, nothing has been finalised as yet.

The Bhushan Power case has been among the most high-profile insolvency proceedings under the IBC, with significant implications for large creditors, including public sector banks. The government maintains that the law continues to deliver on resolution and recovery.