Supreme Court Grants JSW Steel Open Court Review in BPSL Case, Reviving Hopes to Avert Liquidation

NEW DELHI – In a significant legal development with far-reaching implications for India's insolvency jurisprudence, the Supreme Court has agreed to hear a review petition in open court against its own 2 May verdict that had invalidated JSW Steel Ltd’s acquisition of Bhushan Power and Steel Ltd (BPSL). The earlier judgment had ordered the liquidation of BPSL, a move that sent shockwaves through the corporate and financial sectors.

A bench led by Chief Justice B.R. Gavai and Justice Satish Chandra Sharma, in a procedural order following a closed-chamber hearing, granted the application for an oral hearing. "Application(s) for listing review petition(s) in open Court and application for oral hearing are allowed. Issue notice," the order stated, scheduling the matter for a detailed hearing on 31 July 2025.

This decision provides a critical, albeit final, legal lifeline to JSW Steel to retain control of BPSL, which it acquired in March 2021 for ₹19,350 crore under the Insolvency and Bankruptcy Code (IBC) process. More broadly, it reopens a pivotal debate on the delicate balance between procedural sanctity and the substantive economic objectives of the IBC.

The Contentious May Verdict and its Aftermath

The Supreme Court's 2 May ruling was a stunning reversal of a multi-year resolution process. It stemmed from petitions filed by dissenting financial creditors, including Kalyani Group’s Torsteel, and the former promoter of BPSL, Sanjay Singal. The petitioners had challenged the resolution plan primarily on the grounds of significant delays in its implementation, arguing that these delays constituted a material violation of the IBC's mandate for time-bound resolutions.

The Court, in its May judgment, concurred with the petitioners, finding that the prolonged delays had contravened the foundational principles of the IBC. The consequence was severe: the acquisition was quashed, and BPSL, an operational steel plant, was pushed towards liquidation. This order had a cascading financial impact, mandating that the consortium of lenders, led by State Bank of India (SBI) and Punjab National Bank (PNB), return the ₹19,350 crore received from JSW Steel. With the acquisition nullified, the lenders' total exposure of nearly ₹34,000 crore was suddenly at risk of being relegated to liquidation proceeds, which are typically a fraction of the outstanding debt.

The ruling was widely seen as a strict, textual interpretation of the IBC's timelines, prioritising procedural compliance over the successful revival of the corporate debtor—a core tenet of the Code.

The Arguments for Review: A Viable Business vs. Procedural Lapses

In their review petitions, JSW Steel and the committee of creditors have mounted a powerful counter-argument centred on the "going concern" status of BPSL. They contend that while procedural delays occurred, the ultimate goal of the IBC—the resolution and revival of a failing company—has been spectacularly achieved.

JSW Steel's plea highlighted the dramatic operational turnaround of BPSL post-acquisition. The company argued that it has invested significant capital and expertise, nearly doubling BPSL's production capacity from 2.3 million tonnes per annum (MTPA) in 2017 to a projected 4.5 MTPA in 2025. The financial metrics underscore this revival, with revenue soaring from ₹8,701 crore in FY17 to an estimated ₹25,973 crore in FY25.

The core legal argument posited by the petitioners is that ordering the liquidation of a profitable, viable, and growing entity would be a "travesty of justice" and would defeat the very purpose of the IBC. "Both JSW Steel and lenders have cautioned that liquidation would harm BPSL, which has been running as a profitable and viable business under the approved resolution plan," the source material noted. They argue that the Court's May verdict, if allowed to stand, would create a perverse incentive, punishing a successful resolution applicant and pushing a revived national asset towards its demise over procedural issues that have since been rendered moot by the company's success.

The consortium of lenders, who stand to lose the most from liquidation, have filed separate review petitions echoing these sentiments. For them, the JSW Steel resolution represented a significant recovery on a major non-performing asset. The prospect of returning the sale proceeds and facing uncertain liquidation value has been a source of major concern for the banking sector.

Legal Implications and the Significance of an Open Court Hearing

The Supreme Court’s decision to admit the review plea for an open court hearing is, in itself, legally significant. Review petitions are typically decided "by circulation" in judges' chambers and are rarely entertained. The grant of an oral hearing signals that the Court believes the petitioners have raised points that warrant prima facie reconsideration.

Legal experts suggest this case will test the judiciary's approach to the IBC's foundational principles. The key questions before the bench will be:

1. Primacy of Timelines: To what extent are the IBC's timelines sacrosanct? Can a successful post-facto revival of a company cure pre-existing procedural delays in the approval process?

2. Balancing Objectives: How should the court balance the IBC's objective of time-bound resolution against its other primary objective of maximising the value of assets and reviving the corporate debtor?

3. Economic Reality vs. Legal Formality: Should the demonstrable economic success of a resolution plan be a decisive factor when assessing its validity, especially when challenged on procedural grounds?

4. Rights of Dissenting Creditors: The case will also re-examine the rights and influence of dissenting creditors and erstwhile promoters in challenging a resolution plan that has been approved by the overwhelming majority of the Committee of Creditors (CoC) and implemented successfully.

As Suman Kumar, an industry analyst at Dolat Capital, observed, "While it’s still too early to predict the final outcome, the acceptance of the review petition shifts the narrative from JSW Steel having definitively lost BPSL to a more hopeful outlook."

The Supreme Court had previously provided interim relief on 26 May, ordering a status quo on the liquidation proceedings to allow JSW Steel time to file its review. The upcoming hearing on 31 July 2025 will now be a focal point for the entire insolvency and restructuring legal community. The final verdict will not only determine the fate of a major steel asset and tens of thousands of crores in bank funds but will also set a crucial precedent for the interpretation and future application of the Insolvency and Bankruptcy Code.