‘ARTICLE 142 INVOKED TO DO INJUSTICE’: SUPREME COURT RECALLS VERDICT REJECTING JSW’S RESOLUTION PLAN FOR BHUSHAN POWER & STEEL:

On July 31, the Supreme Court took a significant step in the ongoing legal battle involving JSW Steel's resolution plan for Bhushan Power and Steel Ltd. (BPSL), by recalling its earlier judgment delivered on May 2, which had rejected the resolution plan and directed the liquidation of the company. The Court acknowledged that the previous decision might not have aligned with established legal precedents and required reconsideration. A bench comprising Chief Justice BR Gavai and Justice Satish Chandra Sharma decided to re-hear the matter afresh, keeping all legal arguments open for the parties to present during the next hearing scheduled for Thursday.

In its order, the bench noted that the May 2 judgment appeared, on a prima facie basis, to have failed to accurately apply the legal principles established by a series of past rulings. Furthermore, it was submitted that the judgment relied on certain incorrect factual assertions and even considered arguments that were allegedly not raised during the earlier hearings. Although Senior Counsel Dhruv Mehta, representing the respondents, disputed this claim, the Court was of the view that the case merited a full reconsideration. Accordingly, the judgment was recalled, and the appeal will now be heard afresh.

Chief Justice Gavai stated that the bench was inclined to allow the review petition since the judgment appeared inconsistent with prior legal precedents. He emphasized that the review would be conducted based solely on the content of the judgment itself and not on any additional documents. Notably, Justice Satish Chandra Sharma, one of the judges who had authored the original judgment, had also agreed to the review. The Chief Justice remarked that he had spoken with Justice Sharma, who graciously admitted that the matter required reconsideration.

CJI Gavai also underscored the importance of considering ground realities, highlighting that JSW had already invested nearly Rs.20,000 crores in BPSL and that the livelihood of approximately 25,000 workers was at stake. He observed that Article 142 of the Constitution, which grants the Court extraordinary powers to do complete justice, must not be used in a manner that results in injustice to thousands of people. In this context, the Chief Justice reiterated the principle that the commercial wisdom of the Committee of Creditors (CoC), especially when upheld by both the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), should not be interfered with lightly.

Solicitor General Tushar Mehta, appearing for the CoC, supported the review. He pointed out that while BPSL had once been in severe financial distress, it was now a functioning company due to JSW Steel’s acquisition. He argued that the liquidation order under Article 142 was passed for relatively minor violations. Mehta also questioned whether a breach of procedural timelines—an issue flagged in the judgment was serious enough to invalidate a resolution plan that had been successfully implemented over five years.

Senior Advocate Neeraj Kishan Kaul, appearing for JSW Steel, warned that the judgment sent a “dangerous signal” to investors. He argued that a plan worth Rs.20,000 crores, approved by the CoC, NCLT, and NCLAT, was being nullified without proper justification. Kaul further questioned the locus standi of BPSL’s promoter in challenging the resolution, stating that only a creditor could have standing to do so, not the promoter whose actions had led to the company’s financial collapse. He urged the Court to consider the significant investment and successful implementation of the resolution plan, adding that the judgment contained “glaring, palpable errors,” and ignored both statutory provisions and correct facts.

With all parties raising substantial concerns, the Court has now agreed to re-hear the matter comprehensively, signaling a major turning point in one of India’s most closely-watched insolvency cases.