Introduction:

In a landmark development in India’s insolvency jurisprudence, the Supreme Court of India on July 31, 2025, agreed to reconsider its earlier ruling which had rejected the ₹19,700 crore resolution plan submitted by JSW Steel for the revival of Bhushan Power and Steel Limited (BPSL). The previous judgment, dated May 2, had directed the liquidation of BPSL on the grounds of procedural violations under the Insolvency and Bankruptcy Code (IBC), particularly Sections 30(2) and 31(2). The decision had sent shockwaves through the insolvency ecosystem, given that the resolution plan had already been implemented, and significant investments had been made. The review petition was filed under Case No. R.P.(C) No. 1432/2025 titled Punjab National Bank and Anr. v. Kalyani Transco and Ors., wherein the petitioners—Punjab National Bank, JSW Steel, and several other creditors—challenged the May 2 verdict. On July 31, a Bench comprising Chief Justice BR Gavai and Justice Satish Chandra Sharma recalled the previous judgment citing serious legal and factual errors. The Court observed that the verdict did not align with the legal principles laid down in a series of binding precedents and decided to re-hear the matter afresh, keeping all questions open for argument.

Arguments of the Petitioners Supporting the Review:

Solicitor General Tushar Mehta, appearing for the Committee of Creditors (CoC), strongly supported the recall of the earlier judgment. He argued that the Supreme Court’s May 2 decision ordering liquidation of BPSL, a company now revived and operating viably, was fundamentally flawed. Emphasising the revival brought about by JSW Steel, SG Mehta argued that the company was in severe financial crisis prior to the resolution and has now turned into a healthy enterprise due to the significant investments and restructuring undertaken by JSW. He further highlighted that the violations cited in the impugned judgment, particularly regarding timeline breaches in the submission of the resolution plan, were not so grave as to merit liquidation. These timelines, SG argued, are extendable under the IBC framework and their breach should not automatically lead to setting aside a resolution plan, especially one that has been approved by the CoC, the National Company Law Tribunal (NCLT), and the National Company Law Appellate Tribunal (NCLAT). He questioned whether a delay—especially one that wasn’t attributable to the resolution applicant—should be held fatal when the resolution plan had already been successfully implemented over five years. The Solicitor General also pointed out that JSW Steel had raised substantial loans to finance the acquisition and turnaround of BPSL, making the Supreme Court’s earlier order devastating for the company, its stakeholders, and employees.

Senior Advocate Neeraj Kishan Kaul, appearing for JSW Steel, asserted that the earlier judgment had ignored critical statutory provisions and had taken into consideration facts that were neither argued nor pleaded. He contended that the verdict sends a dangerous precedent that undermines the entire IBC framework, where a resolution applicant, despite investing around ₹30,000 crores and successfully implementing the resolution plan, is left to face liquidation orders based on procedural errors. Kaul forcefully argued that the commercial wisdom of the CoC, which is protected under IBC jurisprudence, had been overridden without sufficient justification. He emphasised that the resolution plan had been approved not only by the CoC but also by the NCLT and NCLAT, following rigorous evaluation. In his view, a promoter who was responsible for the financial downfall of BPSL had no standing to challenge the resolution plan, especially when the creditors had not raised any objections. Kaul also invoked the doctrine of “substantial compliance” to argue that minor procedural deviations should not derail an entire resolution process, especially when the outcome has been positive for the company and its employees. He urged the bench to recall the judgment entirely and rehear the matter afresh, as this was a textbook case of “glaring error” and violation of natural justice principles.

CJI BR Gavai echoed many of these concerns during the hearing. Observing that the earlier ruling did not conform to settled law, the CJI stated that prima facie the judgment needed to be reviewed. The Chief Justice stressed the importance of considering ground realities such as the employment of over 25,000 workers and the massive infusion of capital by JSW Steel. Citing Article 142 of the Constitution, which empowers the Court to do “complete justice,” the CJI remarked that the provision must be used to protect livelihoods, not disrupt them. He further underscored that, as per established precedents, courts should not lightly interfere with the commercial decisions of the CoC, particularly when they have been upheld by both the NCLT and NCLAT. The CJI also revealed that Justice Satish Chandra Sharma, one of the authors of the impugned May 2 ruling, had graciously admitted that the judgment required reconsideration, thus lending further credibility to the decision to recall it.

Arguments in Opposition by the BPSL Promoter:

Senior Advocate Dhruv Mehta, appearing on behalf of the erstwhile promoter of BPSL, opposed the recall of the May 2 judgment. Mehta stood by the original finding that JSW Steel had allegedly violated key provisions of the IBC by not implementing the resolution plan within the stipulated timeframe and by making misrepresentations before the CoC. He contested the assertion that facts were misrepresented or that arguments not raised were considered in the earlier judgment. Mehta argued that compliance with procedural requirements under the IBC is fundamental and that the Supreme Court was right in holding JSW accountable for delaying the implementation and failing to disclose vital facts during the CIRP process. He maintained that judicial scrutiny of CoC decisions is valid when there is prima facie evidence of misuse of the insolvency framework, as he believed was the case here. Further, Mehta defended the promoter’s standing to challenge the resolution plan, arguing that he had a legitimate interest in ensuring the plan’s legality and fairness.

Supreme Court’s Prima Facie Findings and Recalling of Judgment:

The Supreme Court Bench of CJI BR Gavai and Justice Satish Chandra Sharma, after hearing the preliminary arguments, held that the May 2 judgment required reconsideration. In its order, the Court observed that the judgment had not correctly interpreted or applied the legal position established by a series of precedents under the IBC. The bench noted that several factual inaccuracies were taken into account, and certain arguments that were not even made were relied upon in the reasoning. It held that these factors collectively made the case fit for review. CJI Gavai further pointed out that Justice Sharma, one of the original authors of the May 2 judgment, had acknowledged the need for review, strengthening the case for recall. The Court recalled the May 2 ruling and directed that the matter be listed for a full-fledged hearing next Thursday. It clarified that all contentions of both sides would remain open and could be argued afresh. CJI Gavai strongly indicated that liquidation, especially under Article 142, should not be invoked lightly when such a decision could devastate thousands of lives and compromise the integrity of the IBC process. He underlined the need to balance strict statutory compliance with the principles of equity and justice.

The decision to recall the judgment and rehear the matter reflects the Court’s evolving understanding of the delicate balance between law and commercial reality in insolvency proceedings. By reopening the case, the Supreme Court has sent a strong signal that finality must not come at the cost of injustice, particularly where massive investments, employment, and systemic confidence in the IBC process are at stake.