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Supreme Court orders status quo on Bhushan Steel liquidation
Shares of JSW closed 2.13% higher at ₹1,030 apiece on a day the benchmark BSE Sensex index rose 0.56%.
The Supreme Court on Monday stopped liquidation proceedings of Bhushan Power and Steel Ltd , weeks after it scrapped JSW Steel’s deal to acquire the company.
The court’s order came after JSW Steel and other creditors told the court that they plan to file a review petition against the May 2 order, which rejected JSW’s acquisition of Bhushan Power & Steel and ordered that the company be liquidated. That order created a flutter in corporate and banking circles as it came six years after JSW’s deal was approved. The acquisition under India’s Insolvency and Bankruptcy Code, introduced in 2016, was often held up as an example of constructive resolution.
The liquidation was to happen before the National Company Law Tribunal (NCLT) and a bench of justices BV Nagarathna and Satish Chandra Sharma said it was not expressing any opinion on the merits of the case at the present stage, but that “it would be in the interest of justice if status quo is maintained on the proceedings pending in NCLT.”
The bench also recorded the assurance of senior advocate Neeraj Kishan Kaul, who appeared for JSW, that a review petition would be filed before the expiry of the limitation period. “We also record the submission of the senior counsel for the appellant that the review petition shall be filed prior to the expiry of the limitation period and in accordance with the law,” the bench said.
Shares of JSW closed 2.13% higher at ₹1,030 apiece on a day the benchmark BSE Sensex index rose 0.56%.
Arguing for a stay of the earlier order, Kaul submitted that NCLT was rushing to appoint a liquidator even though the window for filing a review petition had not closed.
“If a liquidator is appointed, we will be in great difficulty. It is a profit-making company and this resolution plan was given four years ago,” he said.
Solicitor General Tushar Mehta, representing the Committee of Creditors (CoC), did not oppose the plea for deferring the liquidation and suggested the matter be taken up on June 10 . “I am not opposing. NCLT will have to hear the matter. The question is on which date. Kindly ask them to take up this matter on June 10. Everybody’s interests is taken care of.”
When the bench noted that review petitions are not typically listed during the summer break, Mehta pointed out the large financial implications pertaining to the case. “This was a resolution plan implemented five years back. We have taken the money. Now, to reverse everything... they have taken money from other banks. Some of them are foreign banks. It will be difficult for them to deal with foreign banks. So some way will have to be found ,” Mehta told the Court.
The apex court is closed for the summer between May 26 and July 13, during which a vacation bench will sit to hear emergency matters.
The counsel appearing for Bhushan Steel’s former promoter argued that JSW’s appeal against NCLT’s order was not maintainable.
On May 2, the Supreme Court had rejected JSW Steel’s ₹19,700 crore acquisition of BPSL, calling it illegal and in breach of the Insolvency and Bankruptcy Code (IBC). The Court had noted at the time that the resolution professional and the CoC should never have approved the plan and ordered the liquidation of Bhushan Power.
The insolvency proceedings began in 2017. In 2019, several steel companies, including Tata Steel and JSW came up with resolution plans offering to acquire the BPSL. JSW Steel emerged victorious in the bidding race and in September 2019, NCLT had approved its resolution plan.
