The government has identified several “errors” in the Supreme Court’s May 2 verdict that declared JSW Steel’s acquisition of Bhushan Power and Steel Ltd (BPSL) illegal, and is now considering seeking a stay on the ruling, according to sources.
Two senior government officials confirmed that the Committee of Creditors (CoC) plans to file a review petition with the Supreme Court within the next two weeks, challenging the judgement.
“The objective is to obtain a stay on the ruling. It appears the court has made significant errors, particularly regarding the conduct of the resolution professional and the roles of the NCLT and NCLAT, which have been mischaracterized,” a senior official told Moneycontrol after reviewing the court’s decision.
Sources also revealed that top executives from JSW Steel met with officials from the Ministry of Corporate Affairs (MCA), the Insolvency and Bankruptcy Board of India (IBBI), and the Department of Financial Services (DFS) earlier this week to discuss the implications of the ruling.
Financial Services Secretary M Nagaraju had earlier told Moneycontrol that the government is actively examining the Supreme Court judgement and assessing all legal options. Officials are concerned that the ruling could dampen investor confidence and harm the overall business environment.
On May 2, the Supreme Court invalidated JSW Steel’s ₹19,700 crore acquisition of BPSL and directed the company to be liquidated. JSW’s acquisition was part of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), approved by the National Company Law Tribunal (NCLT) in 2019.
However, five years later, the apex court overturned the resolution plan, citing missed timelines, lapses in creditor oversight, and questionable promoter-linked structures that were allowed to proceed despite several irregularities.
Under the original resolution plan, ₹19,350 crore was allocated to financial creditors and ₹350 crore to operational creditors. With the deal now scrapped, banks such as the State Bank of India and Punjab National Bank will be required to return the funds and proceed with the liquidation of BPSL, officials said.
NCLT/NCLAT Acted Within Law, Govt Maintains
A central issue raised by the court was that neither the NCLT nor the NCLAT has judicial review powers over decisions taken by statutory authorities under the Prevention of Money Laundering Act (PMLA). The court emphasized that both bodies are constituted under the Companies Act, not under the IBC.
Government officials, however, argue that both the NCLT and NCLAT acted within the legal framework, especially under Section 32A of the IBC, which provides immunity to the corporate debtor from prosecution for offences committed before the initiation of CIRP, once a resolution plan is approved.
In October 2019, the Enforcement Directorate (ED) issued a provisional attachment order on BPSL’s assets worth over ₹4,000 crore for alleged PMLA violations by its previous promoters. This came after the NCLT had already approved JSW Steel’s acquisition in September 2019. JSW challenged the ED’s move in the NCLAT and secured a stay on the attachment.
Officials argue that any PMLA-related penalties should target BPSL’s former promoters, not the corporate debtor or the acquiring company. “The judgement undermines the IBC framework and could discourage future investments. This contradicts the intent of the law and sets a worrying precedent,” another government official told Moneycontrol.
Legal Experts Raise Concerns
Legal experts also expressed apprehension over the ruling’s broader implications. The Supreme Court had earlier upheld the “clean slate” principle under Section 32A of the IBC in landmark cases like Essar Steel and Ghanshyam Mishra in 2021, which stated that successful resolution applicants are not liable for past offences of the corporate debtor.
“The latest ruling appears to narrow this protection, stating that Section 32A does not shield against public law proceedings such as those under PMLA. While promoter liabilities remain intact, this ruling blurs protections for resolution applicants,” said Kalpit Khandelwal, Partner at Aekom Legal.
Yogendra Aldak, Partner at Lakshmikumaran & Sridharan Attorneys, added that the judgement opens the door for judicial reviews that could reopen even completed insolvency cases if procedural lapses are later identified.
“It raises concerns about the sanctity of the commercial wisdom of the CoC, regardless of the significant economic impact on stakeholders,” Aldak noted.