India’s Supreme Court concluded hearings this week in a contentious case over JSW Steel’s $2.3 billion bid to acquire Bhushan Power & Steel Ltd (BPSL) through India’s bankruptcy mechanism, with the judgment now reserved.
The high-stakes legal battle, heard on August 7th, 8th, and 11th, 2025, involved intricate interpretations of India’s Insolvency and Bankruptcy Code (IBC) and featured heated exchanges between the counsel for BPSL, the Committee of Creditors (CoC), and the Successful Resolution Applicant (SRA), JSW.
The proceedings centred on several contentious issues, including JSW’s alleged non-compliance with its revised bid, the very nature and continued existence of the CoC, the impact of asset attachment by the Enforcement Directorate (ED), the locus standi of promoters to challenge the resolution plan, and the rightful distribution of Earnings Before Interest, Taxes, and Amortization (EBITA).
Issue 1: Alleged fraud in bid proposal, enforcement roadbloack
Senior Advocate Dhruv Mehta, representing Bhushan’s promoters through Kalyani Transco, accused JSW of fraud for failing to deliver on upfront payments that secured additional evaluation points, allowing it to outbid Tata Steel’s ₹16,000 crore offer with a revised ₹19,000 crore proposal.
Solicitor General Tushar Mehta, defending the Committee of Creditors (CoC), countered that the delays were justified due to enforcement actions that froze company assets. JSW was represented by Senior Advocate Neeraj Kishan Kaul.
The dispute traces back to 2019 when JSW’s original ₹11,000 crore bid scored just 35 points under the evaluation matrix, well behind Tata Steel’s 65 points for its ₹16,000 crore offer. JSW’s game-changing revised bid promised upfront payments to creditors and ₹8,000 crore in equity infusion, catapulting it to winning status.
However, financial creditors weren’t paid until March 2021—550 days after approval—while operational creditors waited until March 2022. “The very basis on which JSW received additional points has not been complied with,” argued Mehta.
JSW has infused only ₹100 crore in equity so far, though it issued Compulsory Convertible Debentures for additional funding, which Justice Gavai acknowledged as equivalent to equity “in the long term.”
JSW attributed implementation delays to the Enforcement Directorate’s provisional attachment of company properties in April 2018 over money laundering allegations against Bhushan’s former promoters. Despite Supreme Court and NCLAT orders, assets remained frozen until December 2024, creating uncertainty that JSW claimed made it unreasonable to invest in attached properties.
JSW’s counsel argued that despite an NCLAT order, effective protection only materialized after a Supreme Court order on December 11, 2024, which formally restituted the assets. They stated that it was unreasonable to expect JSW to invest heavily in attached properties and highlighted that the CoC itself had acknowledged the ED attachment as a cause for delay. JSW contended that the CoC failed to provide an unencumbered asset as stipulated in the bid plan.
The CoC acknowledged this challenge, with Mehta noting that enforcement actions “penalized innocent parties” and were contrary to the Insolvency and Bankruptcy Code’s intent.
Section 32A provides immunity to new owners from previous management’s criminal acts, but JSW argued practical protection was lacking. The CoC agreed that it is unfair to expect SRA to pump crores into an attached property.
BPSL’s counsel, however, countered that JSW had been granted complete protection and immunity, and had denied that the plan was conditional on such relief. It was argued that due diligence had been conducted, and ongoing criminal cases cannot be used as a shield for non-fulfillment of plan conditions.
It was noted that JSW implemented the plan after an escrow account was created and steel prices significantly increased in 2021. Justice Sharma acknowledged that the ED released the property in December 2024.
Issue 2: The EBITA profit battle
A parallel dispute emerged over ₹300 million in EBITA (Earnings Before Interest, Tax, and Amortization) profits generated during the 900-day implementation delay.
The CoC argued that non-payment of EBITA provided a strong cause for reconsideration, stating that the CoC had suffered substantial daily losses (₹11.18 crore) and total losses of ₹67.80 crores due to the SRA’s failure to implement the plan. They asserted that since the corporate debtor earned profit under the resolution professional’s management, and the CoC had foregone approximately ₹20,000 crores, EBITA should be distributed to the stakeholders, as it represents public money. NCLT had held that EBITA must go to creditors, and the CoC cited Essar Steel India Ltd. v. Satish Kumar Gupta.
JSW’s counsel, however, defined EBITA as an asset of the company, not a distributable profit, and emphasized it was not contemplated in the RFRP or the plan, implying JSW would have bid differently if it had been. JSW’s counsel argued that Essar Steel was silent on pre-approval EBITA distribution and that the Supreme Court in Essar held that “what is silent need not be given”.
JSW maintained that bidding was on a “going concern” basis, where EBITA remains with the company. JSW also cited the resolution professional’s affidavit, stating a loss of approximately ₹15,000 crores, and the CoC’s own written submissions which stated EBITA may remain with the company.
Justice Gavai interjected that the RP did reduce losses by ₹1,000 crores, which increased the company’s worth, though JSW’s counsel maintained cut-down losses were not distributable profit. BPSL’s rebuttal highlighted that JSW had all relevant financial information as per Regulation 36(2) while bidding, and the bid was not contingent upon EBITA.
Legal experts are divided on the implications. “This move directly threatens the ‘clean slate’ principle, a cornerstone of the IBC designed to attract investors by shielding successful resolution applicants from past liabilities,” warned Chirag Gupta, Associate Partner at Alpha Partners. “This uncertainty would inevitably lead to more conservative bids.”
However, others see potential benefits. “Such an order from the Hon’ble Apex Court with respect to giving the earnings of the Corporate Debtor from the date of the approval of the Resolution Plan and the final date of implementation to the CoC would only strengthen the timebound process enshrined under the IBC,” said Amir Bavani, Founder of AB Legal, Hyderabad.
Bavani cautioned that favoring lenders “could cause a certain amount of discomfort vis-à-vis the willingness of potential Resolution Applicants to enter the insolvency fray to rescue a high-value Corporate Debtor.”
Issue 3: CoC’s status post approval
A major point of contention revolved around the CoC’s role post-approval of the resolution plan. BPSL’s counsel argued that the CoC becomes “functus officio” (losing its authority) once the plan is approved, rendering any subsequent negotiations or indefinite clauses on implementation contrary to law and frustrating the IBC’s objectives. Justice Gavai concurred that open-ended clauses indeed undermine the IBC’s purpose.
Conversely, Mehta, representing the CoC, asserted that the IBC’s framework implies the CoC’s continuous existence until final adjudication, including appeals. He cited various sections of the IBC (S. 21, 23(1) proviso, 28, 30, 33) and Regulation 18 to support the CoC’s ongoing functions and delegation of authority through monitoring committeee. He pointed out that the CoC, in its commercial wisdom, approved the plan with 97.25 per cent votes, and the plan itself stipulated its continuing power.
JSW’s counsel added that extensions were permitted under Regulation 38(2), (3) and were not “open-ended” as prohibited by the Ebix judgment, but rather justifiable and legally permissible
Issue 4: Promoters’ locus standi
A subsidiary issue involves whether Bhushan’s former promoters have legal standing to challenge the resolution plan. BSPL’s counsel argued that the erstwhile promoters gave personal guarantees and are stakeholders, thus affected and fall under the category of ‘aggrieved persons’ under Section 61 and 62 of the IBC.
But Mehta, for the CoC, argued that ‘any aggrieved person’ does not include defaulting creditors or promoters who “brought the company to dust.” Kaul, for JSW, argued that backdoor entry to promoters can derail the proceedings. Reliance was placed on Arun Kumar Jagatramka v. Jindal Steel and Power Ltd to argue that problems of the earlier regime should not re-enter through “disingenuous stratagems.”
The Supreme Court’s eventual ruling will likely establish crucial precedents for India’s bankruptcy resolution process, particularly regarding bid implementation timelines, interim profit allocation, and the finality of creditor committee decisions.
With over 4,000 cases pending under the Insolvency and Bankruptcy Code, the decision could significantly impact how future corporate rescues unfold, potentially requiring explicit EBITDA treatment clauses in all resolution plans.
