Bhushan Steel assets: ED back in play with Supreme Court scrapping JSW Steel’s resolution plan

Bhushan Steel lenders are also likely to explore ways to bring these attached assets, previously protected under the Insolvency and Bankruptcy Code (IBC) provisions, into liquidation proceedings.

“Now, with the resolution plan set aside, even those ED attachments may be revived. A broader question also arises: can properties attached under a different statute be brought under liquidation proceedings at all?" solicitor general Tushar Mehta had said during a 13 May hearing before the National Company Law Tribunal (NCLT).

According to lawyers, the quashing of the resolution plan effectively turns the clock back to the pre-resolution stage, allowing ED proceedings to resume. The protection once offered under Section 32A of the IBC—which was designed to grant immunity to new owners from past liabilities and facilitate smooth asset transfers—no longer applies.

While the ED can resume proceedings under the Prevention of Money Laundering Act (PMLA), the fate of the attached assets is uncertain, and may be decided by special courts under the PMLA, experts said.

“While the ED can now potentially continue its proceedings, the validity of these attachments and whether they can be brought into liquidation remains a grey area," said Divij Kumar, partner at IndusLaw.

Also Read: Mint Explainer: The Supreme Court's Bhushan Power ruling that has stunned India's insolvency ecosystem

 “The Supreme Court made it clear that NCLT and NCLAT don’t have jurisdiction over ED’s asset attachments under the PMLA. Since PMLA deals with public law, any challenge to such attachments must be made before PMLA courts, high courts, or the Supreme Court—not insolvency tribunals," said Siddharth Srivastava, partner at Khaitan & Co.

The PMLA is a criminal statute enforced through special courts. It governs attachment, confiscation, and release of assets linked to alleged proceeds of crime. 

Insolvency courts, as the Supreme Court reiterated in Bhushan Steel ruling, lack jurisdiction over such matters.

"The Supreme Court's rulings strongly suggest that assets confirmed as ‘proceeds of crime’ under PMLA may take precedence over other claims, including those of secured creditors, and might not be available for distribution under the IBC's standard liquidation," noted Aviral Kapoor, partner, Alagh & Kapoor Law Offices.

However, Chirag Gupta, associate partner at Alpha Partners, said the issue would now depend on the view that may be taken by the NCLT. "The present status of the assets of BPSL will have to be examined, and only then can the treatment of those assets be considered." 

Also Read: House panel to scan IBC functioning after SC's Bhushan order 

The ED probe

In December 2024, the ED had returned BPSL’s attached assets to JSW Steel following the Supreme Court’s earlier direction. These assets had originally been provisionally attached in 2019 as part of a money laundering probe involving BPSL’s former promoters. The NCLAT-approved resolution plan had, at the time, stayed PMLA proceedings.

Subsequently, on 8 February 2025, the Delhi high court quashed the ED’s case against BPSL, relying on Section 32A and the IBC’s ‘clean slate’ doctrine. However, the apex court ruling now puts ED back into the position of enforcement. 

IBC’s ‘clean slate’ promise 

Lawyers point out that the ruling strikes at the heart of the IBC’s ‘clean slate’ principle—a legal doctrine aimed at encouraging new bidders by shielding them from past liabilities of the bankrupt company.

This principle, first affirmed in the 2019 Essar Steel ruling and codified in Section 32A through a 2020 amendment, was meant to make distressed assets more attractive by ensuring legal finality for buyers.

“This ruling appears to dilute IBC’s clean slate promise—a cornerstone for attracting credible resolution applicants. It may also embolden enforcement actions during insolvency, increasing legal uncertainty in cases with parallel PMLA proceedings," said Hardeep Sachdeva, senior partner at AZB & Partners.

Also read: Prolonged uncertainty awaits JSW Steel after Supreme Court rejects resolution plan for Bhushan Power

Call for legislative clarity

Lawyers are now calling for legislative or executive clarity on the issues involving the IBC and PMLA, particularly in high-value cases where both laws come into play.

“A legislative or executive clarification is needed to remove ambiguity, streamline the process, and avoid deterring the market from bidding for stressed assets with existing ED attachments," said Srivastava of Khaitan & Co.

Rishabh Gandhi, founder, Rishabh Gandhi & Advocates, suggested amending Section 32A to insulate resolution applicants from revived enforcement even if a plan is overturned later.

“Alternatively, the government must establish clear rules prioritising IBC proceedings over PMLA attachments—at least in bona fide cases," Gandhi added.