Mint Quick Edit | JSW-Bhushan case: Close insolvency process gaps
Summary
The scrapping of JSW’s acquisition of Bhushan Power and Steel under India’s Insolvency and Bankruptcy Code by the Supreme Court doesn’t just impact one resolution case. It spotlights a need to minimize faulty IBC resolutions in general.Last week, the Supreme Court set aside the acquisition of Bhushan Power and Steel Ltd by JSW Steel. This raises fresh questions about the integrity of how insolvencies are resolved in India.
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The mechanism under the Insolvency and Bankruptcy Code enacted in 2016 has had some success in offering a pathway for insolvent companies to either be acquired or dissolved for their assets to be reallotted. But in this case, the top court ruled JSW’s resolution plan illegal and poorly implemented, and found that the Committee of Creditors and resolution professional had failed to abide by the code.
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As a result, four years after the case was thought to have been resolved, the court didn’t just scrap JSW Steel’s purchase, but asked for the acquisition target to be liquidated instead. Apart from the trouble involved in undoing what has been done, this ruling could cast a shadow on other bankruptcy cases too.
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The apex court’s sharp observations may also weaken confidence in the National Company Law Tribunal and its appellate body that approve of resolution plans and pass orders. It’s important that the scope for faulty resolutions is minimized. Such setbacks must never arise.
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