The Supreme Court (SC) of India has annulled the takeover of Bhushan Power and Steel Ltd (BPSL) by JSW Steel Ltd, citing irregularities in the insolvency resolution process. The SC found that JSW Steel had altered the terms of its bid, delayed payments, and reneged on its commitment to pay off operational creditors. The Committee of Creditors (CoC) and the Resolution Professional (RP) were also criticized for their handling of the case. The SC’s decision has raised questions about the effectiveness of the Insolvency and Bankruptcy Code (IBC) and the role of the Insolvency and Bankruptcy Board of India (IBBI) in regulating the resolution process.
The BPSL case began in 2017, when the Reserve Bank of India forced banks to subject 12 big defaulting corporate borrowers to the IBC pathway. Eight years later, several cases remain unresolved, and the BPSL case has joined their ranks. The SC’s decision has been criticized for its apparent disregard of alternative remedies that could have penalized offenders without causing significant harm to economic value and the reputation of India’s insolvency resolution process.
The IBBI, the relevant regulator, was not held accountable for its ineffective oversight of the resolution process. The SC’s decision has raised questions about whether the IBC process needs to be overhauled to prevent such setbacks. Some have suggested that the IBBI should be strengthened to become a true regulator, rather than just a framer of bylaws. Others have proposed adopting a US-style model, where the incumbent management is given a chance to revive the company under court supervision.
The SC’s decision has also highlighted the need for integrity and efficiency in the insolvency resolution process. The case has shown that poorly used assets need to be shuffled into more capable hands quickly, and that the judiciary should prioritize penalizing fraudsters rather than ripping up already built assets. The answers to these questions are not straightforward, but it is clear that the IBC process needs to be reformed to prevent such setbacks and ensure that insolvency resolution is done speedily and efficiently.
Overall, the SC’s decision in the BPSL case has significant implications for India’s insolvency resolution process and highlights the need for reform. The case has shown that the IBC process is not foolproof and that there are gaps that need to be addressed. The government and regulatory bodies need to take steps to strengthen the IBBI and ensure that the insolvency resolution process is transparent, efficient, and effective. This is essential for maintaining investor confidence and ensuring that India’s economy remains dynamic and competitive.