Introduction

The Insolvency and Bankruptcy Code, 2016 (IBC), a pillar reform in India’s corporate sector, was enacted to make insolvency proceedings efficient and induce investor trust by ensuring timely resolutions[1]. The Insolvency and Bankruptcy Code envisages a time-bound Corporate Insolvency Resolution Process (CIRP), placing the resolution professional as a neutral facilitator and the Committee of Creditors as the primary decision-making body, all under the judicial oversight of the National Company Law Tribunal and National Company Law Appellate Tribunal (NCLAT). The Supreme Court’s May 2025 judgment annulling JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel has raised critical questions on the sanctity and finality of approved resolutions under the Insolvency and Bankruptcy Code, emphasizing that procedural compliance cannot be compromised even with an approved and working plan[2]. The Court emphasised that all stakeholders must comply with procedural rules and maintain transparency throughout the Corporate Insolvency Resolution Process (CIRP).

JSW Steel had been the successful resolution bidder for Bhushan Power and Steel in 2019 following a long insolvency process. The scheme, proposed at a bid of ₹19,700 crore, had been sanctioned by the Committee of Creditors (CoC) and subsequently by the National Company Law Tribunal (NCLT), and implemented in 2021. However, the Supreme Court observed that the resolution plan approval process suffered from insufficient scrutiny of disclosures, inadequate verification of related-party connections, and procedural lapses by the Resolution Professional, which cumulatively undermined the statutory objectives of the Insolvency and Bankruptcy Code.

The judgment of the Supreme Court emphasised that the resolution process has to strictly adhere to the procedure prescribed under the Insolvency and Bankruptcy Code. One of the main legal observations was the failure of due disclosures on the part of the resolution applicant and a lack of diligence on the part of the resolution professional and the committee of creditors. The Court emphasised that the integrity of the resolution process is non-negotiable, and any lapses, even if commercially convenient, can justify revocation of the plan. The Court emphasised that compliance with procedure under Sections 29A, 30(2) and 31 of the Insolvency and Bankruptcy Code is not technical, but is fundamental to the legitimacy of the resolution process[3].

Section 29A of the Insolvency and Bankruptcy Code assumes significant importance by excluding some parties from filing resolution plans, especially those associated with the defaulting promoters. Charges had been made that JSW’s plan could have included related parties or tainted parties, which should have resulted in disqualification. The omission to probe such connections and blanket approval by the Committee of Creditors without due diligence were regarded by the Supreme Court as serious violations of the statutory mandate. Furthermore, the Court concluded that judicial scrutiny was not applied adequately by the National Company Law Tribunal and the National Company Law Appellate Tribunal while approving the plan, thus subverting the checks and balances envisaged by the Code.   

The judgment also emphasised the significance of the duty of the Resolution Professional to ensure there is fair, transparent, and impartial behaviour during the CIRP. The Resolution Professional must act as a third-party facilitator and overseer, ensuring eligibility and checking all disclosures for proper consideration. Here, the Resolution Professional’s silence and the Committee of Creditors’ passive acceptance constituted defaults on statutory obligations. This highlights the critical role of Resolution Professionals in safeguarding statutory compliance and investor confidence, which forms the backbone of the IBC’s credibility. The Supreme Court thereby held that such omissions vitiated the entire process and entitled to liquidation instead of continuance under an illegal plan.

The Court also voiced apprehension regarding the larger consequences of permitting defective plans to stand. It noted that the permission of such irregularities would undermine the legitimacy of the Insolvency and Bankruptcy Code, discourage bona fide investors, and destabilise the insolvency platform. The Court drew attention to the broader systemic impact, noting that allowing procedural shortcuts would erode the rule of law in the corporate insolvency framework.  The doctrine of finality cannot derogate from fundamental legal compliance. In reaffirming this position, the Court quoted the ex debito justitiae[4] principle, emphasising that justice must be administered where statutory rights are violated, regardless of the time elapsed.

This decision has been likened to previous landmark judgments. In ArcelorMittal India Private Limited v. Satish Kumar Gupta [5]The Supreme Court affirmed strict enforcement of Section 29A and held that eligibility shall not only be determined at the time of filing but from the commencement up to the termination of the resolution process. Similarly, in Essar Steel India Ltd. v. Satish Kumar Gupta [6]The top court pointed out that the commercial acumen of the CoC is amenable to judicial scrutiny when procedural or legal lapses are apparent. The JSW Steel verdict reinforces the principle that statutory compliance is the baseline for assessing the legitimacy of a resolution plan, irrespective of the elapsed time or commercial consequences.

In addition, the Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd.[7] Judgment established the principle that in case the Corporate Insolvency Resolution Process is affected by some material irregularity or fact suppression, the courts can step in even after approval of the plan. Such jurisprudence highlights the Supreme Court’s willingness to revisit previously approved resolutions in order to uphold the primacy of statutory mandates over procedural convenience. These judgments constitute the jurisprudential foundation of the May 2025 order in line with the Supreme Court’s general policy of guaranteeing commercial convenience with legal sanctity[8].

The Bhushan Power & Steel case underscores critical loopholes in the practical application of the IBC framework. While the Code attempts to resolve insolvency in a time-bound manner, delay in litigation and institutional players’ failure to exercise scrutiny threaten its success. The verdict also resonates with the emerging discussion on Insolvency and Bankruptcy Code and Prevention of Money Laundering Act interaction, where statutory enforcement actions (like asset attachment) must balance economic revival with legal compliance.  This case also highlights the need for rigorous economic and market evaluation, as annulment of a plan years after approval can impact investor confidence and corporate debt markets. The order of liquidation aims, albeit extreme, as a reboot to restore confidence in the system.

On the legal front, this case reaffirms the point that although the Committee of Creditors enjoys primacy of decision-making, its jurisdiction is not untrammelled. Insolvency and Bankruptcy Code envisions a balanced mechanism under which the commercial sense of the creditors must be weighed against judicial oversight to ensure compliance is under the statute. The role of the National Company Law Tribunal and the National Company Law Appellate Tribunal as watchdogs and not a rubber stamp was emphasised, reminding adjudicatory authorities of their role to scrutinise every detail of a resolution plan in depth. The verdict underscores that judicial review must ensure strict adherence to Insolvency and Bankruptcy Code provisions, safeguard against tainted promoters, and enforce transparency, echoing principles also observed in Prevention of Money Laundering Act vs. Insolvency and Bankruptcy Code adjudications. Globally, similar insolvency frameworks allow plan flexibility but maintain strict statutory compliance, reinforcing the importance of adhering to Insolvency and Bankruptcy Code provisions in India[9].

For lawyers, investors, and policymakers, the verdict is a harsh reminder that adherence to the rule of law in the IBC regime is not a matter of compromise[10]. It is also a sign of the judiciary’s growing tendency to reopen settled transactions where material omissions or procedural lapses are found. It also signals the need for enhanced due diligence, meticulous documentation, and proactive monitoring by all stakeholders in the Corporate Insolvency Resolution Process to prevent long-term destabilisation. This development will prompt all stakeholders involved in future Corporate Insolvency Resolution Process to adopt a more rigorous due diligence process, ensure meticulous and enhanced documentation, and maintain a cautious and vigilant approach throughout the resolution process to uphold transparency and statutory compliance.

In conclusion, the Supreme Court decision against the JSW-Bhushan Power & Steel resolution plan is a forceful reaffirmation that sanctity of procedure and fidelity to statute cannot ever be compromised, even in high-stakes insolvency proceedings. By reaffirming the foundational principles of the Insolvency and Bankruptcy Code, 2016, not as an indulgent facilitative economic legislation but as a stern legal code, the Court has reaffirmed the message that the resolution processes have to be guided by the highest standards of transparency, fairness, and legal rigour. In the larger scheme, this judgment puts the IBC back on its fundamental promise: to deliver speedy yet fair resolutions, safeguard stakeholder interests, and create a creditor-led, rule-based regime in which economic expediency never comes at the cost of the rule of law. While the judgment may create short-term uncertainty among investors and affect commercial certainty, it unequivocally strengthens the long-term integrity, credibility, and rule-based foundations of India’s insolvency regime, ensuring that economic expediency never supersedes the rule of law. Ultimately, the JSW Steel judgment reinforces that the insolvency framework must remain anchored in legality, procedural fidelity, and investor confidence, aligning commercial objectives with statutory mandates.

Reference

[1] Insolvency and Bankruptcy Code, 2016, No. 31 of 2016, Sec 1

[2] Live Law, Supreme Court Cancels JSW Steel Resolution Plan for Bhushan Power & Steel, May 2025

[3] Insolvency and Bankruptcy Code, 2016, Sec 29A, 30(2), 31.

[4] Doctrine of Ex Debito Justitiae.

[5] ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1

[6]  Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531

[7] Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC, (2021) 5 SCC 624

[8] Live Law, supra note 2

[9] Vikash Kumar Jha & Namrata Sadhnani , IBC vs. PMLA: Supreme Court Reinforces Jurisdictional Boundaries in Kalyani Transco Case, June 10, 2025,

[10] Live Law, supra note 2