Welcome to this week’s edition of TOPICAL WEDNESDAY! Today, we examine the Supreme Court’s recent verdict reversing JSW’s acquisition of Bhushan Power & Steel Ltd.
The JSW Steel’s acquisition of Bhushan Power and Steel Ltd. (BPSL) has been considered one of the big wins of India’s Insolvency and Bankruptcy Code that was introduced in 2016 to clean up corporate India’s mess created from rising NPAs after the 2008 financial crisis. With this acquisition, everyone seemed happy: JSW Steel got a huge strategic asset, BPSL received a knight in shining armor who saved its assets from liquidation, and creditors got some of their money back. The NCLT blessed this acquisition, and everyone was happy. Well… not everyone actually.
A group of operational creditors, those who provided goods and services to BPSL, felt ignored during the entire acquisition process. They decided to appeal to the Supreme Court. The Supreme Court, being the apex court and guardian of law, reviewed the entire process to determine if there was any wrongdoing. What it found was nothing short of a mockery of the law, where laws were violated or circumvented at every stage of the process multiple times. Therefore, on May 2, 2025, the Court delivered a verdict declaring the entire acquisition illegal and ordered the liquidation of BPSL.
This verdict shocked corporate India as it set a precedent for how major acquisitions under IBC must be carried out. You might think this will negatively affect India and its IBC, but if you flip that thought process, you’ll see the Supreme Court did nothing extraordinary—it simply upheld laws that were blatantly violated. The real winners in this ordeal would be, without doubt, the operational creditors who finally had their voices heard and will receive the benefits that should have accrued to them. This was a win for the smaller guys… relatively speaking.
We’re no law experts here, so let’s try to understand how it all began and what actually happened to make sense of why the Supreme Court took such a drastic decision.
BPSL’s Fall into Insolvency
Founded in 1970, Bhushan Power & Steel Ltd. was a leading private steel and power company with major facilities in Odisha, Punjab, and West Bengal. Its advanced plants allowed it to serve sectors like automotive, construction, and white goods, with a steel-making capacity of 2.75 MTPA. Despite strong revenues (Rs. 11,000 crore), the company struggled under an unsustainable debt load of Rs. 47,000 crore and razor-thin profit margins.
In 2017, Punjab National Bank (PNB) filed for insolvency proceedings under the IBC. BPSL was one of the “dirty dozen” large defaulters identified by the RBI for urgent resolution. On July 26, 2017, the NCLT admitted the case, officially kicking off BPSL’s insolvency process.
The Bidding War
Three major players emerged to acquire BPSL:
- Tata Steel: Rs.17,000 crore
- JSW Steel: Rs. 11,000 crore
- Liberty House (UK): Rs. 26,000 crore (submitted after the deadline)
Liberty House’s bid was rejected by the Committee of Creditors (CoC) for being late. They challenged this at NCLT, which led the NCLAT to order fresh bids from all three contenders. On July 26, 2018, revised bids came in:
- Tata Steel stuck with Rs. 17,000 crore
- Liberty House: Rs. 19,000 crore
- JSW Steel: Rs. 19,700 crore
On August 13, 2018, the CoC selected JSW Steel’s Rs 19,350 crore offer (revised from Rs. 18,000 crore). The NCLT approved this resolution plan in 2019.
How JSW Funded the Acquisition
JSW Steel agreed to pay Rs. 19,350 crore to BPSL’s financial creditors. While the deal was expected to be equity-led (as preferred under the IBC), JSW primarily used debt. Here’s how the funding worked:
JSW Investment via Merkel Pvt. Ltd. (SPV):
- Rs. 100 crore equity
- Rs. 8,450 crore via Optionally Convertible Debentures (OCDs), routed through a trust under Piombino Steel Ltd. (PSL), a JSW subsidiary.
The trust borrowed funds externally, backed by JSW shares through a put option—effectively securing the lenders and minimizing JSW’s upfront risk.
External Debt Raised by Merkel:
It raised Rs. 10,800 crore from banks (SBI: Rs. 7,300 crore, BoB: Rs. 3,500 crore)
(Source: Bastion Research)
Afterward, Merkel Pvt. Ltd. was merged into BPSL, transferring the Rs. 10,800 crore debt onto BPSL’s books.
So, while technically acquired, the resolution was largely debt-financed—contrary to the IBC’s expectation for significant equity infusion.
Delays in Execution
The insolvency resolution process for BPSL began on July 26, 2017, when the NCLT admitted the case under the IBC, 2016. JSW Steel’s resolution plan was approved by the CoC on October 16, 2018, and later by the NCLT on September 5, 2019, after a 771-day delay.
However, in October 2019, the Enforcement Directorate (ED) attached BPSL’s assets under the Prevention of Money Laundering Act (PMLA), citing alleged financial crimes by the previous management. This blocked JSW from taking control or investing funds.
In 2021, the Supreme Court ruled that resolution applicants under the IBC are not liable for crimes committed by prior management, clearing the way for implementation. As a result of these legal delays and the ED’s actions, JSW began payments to financial creditors in March 2021 and to operational creditors in March 2022, despite the resolution plan being approved by the NCLT in 2019.
However, it’s important to note that there was no legal bar from the NCLT preventing JSW from implementing the plan after September 2019. The company decided to delay, citing the practical impediment of the ED’s asset attachment, which stalled the process until it was resolved.
(Source: Bastion Research)
Completion of BPSL Acquisition:
JSW Steel, through its acquisition structure (involving PSL and Makler Pvt Ltd), acquired BPSL and subsequently consolidated its holding to 83.3% by October 2021.
After the takeover, JSW Steel invested Rs. 4,000 crore to expand BPSL’s production capacity from 2.75 MTPA to 4.5 MTPA, with plans to scale up to 10 MTPA by 2030. This turnaround led to strong financial performance: by FY24, BPSL contributed 10% to JSW Steel’s consolidated EBITDA, with annual revenues estimated at Rs. 22,000–Rs. 25,000 crore and net profit of Rs. 2,000–Rs. 2,500 crore.
The acquisition gave JSW a major presence in eastern India, improved its product mix, and supported its long-term growth strategy.
The business was turning around. But then came the harsh verdict from the Supreme Court.
Supreme Court Verdict: A Precedent Set
On May 2, 2025, the Court ruled JSW Steel’s acquisition of BPSL illegal, ordering liquidation. The key reasons:
- Violation of IBC Timelines – The process took 771 days instead of the mandated 270–330 days.
- Violation of IBC Intent – The resolution plan involved minimal equity (Rs. 100 crore), heavily relying on debt and OCDs. This goes against the Code’s intent—to ensure long-term viability through real equity infusion.
- Unjustified Delays Post-Approval – Despite NCLT clearance in 2019, JSW delayed execution till 2021 without a legal block—impacting creditors, especially operational ones.
In short, this wasn’t a technicality—it was a systemic failure to comply with both the letter and spirit of the IBC.
Financial Impact on JSW Steel:
BPSL raised Rs. 10,800 crore from banks under JSW Steel’s guarantee. They still owe this money to the banks. JSW has spent nearly Rs. 3,000 crore on expanding BPSL, money that is now effectively wasted. BPSL contributed around 10-15% to JSW’s consolidated EBITDA, causing an approximate impact of Rs. 4,000 crore in EBITDA and Rs. 22,000 crore in revenue.
Because of the verdict, JSW Steel’s share price dropped by 5.5% in a single day, resulting in the erosion of market cap by Rs. 13,731 crore. The Rs. 19,350 crore JSW Steel paid to banks for the acquisition of BPSL might be returned to JSW. However, there is still no certainty on recovery of those funds.
Conclusion:
If you think this was a bad decision by the Supreme Court that sets a major precedent against corporate India, think again. The violations mentioned by JSW and all other parties involved did happen—the Supreme Court simply upheld the law. The entire acquisition process operated in a gray area of legal compliance.
However, this liquidation will have far-reaching consequences, as it’s very difficult to simply reverse a 4-year-old acquisition and send it for liquidation. Also, this is a new precedent for IBC and will forever change how acquisitions through IBC are viewed. Whether the consequences are positive or negative, only time will tell.
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Disclaimer: This newsletter is for educational purposes only and is not intended to provide any kind of investment advice. Please conduct your own research and consult your financial advisor before making any investment decisions based on the information shared in this newsletter.
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