Supreme Court: In a batch of six appeals filed under Section 62 of the Insolvency and Bankruptcy Code, 2016, (‘IBC’) erstwhile promoters and various operational creditors of the corporate debtor challenged the impugned judgment and order dated 17-02-2020, which had been passed by the National Company Law Appellate Tribunal (‘NCLAT’) in relation to the Corporate Insolvency Resolution Proceedings of Bhushan Power and Steel Limited (‘BPSL’).
The three-judge bench of B.R. Gavai, CJI, and Justices Satish Chandra Sharma and K. Vinod Chandran, JJ. dismissed the appeals filed by the erstwhile promoters-cum-directors of BPSL and upheld the NCLAT’s judgment dated 17-02-2020.
The Court strongly rejected the arguments raised by the appellants and the CoC regarding post-approval claims, particularly concerning Earnings Before Interest, Taxes, Depreciation and Amortization (‘EBITDA’)
The Court noted that:
- The Request for Resolution Plan (‘RfRP’) did not mention the treatment of EBITDA.
- The Resolution Plan submitted by JSW Steel was implemented after significant delays and had successfully turned BPSL from a loss-making into a profit-making entity.
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Thousands of jobs were preserved, and the business continues as a going concern, aligning with the core objective of IBC.
The Court warned that allowing parties to raise new claims after the Resolution Plan has been approved by the CoC and NCLT would:
- Undermine the finality of the resolution process,
- Violate the sanctity of the approved Resolution Plan, and
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Potentially open a Pandora’s box of post-approval litigation.
Citing the Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta , (2020) 8 SCC 531 (Supreme Court Essar), the Court reaffirmed that claims not included in the RfRP or Resolution Plan cannot be raised later, and the Successful Resolution Applicant (‘SRA’) cannot be penalised for turning around a distressed asset.
Background
The Banking Regulation Act, 1949 was amended with effect from 4-05-2017, empowering the Reserve Bank of India (RBI) to direct banks to initiate insolvency proceedings under the IBC. Pursuant to RBI’s circular dated 13-06-2017, 12 major defaulters, including BPSL, were identified for insolvency proceedings.
Punjab National Bank filed a petition under Section 7 of the IBC before the NCLT, which admitted the same on 26-07-2017, thereby commencing CIRP against BPSL. The Interim Resolution Professional (‘IRP’) invited claims and admitted claims worth approx. ₹47,204 crore from Financial Creditors and ₹621 crore from Operational Creditors.
JSW Steel Ltd. submitted a Resolution Plan which was approved by the Committee of Creditors (CoC) on 14-10-2018. The plan was later filed before the NCLT for approval under Sections 30(6) and 31(1) of the IBC.
While the approval proceedings were pending, the CBI registered an FIR, and the Enforcement Directorate (‘ED’) initiated a money laundering case against BPSL. ED provisionally attached assets of BPSL under the PMLA, which were challenged by JSW Steel and the CoC. The NCLAT stayed both the implementation of the Resolution Plan and the ED’s attachment.
On 5-09-2019, the NCLT approved the Resolution Plan with conditions. Appeals followed before the NCLAT, which modified some of the NCLT’s conditions but upheld the plan on 17-02-2020. This led to a batch of appeals before the Supreme Court, including by ED and CoC.
The Supreme Court admitted the appeals and stayed the ED’s Provisional Attachment Order. On 11-12-2024, it directed ED to hand over BPSL’s properties to JSW Steel, treating it as restitution, without ruling on the interpretation of Section 32A of the IBC.
On 2-05-2025, the Supreme Court quashed the NCLT and NCLAT orders, rejected the Resolution Plan of JSW Steel for non-compliance with Sections 30(2) and 31(2) of the IBC, and directed liquidation of BPSL under Section 33. It left legal questions, including EBITDA, open.
Aggrieved parties filed review petitions. On 29-07-2025, the Court allowed open court hearing. On 31-07-2025, the Court recalled the judgment dated 2-05-2025, holding that errors apparent on the face of the record warranted reconsideration.
Analysis and Decision
Locus Standi of Erstwhile Promoters
The Court held that the erstwhile promoters of BPSL lacked locus standi to maintain the appeals. While Section 62 of the IBC does not define “person aggrieved,” the Court emphasised that the term must be interpreted in light of the object and purpose of the IBC, which is to ensure expeditious and effective resolution of insolvency proceedings, free from interference by the previous management.
The Court noted that once the CIRP is initiated, the promoters cease to have any legal relationship with the corporate debtor. Allowing them to challenge or interfere post-resolution would defeat the very intent of the Code and risk reviving problems of the earlier regime. A purposive interpretation of the IBC thus bars such interference to protect the integrity of the resolution process.
Conduct of Erstwhile Promoters
The Court noted that after the NCLT had extensively heard the matter, multiple applications were filed by the erstwhile management before various forums. These filings resulted in delays in the pronouncement of the NCLT’s approval order.
The NCLT specifically observed that the promoters were attempting to delay and derail the resolution process, driven by desperation and frustration. It also imposed a cost of ₹1 lakh on the appellants, terming their application for a copy of the Resolution Plan frivolous.
The Court concluded that the conduct of the appellants reflected a deliberate attempt to obstruct the CIRP and prevent it from reaching its logical conclusion.
Existence of the CoC after approval of the Resolution Plan by the Adjudicating Authority
The Court held that under the IBC, particularly Sections 20, 21, 24, and 30, and read with relevant IBBI (CIRP) Regulations, the CoC continues to exist beyond the approval of the Resolution Plan by the Adjudicating Authority.
It clarified that the CoC does not become functus officio upon approval under Section 31, as finality is only achieved after the appellate processes under Sections 61 and 62 are concluded.
The Court relied on the Explanation to Regulation 18(2), which permits the CoC to convene meetings until the Resolution Plan is implemented or liquidation is ordered under Section 33. The CoC retains a vital interest until creditors are paid as per the plan.
The Court rejected the appellants’ contention that the CoC ceases to exist post-approval, calling such an interpretation anomalous and inconsistent with the objective of the IBC
Grounds of Appeal
The Court held that an appeal under Section 61 of the IBC against approval of a Resolution Plan is maintainable only on specific grounds, such as:
- Contravention of existing laws,
- Material irregularity by the RP,
- Improper treatment of operational creditors,
- Non-provision for CIRP costs, or
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Non-compliance with IBBI-specified criteria.
In the present case, none of these grounds were made out. Therefore, the appeal before the NCLAT was not maintainable, and as a result, the appeal before the Court under Section 62 also failed.
The Court emphasised that when concurrent findings are given by the NCLT and NCLAT under a special statute, interference by the Court is unwarranted unless those findings are perverse, illegal, or arbitrary.
Though the EBITDA issue was separately considered, the Court concluded that the appeal could have been dismissed solely on the basis of concurrent findings.
Legality of clause permitting CoC to extend the period for implementation of the Resolution Plan
The Court rejected the appellants’ challenge to Clause 3 of the Resolution Plan, which allowed the erstwhile CoC (by 66% majority) to extend the implementation period beyond 30 days of NCLT approval.
It held that:
- This was not an open-ended clause, nor did it allow for modification, withdrawal, or renegotiation of the Resolution Plan.
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The clause simply recognised that implementation delays may occur due to practical exigencies and gave the CoC limited discretion to extend the time.
Therefore, the Court found no merit in the contention that Clause 3 was contrary to the IBC or past precedents.
Delay in implementation of the Resolution Plan
The Court rejected the appellants’ claim that the 1.5-year delay in implementing the Resolution Plan by JSW warranted setting it aside.
It held that:
- The delay was due to legal and regulatory hurdles, including:
- CBI and ED proceedings for alleged financial crimes by the erstwhile promoters.
- Provisional attachment of assets worth ₹4,025 crore by the ED.
- Legal ambiguity around Section 32A of IBC (protection of new management from past offences).
- Conflicting directions from NCLT and NCLAT, including the issue of sharing EBITDA.
- Supreme Court proceedings and ED appeals, finally resolved only in December 2024.
- The CoC and JSW worked jointly and consistently to ensure implementation despite these barriers.
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The CoC, by a 97.25% majority, passed a resolution extending the implementation timeline to 31-03-2021, and the plan was implemented on 26-03-2021.
Contravention of law
The Court noted that the erstwhile promoters argued that the SRA — JSW’s Resolution Plan did not comply with the IBC and IBBI (CIRP) Regulations, specifically because the plan did not prioritize payments to Operational Creditors (OCs) over Financial Creditors (FCs).
However, the SRA — JSW asserted that the plan was compliant with the law as it existed when the plan was submitted and that subsequent amendments to the law should not affect the validity of the plan.
The Court further noted that initially, Regulation 38(1)(b) mandated that the liquidation value due to OCs must be paid in priority to FCs. On 5-10-2018, the regulation was amended, removing the “liquidation value” requirement and stating that the amount due to OCs should be prioritized over FCs. SRA — JSW amended the Resolution Plan in line with this new regulation, offering an ex-gratia payment to OCs despite their claims being nil.
Further, the amended Resolution Plan was approved by the CoC and the NCLT on 5-09-2019. A further amendment to the regulations on 27-11-2019 had no impact, as it came after the NCLT approval.
The court held that the latest amendment (27th November 2019) did not apply retrospectively to the plan, as the NCLT had approved it before the amendment came into effect. SRA — JSW’s ex-gratia payment to OCs was in compliance with the regulations as they stood when the plan was approved.
The Court also noted that the erstwhile promoters had no direct concern with the issue of payment priority, as it was not raised by the OCs. Hence, The Court dismissed the contention of the erstwhile promoters, stating that the Resolution Plan did not contravene the law.
Upfront infusion of funds by the SRA — JSW
The Court noted that the erstwhile promoters argued that the SRA — JSW failed to honor its commitment of an “upfront infusion of funds” as per the Resolution Plan. They claimed that the plan required an upfront equity infusion of Rs. 8,550 crore, but only Rs. 100 crore was actually infused. The Appellants argued that this non-compliance affected the evaluation of bids and the implementation of the Resolution Plan.
SRA — JSW countered by stating that the remaining commitment was fulfilled through Compulsorily Convertible Debentures (CCDs), which are considered equivalent to equity instruments. They also argued that the scoring matrix used by the CoC is a matter of commercial discretion, which cannot be challenged by the Appellants.
The Court referenced its earlier judgment in Narendra Kumar Maheshwari v. Union of India, 1990 Supp SCC 440, where it was held that CCDs, which are mandatorily convertible into equity at maturity, are to be treated as equity instruments.
The Court reaffirmed that CCDs do not involve any repayment obligation, and therefore, should be treated as equity rather than debt.
The CoC confirmed that a meeting was held in March 2021, where it approved the issuance of Rs. 8,450 crore worth of CCDs to Piombino Steel Limited (a group company of SRA — JSW). These CCDs are to be mandatorily converted into equity within five years, fulfilling the commitment for the upfront equity infusion.
The Court held that the CCDs issued by SRA — JSW fulfilled the upfront equity infusion requirement under the Resolution Plan. Given that CCDs are legally equivalent to equity, and in light of the CoC’s confirmation, the Court rejected the Appellants’ contention.
The Court upheld the compliance of SRA — JSW with its financial commitment, emphasising that the commercial wisdom of the CoC in such matters cannot be interfered with.
Distribution of EBITDA
The Court noted that the central issue concerns the entitlement of the lenders to EBITDA generated during the CIRP. Initially, the NCLT relied on the NCLAT’s decision in NCLAT Essar to determine the distribution of EBITDA. However, by the time the NCLAT’s judgment was issued, the Supreme Court had already delivered a decision in Supreme Court Essar which overruled the NCLAT’s stance on profit distribution during CIRP.
The Court made it clear that claims not part of the approved resolution plan should not be introduced after approval. This ruling also stipulated that any profits during CIRP should remain within the company unless explicitly stated in the RFRP. The Court emphasised that once a resolution plan is approved, no new claims should be allowed, as doing so could lead to confusion and uncertainty for the successful resolution applicant.
The CoC had initially supported the distribution of EBITDA to creditors, citing the NCLAT Essar judgment. However, after the judgment in Supreme Court Essar, the CoC reversed its stance and noted that the RFRP for BPSL did not require the distribution of EBITDA, thus deciding to retain the profits within the company.
The Court noted that the ruling in Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, (2021) 9 SCC 657 reinforced the principle that once a resolution plan is approved, claims should be considered “frozen,” binding the creditors and the corporate debtor. Allowing claims outside of the approved resolution plan would undermine the purpose of the IBC, which is to ensure a clean slate for the successful resolution applicant.
The Court rejected the CoC’s attempt to change its earlier stance, citing the inconsistency with the previous position taken during the appeals and review petitions. The Court emphasised that the decision to retain EBITDA with the company was in line with the law as laid out by the Supreme Court, particularly given the silence of the RFRP on the matter.
The Court concluded that any attempt by the CoC to reopen the treatment of EBITDA at this stage would violate the settled legal principles of the IBC, specifically the binding nature of the approved resolution plan. Additionally, the Court rejected the CoC’s arguments related to adjustments against personal guarantees, asserting that this had not been raised in the proceedings prior to the appeals.
In the present case, one of the appellants also contended that it has been wrongfully classified as a “contingent creditor” in the Resolution Plan and seeks to challenge this classification. He claimed to be the largest operational creditor (OC) of the Corporate Debtor, BPSL, with admitted claims amounting to Rs. 151.37 crores based on four international arbitral awards. It argues that, as an OC, it should be eligible for 50% of its crystallized claims under the plan, while contingent creditors are entitled to only 10%.
The Court observed that the appellant initially presented its claims as contingent liabilities and later shifted its position to claim it was an operational creditor. Such inconsistent submissions have created confusion regarding its classification.
For foreign arbitral awards to be enforceable in India under Section 49 of the Arbitration Act, they must be deemed enforceable by an Indian court. Since the appellant withdrew its enforcement proceedings in India, the awards could not be deemed “crystallized” for the purposes of the Resolution Plan.
The Court highlighted that the IBC differentiates between operational creditors (OCs) and financial creditors (FCs), with Section 30(4) of the IBC mandating that the Committee of Creditors (CoC) has the final say in approving the Resolution Plan.
The Court reiterated that the decision of the CoC is based on its commercial wisdom, which is not open to judicial scrutiny unless there are specific statutory grounds. The commercial decisions of the CoC, particularly regarding the classification of creditors, are upheld unless manifestly contrary to the law.
The Court further noted that two operational creditors (OCs) of the Corporate Debtor, have filed appeals challenging the decision of the NCLT/NCLAT regarding their claims.
The appellants contended that they were promised payments of pre-CIRP dues by the Resolution Professional (RP) as an incentive to continue doing business with the Corporate Debtor during the CIRP. They argued that after receiving payments for 10 months, the RP issued a corrigendum, stating that the payments were made due to an accounting mistake and would now be adjusted towards services provided during the CIRP period.
The Court said that the appellants failed to produce any agreement with the RP regarding payments after the CIRP commenced. Even though the RP acknowledged the payments were made, it was stated that these were an error and corrected through a subsequent adjustment for CIRP-related services.
The Court noted that there is no evidence that the CoC approved the pre-CIRP payments or that such payments were included in the Resolution Plan. As per settled law, any pre-CIRP payments to creditors must be made in accordance with the Resolution Plan and with the explicit agreement of the CoC.
The Court found no new legal issue raised in the present appeals. As such, the appeals were dismissed, and the impugned judgment of NCLAT was upheld.
[Kalyani Transco v. Bhushan Power & Steel Ltd., 2025 SCC OnLine SC 2093, decided on 26-09-2025]
*Judgment Authored by: Chief Justice B.R. Gavai
Advocates who appeared in this case :
For Appellant(s): Mr. Dhruv Mehta, Sr. Adv., Mr. Sandeep Bajaj, Adv., Mr. Soayib Qureshi, Adv., Mr. Anubhav Ray, Adv., Ms. Chetna Alagh, Adv., Ms. Anchal Kushwaha, Adv., Mr. Mayank Biyani, Adv., Ms. Ranjeeta Rohatgi, AOR, Mr. Nikhil Sabri, Adv., Mr. Aman Qayoom Wani, Adv., Ms. Shrika Gautam, Adv., Mr. Arjun Asthana, Adv., Mr. Sidhartha Sharma, Adv., Ms. Shubhangi Gupta, Adv., Mr. Nachiket Chawla, Adv., Ms. Prachi Sharma, Adv., Mr. Arup Banerjee, AOR, Mr. Diwakar Maheshwari, Adv., Ms. Pratiksha Mishra, Adv., Mr. Mayank Kshirsagar, AOR, Mr. Sandeep Bajaj, Adv., Mr. Mayank Biyani, Adv., M/S. Law Associates, AOR, Mr. Manu Beri, Adv., Mr. Varun Varma, Adv., Ms. Kudrat Mann, Adv., Mr. Upmanyu Tewari, AOR
For Respondent(s): Mr. Tushar Mehta, Solicitor General, Mr. L. Viswanathan, Adv., Mr. Raunak Dhillon, Adv., Mr. Uday Khare, Adv., Ms. Aishwarya Gupta, Adv., Ms. Isha Malik, Adv., Mr. Nihaad Dewan, Adv., Mr. Anchit Jasuja, Adv., Ms. Bhawna Lakhina, Adv., Mr. Bhuvan Kapur, Adv., Mr. Aman Mehta, Adv., For M/s. Cyril Amarchand Mangaldas, Mr. Neeraj Kishan Kaul, Sr. Adv., Mr. Gopal Jain, Sr. Adv., Ms. Nandini Gore, Adv., Mr. Rajendra Barot, Adv., Ms. Tahira Karanjawala, Adv., Mr. Vivek Shetty, Adv., Mr. Suharsh Sinha, Adv., Ms. Swati Bhardwaj, Adv., Mr. Akarsh Sharma, Adv., Ms. Manvi Rastogi, Adv., Mr. Pranav Garg, Adv., Ms. Sherna Doongaji, Adv., Mr. Akilesh Menezes, Adv., Mr. Harsh Sethi, Adv., Ms. Isha Patil, Adv., Mr. Deepak Joshi, Adv., Ms. Dhanya S. Krishnan, Adv., Mr. Varun Tyagi, Adv., For M/s. Karanjawala & Co., Mr. Tushar Mehta, Solicitor General, Mr. K.M. Nataraj, A.S.G., Mr. Sudarshan Lamba, AOR, Ms. Kanu Agrawal, Adv., Mr. Mohd. Akhil, Adv., Mr. Saurav Roy, Adv., Mr. Vinayak Sharma, Adv., Mr. Pratyush Shrivastava, Adv., Mr. S. S. Shroff, AOR, Ms. Misha, Adv., Mr. Vaijayant Paliwal, Adv., Ms. Charu Bansal, Adv., Ms. Kirti Gupta, Adv., Mr. Soayib Qureshi, AOR, Mr. Soumya Dutta, AOR, Mr. Mukesh Kumar Maroria, AOR, Dr. Vinod Kumar Tewari, AOR
