KALYANI TRANSCO VS BHUSHAN POWER AND STEEL LTD : CASE SUMMARY
The Supreme Court in Kalyani Transco Vs. Bhushan Power and Steel Ltd. ( Civil Appeal 1808/2020) inter alia held that CoC does not become functus officio after approval of Resolution Plan. The CoC continues to exist till the Resolution Plan is implemented or an order of liquidation is passed under Section 33 IBC.
FACTS OF THE CASE
Baking Regulation Act, 1949 vide 2019 amendment empowered the RBI to issue directions to Banks to initiate CIRP against major Corporate defaulters. Bhusan Power and Steel Ltd ( BPSL) was one of such company identified by RBI. Punjab National Bank filed Petition under Section 7 IBC, which was admitted vide order dated 26th July, 2017 by NCLT. Subsequently IRP admitted claims of Rs. 4,72,04,51,78,073 on behalf Financial Creditors and Rs.6,21,37,61,735/- on behalf of Operational Creditors. During CIRP thirteen Resolution Applicants submitted their Resolution Plans. JSW Steel emerged as Successful Resolution Applicant (SRA). NCLT approved the Resolution Plan of JSW on 5th September, 2019. Several appeals were filed before NCLAT, which approved the Resolution Plan with some modifications.
The Supreme Court vide its judgment dated 2nd May, 2025 set aside judgments dated 5th September, 2019 and 17th February, 2020 of NCLT and NCLAT respectively. Review Petitions were filed before the Supreme Court, which was allowed on 31st July, 2025 and order dated 2nd May, 2025 was recalled.
FINDINGS OF THE SUPREME COURT
The Supreme Court rejected the argument that promotors of the Corporate Debtor donot have locus to challenge the decision of NCLAT.
The Supreme Court held that in view of Explanation to clause 2 of Regulation 18 of the IBBI (CIRP) 68 Regulations, the CoC continues to exist till the Resolution Plan is implemented or an order of liquidation is passed under Section 33 of the IBC. It will not be out of place to mention that the cloud of uncertainty exists till a finality is given by this Court in the proceedings under Section 62 IBC.
The Supreme Court noted that the appeal has been filed against concurrent finding of NCLT and NCLAT. Supreme Court noted that no grounds as provided under Section Section 61 IBC is made.
The Supreme Court observed that in the instant case there was not any renegotiation of any terms of Resolution Plan. Both the CoC and the SRA – JSW found it difficult to implement the Resolution Plan on account of various issues including the PMLA proceedings initiated against the Corporate Debtor – BPSL and its management, the provisional attachment of properties and the unilateral directions of NCLT to distribute EBITDA etc. It is further to be noted that both the CoC and the SRA – JSW were jointly making efforts before this Court for implementation of the Resolution Plan which was in fact implemented on 26th March, 2021. There was not deliberate delay in implementation of Resolution Plan.
The Supreme Court observed that the payments made to the OCs in the present matter are not amounts due as per the Resolution Plan and are ex – gratia payments.
The Supreme Court also rejected the contention that JSW has not paid upfront amount of Rs. 8550 Crore as equity. The JSW claimed that it has paid 100 crore and remaining amount as Compulsory Convertible Debentures( CCD). The Supreme Court held that it is not res integra that CCD is different type of debenture and can be considered as equity instruments.
The Supreme Court observed that for distribution of profits, provisions in the process document have to be followed. It has been reiterated on more than one occasion that since the RFRP was silent on the treatment of EBITDA generated during CIRP and in view of Supreme Court Essar judgment, EBITDA may be retained with the Corporate Debtor.
The Supreme Court observed, as far as admission of claim of Jaldhi as contingent claim, that in the present matter , the CoC had exercised its commercial wisdom while approving the Resolution Plan whereby the Appellant – Jaldhi was classified as a contingent creditor and such a decision is deemed to be non – justiciable by this Court in view of K. Sashidhar which has been subsequently followed in a catena of judgments.
The Supreme Court dismissed the appeal and findings of the NCLAT was affirmed.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.
