In the case of Kalyani Transco v Bhushan Power & Steel Ltd, the Supreme Court overturned an approved resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC), more than five years after implementation.
Bhushan Power & Steel (BPSL), one of the Reserve Bank of India’s “dirty dozen” defaulters, entered insolvency in 2017 with debts exceeding INR45 billion (USD511.3 million). In 2018, the committee of creditors (CoC) approved JSW Steel’s INR197 billion resolution plan, which the National Company Law Tribunal and National Company Law Appellate Tribunal upheld.
Kalyani Transco challenged the plan before the Supreme Court, alleging serious flaws in the process. The objections were threefold.
First, JSW Steel’s eligibility under section 29A was not independently verified, with the resolution professional relying solely on self-declarations. Second, the corporate insolvency resolution process (CIRP) exceeded the statutory 330-day limit under section 12, and was time-barred. Third, the plan discriminated against operational creditors, violating section 30(2) and regulation 38, which require equitable treatment.
On 2 May 2025, the Supreme Court accepted these objections, struck down the plan, and ordered the liquidation of BPSL. The court held that the resolution process suffered from irregularities, statutory violations, and inequitable treatment of creditors. This was a rare outcome, as liquidation was ordered despite a CoC-approved and partly implemented plan.
The May 2025 ruling drew resistance from lenders led by Punjab National Bank, who filed review petitions. In Punjab National Bank v Kalyani Transco, the court agreed to reconsider, noting that binding precedents had been overlooked and arguments not advanced by the parties had been considered.
Key IBC rulings such as Kalpraj Dharamshi, Ghanashyam Mishra; Vallal RCK; Essar Steel; K Sashidhar; and Swiss Ribbons affirmed two principles: creditor commercial wisdom is paramount, and the revival of stressed assets prevails over liquidation. The Supreme Court’s May 2025 ruling, criticised for prioritising procedural lapses over resolution, was recalled in July 2025.
Restoring the case for rehearing, the court realigned with the IBC’s rescue objective, stressing that while statutory compliance matters, excessive formalism must not derail viable resolutions. The decision underscores liquidation as a last resort, and reaffirms the IBC’s role in preserving, not dismantling, businesses, bolstering creditor and investor confidence.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
