In a landmark judgement, Supreme Court has reaffirmed the sanctity and finality of resolution plans under the Insolvency and Bankruptcy Code, 2016.
Reversing its earlier order that had directed liquidation of Bhushan Power & Steel Ltd, the Court upheld JSW Steel’s ₹19,000+ crore resolution plan. It emphasized that once a plan is approved by the Committee of Creditors (CoC) and the NCLT, reopening claims at a later stage would “commit violence” on the provisions of the IBC.
The Bench stated that not only the motive of IBC to ensure that the corporate debtor continues as a going concern has been achieved, but Bhushan Power and Steel has been transformed from a loss-making to a profit-making entity. We cannot penalise JSW Steel for exactly doing what was expected of them.
This pragmatic approach underlines two key principles:
1) Commercial wisdom of the CoC is paramount and cannot be interfered with.
2) Finality of resolution plans must be preserved to ensure stability and revival of distressed companies.
By protecting resolution applicants from endless litigation and retrospective claims, the Court has reinforced the IBC’s core objective which is keeping corporate debtors as going concerns and enabling their transformation into profit-making entities.
This ruling not only boosts confidence among investors and resolution applicants but also sends a clear message that sanctity of the IBC is stronger than ever.