The Insolvency and Bankruptcy Code, 2016 (“IBC”) is one of the most impactful economic legislations in India, enacted to provide a time-bound mechanism for insolvency resolution, maximize the value of assets, encourage entrepreneurship, and balance the interests of all the stakeholders. Judicial interpretation of its provisions has played a critical role in shaping its contours, often reinforcing strict discipline while at times tempering rigidity to protect the Code’s broader purpose. The litigation in Kalyani Transco v. Bhushan Power and Steel Ltd. is a clear example.
Two pronouncements of the Supreme Court, dated May 2, 2025, and September 26, 2025, stand as contrasting yet complementary rulings. The first one struck down the resolution plan submitted by JSW Steel Limited on grounds of statutory infirmities, while the latter review order recalled that judgment on recognizing errors apparent on the record, and restoring the appeals for rehearing. Collectively, these decisions highlight the balance between procedural rigor and the fundamental objective of revival under the IBC.
The judgment dated May 2, 2025, arose in the context of long-pending CIRP proceedings of Bhushan Power and Steel Ltd. (“BPSL”). The Supreme Court undertook a close scrutiny of the resolution process and stressed that the sanctity of IBC lies not only in its outcomes but in adherence to its statutory framework. One of the foremost issues addressed by the SC was the timeline under Section 12 of the Code. The Court held that the completion of CIRP within 330 days, including all extensions and litigation delays, is mandatory. It observed that delay is an anathema to the Code, which is designed to preserve value and keep the corporate debtor as a going concern. Consequently, if resolution is not completed within the statutory period, liquidation is the only permissible outcome.
Another important issue concerned eligibility under Section 29A of IBC. The Court clarified that a resolution applicant must submit an affidavit affirming compliance with Section 29A, and this requirement is mandatory, and not merely procedural. The Resolution Professional (“RP”), as fiduciary of the process, has a statutory duty to independently examine the affidavit. Blind acceptance would permit ineligible persons to participate and compromise the entire insolvency process. The Court made clear that the RP’s failure to exercise scrutiny amounts to dereliction of duty.
The Court also analyzed the character of a resolution plan once approved under Section 31 of IBC. It held that such a plan must be unconditional, binding, and immediately enforceable. Contingent plans dependent on regulatory exemptions or approvals were held to be defective, as they defeat certainty and finality. The apex court cautioned that adjudicating authorities and appellate bodies should not grant excessive flexibility to successful resolution applicants post-approval, since such indulgence frustrates the Code’s purpose of time-bound resolution.
On the scope of judicial review of CoC’s commercial wisdom, the Court reaffirmed its primacy but clarified that such discretion must be exercised within statutory limits. The CoC must ensure the applicant’s eligibility, the plan’s viability, and compliance with timelines. Ignoring these would invite judicial scrutiny. Thus, while CoC retains autonomy, it cannot override mandatory legal requirements.
The judgment also expanded on the phrase “any person aggrieved” under Section 61 of the IBC. It held that CIRP is a proceeding in rem, and appeals can be filed not only by direct parties but by any stakeholder materially prejudiced by an order, including financial creditors, operational creditors, guarantors, or even former directors. However, the Court emphasized that grounds of appeal remain limited to those enumerated in Section 61(3) of IBC, that is, contravention of law, material irregularities, non-provision for operational creditors or CIRP costs, or violation of IBBI criteria.
Finally, the Court clarified the jurisdictional boundaries of NCLT and NCLAT. It held that these tribunals are statutory creations under the Companies Act and the IBC, without constitutional authority of judicial review. They cannot adjudicate disputes under other laws, such as the Prevention of Money Laundering Act, 2002 (“PMLA”), and corporate debtors cannot use IBC forums to bypass separate statutory regimes.
Based on these findings, the Court invalidated JSW Steel’s resolution plan and ordered the liquidation of BPSL due to the expiry of the 330-day period.
The May 2025 order, however, attracted widespread criticism. Review petitions were filed by creditors and the resolution applicant, arguing that the said judgment contained errors apparent on the record. They submitted that the Court overlooked binding precedents which protect CoC’s commercial wisdom from judicial interference except in narrow cases. It was also argued that delays in implementation were caused by external proceedings, such as interim appellate orders and PMLA attachments, and not by the CoC or the successful resolution applicant (“SRA”). Penalizing them for such delays was contrary to the spirit of the IBC. Petitioners warned that if left uncorrected, the earlier order would undermine the finality of approved plans, discourage credible bidders, and push viable companies into liquidation unnecessarily.
On July 31, 2025, the Supreme Court, sitting in review, accepted these submissions and recalled its earlier judgment. Exercising its powers under Article 137 of the Constitution, it restored the appeals to their original position for rehearing, keeping all questions of law open. The review order marked a significant course of correction and reflected the Court’s willingness to revisit its own ruling where justice demanded.
In its review order, the Court first addressed the locus of promoters and guarantors in filing an appeal. It held that they cannot be denied the right to appeal merely on the ground of being promoters or guarantors, since their legal rights and liabilities are directly impacted by resolution plans. However, it clarified that their conduct, such as filing frivolous applications or delaying the process, remains a relevant factor. This ensured that genuine grievances are considered, while misuse of process is curbed.
The Court then addressed the role of the CoC after approval of a resolution plan. It rejected the argument that the CoC becomes functus officio once the plan is approved by the NCLT. Relying on Regulation 18 of the CIRP Regulations, the Court clarified that the CoC retains powers until the resolution plan is fully implemented or liquidation is ordered. Otherwise, creditors would be left in limbo if the plan fails post-approval.
On the grounds of appeal, the Court reaffirmed that an appeal against approval of a resolution plan under Section 61 is limited to specific statutory grounds: contravention of law, material irregularities by the RP, inadequate provision for operational creditors, non-provision for CIRP costs, or violation of IBBI criteria. Unless one of these grounds is proven, an appeal cannot be entertained. The Court reiterated that concurrent findings of NCLT and NCLAT cannot be interfered with unless shown to be perverse, illegal, or arbitrary.
The review order also examined the issue of delays. While acknowledging delays in implementing the JSW plan, the Court clarified that these were due to external proceedings and regulatory hurdles, not to bad faith on the part of the CoC or SRA. Attributing blame to the CoC/SRA was therefore unjustified. This interpretation allowed timelines to be enforced with a degree of fairness, aligning Section 12 with practical realities.
Another objection related to the upfront infusion of funds was raised. JSW had committed ₹8,550 crore, out of which₹100 crore had been infused in cash and the balance through issuance of Compulsory Convertible Debentures (“CCDs”). Courts have consistently held that CCDs, being mandatorily convertible into equity at maturity, constitute equity instruments and not debt. The CoC, in its meeting of March 6, 2021, approved the issuance of CCDs worth ₹8,450 crore to Piombino Steel Limited (JSW group entity), thus treating the upfront infusion requirement as satisfied. This stand reflects compliance with the Resolution Plan, falling within the domain of the CoC’s “commercial wisdom,” which is beyond judicial interference.
Furthermore, with respect to CoC’s claim for distribution of EBITDA during CIRP, the Court held that a Successful Resolution Applicant cannot be burdened with undecided claims post-approval, as this would undermine certainty and deter revival efforts. Since neither the request for resolution plan (RfRP) nor the Resolution Plan provided for distribution of EBITDA, permitting such claims at a later stage would violate the sanctity and finality of an approved Resolution Plan, leading to uncertainty inconsistent with the objectives of the IBC.
The recall order dated September 26, 2025, thus realigned the interpretation of IBC with its core objectives. The Code is designed to rescue viable enterprises, and not to liquidate them at the first instance. By correcting its earlier judgment, the Court prevented unnecessary liquidation of a major corporate debtor, thereby preserving value for creditors, employees, and the economy. It reinforced the sanctity of CoC’s commercial wisdom, safeguarded the finality of resolution plans, and ensured fair attribution of delay. At the same time, it upheld the duties of RPs and recognized that the promoter’s conduct remains a relevant consideration.
In conclusion, the two orders of the Supreme Court in Kalyani Transco v. Bhushan Power and Steel Ltd. reflect the evolving nature of insolvency jurisprudence in India. The order of May 2, 2025, highlighted strict adherence to timelines, eligibility requirements, and the need for unconditional plans. The review order of September 26, 2025, corrected the earlier approach, reaffirming commercial wisdom, ensuring fairness in attributing delays, and keeping the revival objective of the IBC intact.
Together, they demonstrate that while procedural rigor is indispensable, it cannot override the primary goal of the Code, that is, resolution in a manner that preserves value, ensures certainty, and maintains economic stability. The Supreme Court’s readiness to correct itself under review jurisdiction enhances confidence in its role as a self-corrective institution and reaffirms its commitment to upholding the spirit of the IBC.
About the authors: Jyoti Kumar Chaudhury is a Senior Partner and Jatin Chaddha is an Associate at Hammurabi & Solomon Partners.
Disclaimer: The opinions expressed in this article are those of the author. The opinions presented do not necessarily reflect the views of Bar & Bench.
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