CoC remains functional till resolution plan is actually implemented: Supreme Court in Bhushan Power case

The Supreme Court, while upholding JSW's resolution plan for Bhushan Power, clarified that a Committee of Creditors (CoC) does not become functus officio after the resolution plan approval, but continues to oversee implementation until plans are fully executed or appeals finally decided. [Kalyani Transco v. Bhushan Power and Steel Limited]

A Bench of Chief Justice of India (CJI) BR Gavai and Justices Satish Chandra Sharma and Vinod Chandran held,

"It may not be out of place to mention that the CoC has a vital interest in the Resolution Plan and that such an interest would continue till the Resolution Plan is actually implemented. It is only after the implementation of the Resolution Plan that payment can be made to the creditors, of their dues, in accordance with the Resolution Plan, which has been approved by the Adjudicating Authority."

Bhushan Power and Steel Limited was among twelve large corporate defaulters identified by the Reserve Bank of India in June 2017, collectively termed the "dirty dozen" with debts exceeding ₹5,000 crore each. The company owed financial creditors ₹47,204 crore and operational creditors ₹621 crore when insolvency proceedings commenced in July 2017 following a petition by Punjab National Bank.

JSW Steel emerged as the successful resolution applicant among thirteen bidders, submitting its consolidated resolution plan in October 2018. The CoC approved the plan, and the National Company Law Tribunal sanctioned it in September 2019, though with certain conditions that were later modified by the National Company Law Appellate Tribunal.

Implementation faced delays due to criminal proceedings by investigative agencies and provisional attachment orders by the Enforcement Directorate. The resolution plan was eventually implemented on March 26, 2021, with JSW Steel paying ₹19,350 crores to financial creditors. Multiple appeals by erstwhile promoters and operational creditors brought the matter before the Supreme Court.

While confirming that erstwhile promoters retain the standing to challenge resolution plans as they affect guarantors' rights, the Court scrutinised their conduct during proceedings. The NCLT had observed that promoters were "moving places to delay the conclusion of proceedings" and imposed ₹1 lakh in costs for frivolous applications.

"The entire attempt of the appellants has been to thwart the CIRP and to not permit the same to be taken to a logical end," the court noted, while nevertheless deciding the appeals on merits rather than dismissing them for lack of standing," the Court said.

On allegations that JSW Steel opportunistically delayed implementation to benefit from rising steel prices (from ₹35,000 to ₹55,000 per metric ton), the Court found that external factors caused legitimate delays. Criminal proceedings by investigative agencies, provisional attachment orders and legal uncertainties created obstacles beyond JSW Steel's control, it said.

"The delay is neither attributable to the CoC nor to the SRA – JSW. Both were making consistent efforts to get the matter sorted out before this Court so as to ensure the expeditious implementation of the Resolution Plan."

The Court strongly rejected attempts to claim distribution of earnings before interest, taxes, depreciation and amortisation (EBITDA) generated during insolvency proceedings. Neither the request for resolution plan nor the resolution plan contained provisions for such distribution.

"Permitting the erstwhile promoters or the CoC to raise an argument in that regard at such a belated stage would amount to doing violence to the very intention with which the IBC was enacted," the court ruled, applying the established principle from Committee of Creditors of Essar Steel India Limited against allowing post-approval claims."

Reinforcing established precedent, the Court held that creditor committees' commercial decisions remain largely non-justiciable. This protection extended to decisions about creditor classification and treatment priorities.

"Such a decision squarely falls under the protected umbrella of the ‘commercial wisdom’ of the CoC which has been given paramount status … The legislature, consciously, has not provided any ground to challenge the ‘commercial wisdom’ of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable."

The Court validated JSW Steel's compliance with payment priorities, noting that amendments requiring priority payments to operational creditors came into effect only after plan approval. Since operational creditors were entitled to nil amounts under liquidation value analysis, JSW Steel's ex-gratia payments complied with applicable regulations.

The judgment also confirmed that compulsorily convertible debentures qualify as equity instruments for meeting infusion commitments, following established precedent that such instruments constitute equity rather than debt.

The matter arose from the Court’s May 2, 2025 judgment which struck down JSW Steel’s plan and ordered BPSL’s liquidation under Article 142 of the Constitution. That ruling by Justices Bela M Trivedi and Satish Chandra Sharma had held that the CoC erred in approving the plan.

On July 31, the Supreme Court recalled its May 2 judgment, noting that it may have misapplied settled Insolvency and Bankruptcy Code (IBC) principles and relied on inaccurate or unargued points. It thus decided to rehear the matter.

[Read Judgment]