Tag Archive for: Bhushan Steel

– Sikha Bansal, Senior Partner | resolution@vinodkothari.com

The proceedings in Bhushan Steel now take a U-turn, as the SC ruling has upheld the resolution plan of SRA. Earlier, the SC had ordered liquidation of the CD. 

Here is a quick round up of important takeaways from the verdict:

1. CoC has a vital interest in the resolution plan and that such an interest would continue till the Resolution Plan is actually implemented. If it is argued that the CoC cannot act in any manner after approval of resolution plan, then it can lead to a limbo or an anomalous situation where, say, the plan could not be implemented for any reason, leaving the creditors high and dry. Notably, the cloud of uncertainty exists until finality is given by the SC under section 62. Until then, CoC remains interested. 
2. Appeal to SC can be made only if it was appealed against before the NCLAT. Also, appeal to SC is available only on questions of law pertaining to any of the five grounds specified in Section 61 of the IBC – and, for no other reason.
3. A clause in the resolution plan empowering the CoC to merely extend the implementation timeline by a specified majority and neither providing for withdrawal nor modification, cannot be stated to be an open ended or indeterminate plan solely at the discretion of the resolution applicant.
4. CCDs are equity. Courtesy: SC rulings in Narendra Kumar Maheshwari, IFCI Limited v. Sutanu Sinha and Others. Also, if CoC has exercised its commercial wisdom in the matter, judiciary has nothing to interfere with.
5. For issues like distribution of profits arising during CIRP, look at the RFRP and the resolution plan. Unless there is a specific provision with regard to such distribution to be made to creditors, the money shall remain with CD. Also, in this case, the resolution plan explicitly contemplated that SRA shall take over the assets and liabilities of the CD as a ‘going concern’, which would include the profits or losses that may be generated by the company during CIRP.
6. Where a creditor was classified as contingent creditor by SRA and the plan was approved by CoC; and ambivalent stance was taken by the concerned creditor, then the commercial wisdom of CoC cannot be challenged.
7. Payments to creditors against pre-CIRP dues must be done only in accordance with the resolution plan and with the express agreement of the CoC.
8. Decisions pertaining to the resolution plan and dues thereunder fall under the “commercial wisdom” of CoC. Where CoC exercises commercial wisdom, the decision  is deemed to be non-justiciable by this Court in view of ruling in K. Sashidhar. 
9.  Once the resolution plan has been approved by the CoC and NCLT, permitting any claims to be reopened which were not a part of the RFRP/resolution plan will open Pandora’s box, and will do violence to the provisions of IBC. SRA cannot be forced to deal with claims that are not a part of the RfRP issued in terms of Section 25 of the IBC or a part of its Resolution Plan. Courtesy: SC ruling in Essar Steel and Ghanshyam Mishra.

Ruling available here: https://api.sci.gov.in/supremecourt/2020/7358/7358_2020_1_1501_64744_Judgement_26-Sep-2025.pdf

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