High Court dismisses JSW Steel's proposed solution for Bhushan Power & Steel

JSW Steel's Hurdle: Supreme Court Rejects Bhushan Power and Steel Resolution Plan

High Court dismisses JSW Steel's proposed solution for Bhushan Power & Steel

Take a look at the latest corporate turmoil rocking the steel industry—JSW Steel's plan for Bhushan Power and Steel has been thwarted by the Supreme Court. The Apex Court's rejection stems from two critical issues with JSW's resolution plan:

1. Mixed payment structure: The plan's financing strategy combined equity and convertible debentures, contradicting the insolvency laws' exclusive equity clause for resolution plans [2][4].
2. Timeline lapses: JSW failed to complete the plan within the mandated timeline set by the Insolvency and Bankruptcy Code [2][4].

The court categorically declared the plan as "illegal" and criticized the Committee of Creditors (CoC) for approving it, ultimately ordering the liquidation of Bhushan Power and Steel [1][4]. This setback could potentially upset JSW Steel's strategic expansion objectives, as the Bhushan Power and Steel acquisition accounted for approximately 10% of JSW Steel's EBITDA and 12.5-13% of its 37.5 MTPA capacity [2]. Legal experts anticipate JSW might file a review petition to correct this inequity [2].

This judgement may create ripples in future Insolvency and Bankruptcy Code (IBC) cases by adding rigidity to compliance requirements surrounding payment structures and time limits [1][2]. Shares of JSW Steel plummeted by 7% intraday following the verdict [1][3].

In a separate development, Godrej Properties reported a 19% drop in their Q4 net profit, with expectations for FY26 business development to be lower than FY25. JSW Steel originally obtained a 49% stake in the debt-laden Bhushan Steel through the insolvency and bankruptcy process, with a proposed payment of Rs 19350 crore to Bhushan Steel's creditors as per the resolution plan [4]. However, controversies surrounding Bhushan Steel later surfaced, with investigative agencies naming the company and its chairman as part of a Rs 47,204 crore bank fraud and money laundering scam [4].

1. The mixed payment structure targetting a combination of equity and convertible debentures in JSW Steel's resolution plan for Bhushan Power and Steel has been criticized as it violates the exclusive equity clause for resolution plans in insolvency laws.
2. The Committee of Creditors (CoC) faced criticism for approving JSW Steel's plan, as the Supreme Court declared it as "illegal" due to timeline lapses and non-compliance with insolvency laws.
3. The liquidation of Bhushan Power and Steel was ordered by the Supreme Court, which could potentially upset JSW Steel's strategic expansion objectives, as the acquisition accounted for a significant portion of its EBITDA and capacity.
4. Legal experts are anticipating JSW might file a review petition to rectify this inequity in the Bhushan Power and Steel resolution plan.
5. The judgement may create ripples in future Insolvency and Bankruptcy Code (IBC) cases by adding rigidity to compliance requirements surrounding payment structures and time limits.
6. Shares of JSW Steel, a major player in the finance and business sector, experienced declines following the Supreme Court's verdict, with a 7% intraday plummet, reflecting the market's concern for the company's strategic direction and financial stability.

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