SC Raps Ex-Promoters of Bhushan Steel for Delay Tactics as it Upholds JSW's Resolution Plan

The Supreme Court on Friday made scathing observations on the conduct of Bhushan Power and Steel Limited's former promoters, led by Sanjay Singal, accusing them of systematically attempting to stall the corporate insolvency resolution process (CIRP).

The observations were made in a judgment delivered by a bench of Chief Justice of India (CJI) B R Gavai and Justices Satish Chandra Sharma and K Vinod Chandran while upholding JSW Steel's ₹19,700-crore resolution plan for debt-ridden Bhushan Power and Steel Limited (BPSL).

It upheld the February 17, 2020 verdict of the National Company Law Appellate Tribunal (NCLAT), allowing JSW Steel to acquire BPSL by providing it immunity from prosecution by the Enforcement Directorate (ED).

Writing the judgment, the CJI underscored that the former BPSL promoters' actions were not aimed at constructive participation in the resolution process, but rather at frustrating its timely conclusion.

"The entire attempt of the appellants has been to thwart the CIRP and not to permit the same to be taken to its logical end," the judgment read.

The bench drew attention to the records placed before it, including the findings of the National Company Law Tribunal (NCLT), which had earlier censured the promoters for adopting dilatory tactics.

The court took note of the submissions made by the successful resolution applicant, JSW Steel, that Sanjay Singal attended only one of the 46 Committee of Creditors (CoC) meetings in person and just two more through his representatives.

His wife and co-promoter, Aarti Singal, did not attend a single CoC meeting.

"It can thus be seen that after the NCLT had heard the matter in detail, various applications had been filed by the erstwhile management, including Sanjay Singal, before 48 various forums. This had led to a delay in the pronouncement of the approval order by the NCLT.

"A specific observation has been made by the NCLT that the erstwhile promoters were making efforts to cause delays, which indicated how desperate and frustrated they were. The NCLT also imposed a cost of ₹1 lakh on the appellants -- the erstwhile promoters -- as it concluded that the application seeking copies of the resolution plan filed by them was frivolous," the judgment said.

The court said it could clearly be seen that the entire attempt of the former promoters was to thwart the insolvency proceedings and "not permit the same to be taken to a logical end".

The bench then proceeded to deal with the issues on merits. It said the approach reflected a "lackluster participation" by those who had once controlled the company but were now expected to engage responsibly in the resolution process.

The NCLT, in its 2019 order approving the JSW plan, had already recorded the promoters' disinterest, highlighting that they appeared more focussed on procedural manoeuvring than on constructive engagement.

The judgment noted how, after extensive hearings before the NCLT, the erstwhile management filed multiple applications across various forums, leading to delays in the pronouncement of the resolution order.

The NCLT, in fact, explicitly observed that the promoters were "moving places to delay the conclusion of proceedings", and even imposed a penalty of ₹1 lakh on them for filing a frivolous plea seeking copies of the resolution plan