Supreme Court Dismisses JSW Steel's Bhushan Power Resolution Plan, Directs Liquidation; Shares Plunge

Supreme Court Dismisses JSW Steel's Bhushan Power Resolution Plan, Directs Liquidation; Shares Plunge

 

In a shocking turn of events for India's steel industry, the Supreme Court on Friday turned down JSW Steel Ltd's ₹19,700-crore resolution plan to buy Bhushan Power and Steel Ltd (BPSL), terming the plan "illegal" and directing the liquidation of the struggling company. The top court held that JSW Steel's proposal, which had been approved earlier by BPSL's Committee of Creditors, contravened some of the most important provisions of the Insolvency and Bankruptcy Code (IBC) by employing a combination of equity and optionally convertible debentures rather than equity alone, and not applying the resolution within the required timeline.

 

The court termed JSW Steel's conduct as "malafide and dishonest," observing that the company exploited pending Enforcement Directorate proceedings to an undue extent and delayed plan implementation, which thwarted the goals of the IBC. The judgment also faulted the Committee of Creditors and the Resolution Professional for not safeguarding creditors' interests and not following statutory obligations.

 

After the verdict, JSW Steel's shares dropped as much as 7%, wiping out much of its market value. The judgment not only invalidates one of India's biggest insolvency-led takeovers but also puts a cloud of uncertainty over BPSL assets, which account for around 10% of JSW's consolidated EBITDA and 12.5% of its steel-producing capacity. JSW Steel said it will determine future course of action after going through the formal order, which is yet to come.

 

Source: Business Standard, Economic Times, CNBC-TV18