{"id":65476,"date":"2025-09-28T12:39:26","date_gmt":"2025-09-28T07:09:26","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=65476"},"modified":"2025-09-29T17:34:26","modified_gmt":"2025-09-29T12:04:26","slug":"insolvency-and-bankruptcy-code-ibc-sc-clears-jsw-steels-acquisition-of-bpsl","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/insolvency-and-bankruptcy-code-ibc-sc-clears-jsw-steels-acquisition-of-bpsl\/","title":{"rendered":"Insolvency and Bankruptcy Code (IBC) &#8211; SC Clears JSW Steel\u2019s Acquisition of BPSL"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><b>Insolvency and Bankruptcy Code (IBC) Latest News<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Supreme Court of India has approved JSW Steel\u2019s $2.3 billion (\u20b919,350 crore) acquisition of Bhushan Power and Steel (BPSL), <\/span><b>reversing its earlier decision of liquidation<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This judgment<\/span><b> strengthens the Insolvency and Bankruptcy Code (IBC), 2016<\/b><span style=\"font-weight: 400;\">, by prioritising revival of distressed firms over liquidation.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Understanding Insolvency and Bankruptcy and the IBC<\/b><\/h2>\n<ul>\n<li><b>Insolvency vs Bankruptcy:<\/b><span style=\"font-weight: 400;\"> While insolvency results from an inability to pay debts due to a lack of assets, bankruptcy occurs when an application is presented to an authority declaring insolvency and requesting to be declared bankrupt, which will last until discharge.<\/span><\/li>\n<li><b>About the IBC 2016:<\/b><span style=\"font-weight: 400;\">\u00a0<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">It is the bankruptcy law of India which seeks to<\/span><b> consolidate the existing framework<\/b><span style=\"font-weight: 400;\"> by creating a single law for insolvency and bankruptcy.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">It is <\/span><b>a one stop solution<\/b><span style=\"font-weight: 400;\"> for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">It <\/span><b>aims to protect the interests of small investors<\/b><span style=\"font-weight: 400;\"> and make the process of doing business less cumbersome.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Insolvency and Bankruptcy Board of India (IBBI):<\/b>\n<ul>\n<li><b>It is the regulator for overseeing insolvency proceedings<\/b><span style=\"font-weight: 400;\"> and entities like Insolvency Professional Agencies (IPA), Insolvency Professionals (IP) and Information Utilities (IU) in India.\u00a0<\/span><\/li>\n<li><b>It was established on 1 October 2016 <\/b><span style=\"font-weight: 400;\">and given <\/span><b>statutory <\/b><span style=\"font-weight: 400;\">powers through the IBC 2016.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">It functions under the <\/span><b>Ministry of Corporate Affairs<\/b><span style=\"font-weight: 400;\"> and <\/span><b>covers <\/b><span style=\"font-weight: 400;\">Individuals, Companies, Limited Liability Partnerships and Partnership firms.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Process Followed under the IBC<\/b><\/h2>\n<ul>\n<li><b>Initiation of CIRP:<\/b>\n<ul>\n<li><b>Corporate Debtor (CD)<\/b><span style=\"font-weight: 400;\">: A company that has taken loans and defaults on repayment.<\/span><\/li>\n<li><b>Who can Apply:<\/b><span style=\"font-weight: 400;\"> Either the creditor or the debtor can initiate proceedings.<\/span><\/li>\n<li><b>Relevant Section<\/b><span style=\"font-weight: 400;\">: Corporate Insolvency Resolution Process (<\/span><b>CIRP<\/b><span style=\"font-weight: 400;\">) is governed by Section 6 of the IBC.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Threshold for default:<\/b>\n<ul>\n<li><b>Earlier limit<\/b><span style=\"font-weight: 400;\">: \u20b91 lakh default.<\/span><\/li>\n<li><b>Revised limit<\/b><span style=\"font-weight: 400;\">: Raised to \u20b91 crore during the pandemic to reduce undue stress on companies.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Adjudicating Authority (AA):<\/b>\n<ul>\n<li><b>Designated authority<\/b><span style=\"font-weight: 400;\">: National Company Law Tribunal (<\/span><b>NCLT<\/b><span style=\"font-weight: 400;\">) benches across India.<\/span><\/li>\n<li><b>Role<\/b><span style=\"font-weight: 400;\">: Receives insolvency applications from creditors or debtors.<\/span><\/li>\n<li><b>Timeline<\/b><span style=\"font-weight: 400;\">: Must admit or reject application within 14 days, with reasons for delay if not disposed within this period.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Commencement of CIRP:<\/b>\n<ul>\n<li><b>Trigger point<\/b><span style=\"font-weight: 400;\">: CIRP begins once NCLT admits the application.<\/span><\/li>\n<li><b>Resolution timeline<\/b><span style=\"font-weight: 400;\">: As per amendment, the process must be completed within 330 days (including litigation period).<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Outcome of CIRP:<\/b>\n<ul>\n<li><b>Resolution<\/b><span style=\"font-weight: 400;\">: Revival of the corporate debtor through restructuring or takeover by a Successful Resolution Applicant (SRA).<\/span><\/li>\n<li><b>Liquidation<\/b><span style=\"font-weight: 400;\">: If no resolution plan is approved within the stipulated period.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Supreme Court\u2019s Ruling<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Revival of BPSL<\/b><span style=\"font-weight: 400;\">: JSW Steel has invested in modernisation, safeguarded thousands of jobs, and ensured that the company will continue to operate.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>IBC objective fulfilled<\/b><span style=\"font-weight: 400;\">: The court emphasised that the essence of IBC is to convert loss-making firms into profitable entities.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>On claims<\/b><span style=\"font-weight: 400;\">: Creditors\u2019 demand for an additional \u20b96,100 crore was dismissed. The Court stated that once the Committee of Creditors (CoC) approves a plan, reopening claims undermines the law.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>CCDs as equity<\/b><span style=\"font-weight: 400;\">: Compulsorily Convertible Debentures (CCDs) issued by the Successful Resolution Applicant (SRA) must be treated as equity.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Background<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The SC had earlier<\/span><b> ordered liquidation<\/b><span style=\"font-weight: 400;\">, citing JSW Steel\u2019s delay in implementing the plan and failure of CoC to exercise its commercial wisdom.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The court <\/span><b>criticised the Resolution Professional (RP)<\/b><span style=\"font-weight: 400;\"> and CoC for failing to protect creditors\u2019 interests and supporting JSW despite violations.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The (May 2024) order unsettled investors and cast doubts on the effectiveness of IBC reforms.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Importance of BPSL to JSW Steel<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">BPSL contributes significantly to JSW\u2019s revenue and profitability. <\/span><b>FY25 performance<\/b><span style=\"font-weight: 400;\"> &#8211; Profit of \u20b9300 crore (Q1), loss of \u20b993 crore (Q2), profit of \u20b911 crore (Q3).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">BPSL increased capacity from 3.5 MTPA to 5 MTPA, operating advanced facilities across India.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Analysts estimate an <\/span><b>8\u201310% revenue and EBITDA decline<\/b><span style=\"font-weight: 400;\"> in FY26 if BPSL is liquidated.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Liquidation Trends and Broader Implications of Judgment<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Rising liquidations<\/b><span style=\"font-weight: 400;\">: FY24 witnessed 2,476 cases ending in liquidation with total claims of \u20b911 lakh crore. Recovery rate remained only 6.33% of admitted claims (\u20b969,634 crore).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Example of Jet Airways<\/b><span style=\"font-weight: 400;\">: Earlier, Jet Airways faced liquidation due to a failed resolution plan (\u20b915,723 crore admitted claims).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Liquidation of BPSL<\/b><span style=\"font-weight: 400;\">: This would have been the largest in corporate history.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>The judgment: <\/b><span style=\"font-weight: 400;\">This is expected to <\/span><b>restore investor confidence<\/b><span style=\"font-weight: 400;\"> in IBC and <\/span><b>discourage frivolous delays.<\/b><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Conclusion<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Supreme Court\u2019s<\/span><b> reversal aligns with the spirit of the IBC<\/b><span style=\"font-weight: 400;\"> by prioritising corporate revival over liquidation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The ruling will <\/span><b>likely strengthen creditors\u2019 trust in resolution plans<\/b><span style=\"font-weight: 400;\">, reduce litigation uncertainties, and boost investor confidence in India\u2019s insolvency ecosystem.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Going ahead, <\/span><b>stricter accountability <\/b><span style=\"font-weight: 400;\">for Resolution Professionals and CoCs is essential to prevent delays and safeguard creditors\u2019 interests.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/jsw-takeover-bhushan-power-sc-10273279\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SC clears JSW Steel\u2019s $2.3B (\u20b919,350 cr) acquisition of Bhushan Power &#038; Steel under Insolvency and Bankruptcy Code, 2016.<\/p>\n","protected":false},"author":19,"featured_media":65615,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[2945,60,22,59],"class_list":{"0":"post-65476","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-insolvency-and-bankruptcy-code-ibc","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/65476","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=65476"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/65476\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/65615"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=65476"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=65476"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=65476"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}