Legal Review and Analysis of Kalyani Transco vs Ms Bhushan Power and Steel Limited & Ors 2025 INSC 1165
1. Heading of the Judgment
Case Title: Kalyani Transco vs. M/s Bhushan Power and Steel Limited & Ors.
Citation: 2025 INSC 1165
Court: Supreme Court of India
Bench: Chief Justice B.R. Gavai, Justice Satish Chandra Sharma, Justice K. Vinod Chandran
Date of Judgment: September 26, 2025
2. Related Laws and Sections
This judgment primarily interprets and applies the following statutory framework:
The Insolvency and Bankruptcy Code, 2016 (IBC):
Section 12: Mandates time-bound completion of the Corporate Insolvency Resolution Process (CIRP).
Section 21: Constitution of the Committee of Creditors (CoC).
Section 30: Submission and approval of a resolution plan.
Section 31: Binding nature of the approved resolution plan on all stakeholders.
Section 32A: Grants immunity to the corporate debtor and its assets from offenses committed prior to the CIRP upon a successful resolution.
Section 61: Grounds for appeal to the National Company Law Appellate Tribunal (NCLAT).
Section 62: Appeal to the Supreme Court on a question of law.
Section 33: Provision for initiation of liquidation.IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations):
Regulation 18: Pertains to the meetings of the CoC, including the explanation clarifying its existence until plan approval or liquidation.
Regulation 38: Mandatory contents of a resolution plan, including the priority of payments to operational creditors.The Arbitration and Conciliation Act, 1996:
Section 49: Relating to the enforcement of foreign awards, which was relevant for determining the status of a creditor's claim.
3. Basic Judgment Details
This batch of six civil appeals arose from a common judgment dated February 17, 2020, passed by the NCLAT. The appeals were filed by the erstwhile promoters of Bhushan Power and Steel Limited (BPSL) and several operational creditors, challenging the approval of the resolution plan submitted by JSW Steel Limited (JSW). The Supreme Court had initially, on May 2, 2025, set aside the NCLAT's order and directed the liquidation of BPSL. However, upon review petitions, that judgment was recalled on July 31, 2025, and the matters were reheard, leading to the present judgment.
4. Core Principles and Analysis of the Judgment
The Supreme Court addressed a multitude of contentious issues raised by the appellants. The core of the judgment can be broken down into the following key areas:
A. Locus Standi of Erstwhile Promoters
The Issue: JSW and the CoC challenged the very maintainability of the appeals filed by the erstwhile promoters, arguing that upon the initiation of CIRP, they cease to have any relationship with the corporate debtor and are not "persons aggrieved" under Sections 61 and 62 of the IBC.
The Court's Analysis and Ruling: The Court acknowledged that the IBC's primary objective is the timely resolution of insolvency, and the interests of the corporate debtor must be de-linked from those of its erstwhile management. It also took note of the promoters' conduct, which the NCLT had found to be obstructive and aimed at delaying the process. However, relying on the precedent in Vijay Kumar Jain v. Standard Chartered Bank, the Court held that since the promoters were personal guarantors and the resolution plan affected their rights, they could be considered "persons aggrieved." Nevertheless, instead of non-suiting them on this ground, the Court proceeded to examine the appeals on their merits, ultimately finding no substance in their contentions. (Para 53-66)
B. Continuity of the Committee of Creditors (CoC) Post-Plan Approval
The Issue: The appellants argued that the CoC becomes functus officio (ceases to have authority) once the adjudicating authority (NCLT) approves a resolution plan. They challenged the validity of a clause in JSW's plan that allowed the "erstwhile CoC" to extend the plan's implementation timeline.
The Court's Analysis and Ruling: The Supreme Court rejected this contention. It conducted a detailed analysis of the IBC and the CIRP Regulations, particularly the Explanation to Regulation 18(2). The Court held that the CoC continues to exist until the resolution plan is fully implemented or an order of liquidation is passed. This continuity is essential to supervise the implementation, handle exigencies, and protect the creditors' interests, especially when appeals are pending and the plan's finality is uncertain. The clause permitting the CoC to extend the implementation period was upheld as a legitimate exercise of its supervisory role and commercial wisdom, not a impermissible modification of the plan. (Para 67-86)
C. Delay in Implementation of the Resolution Plan
The Issue: The appellants contended that JSW inordinately delayed the implementation of the plan by over 900 days, which was a ground for setting it aside.
The Court's Analysis and Ruling: The Court meticulously traced the timeline and attributed the delay to factors beyond JSW's control. These included:
Unilateral modifications by the NCLT regarding the distribution of EBITDA.
A stay on implementation granted by the NCLAT during the pendency of appeals.
The attachment of BPSL's assets by the Enforcement Directorate (ED) under the PMLA.
Lingering uncertainty regarding the protection offered by Section 32A of the IBC from prosecution.
The Court found that JSW and the CoC were jointly making efforts to resolve these legal impediments. The delay was not due to JSW's unwillingness but was a consequence of external legal and procedural challenges. The CoC itself had, by a 97.25% majority, extended the timeline, recognizing these hurdles. Thus, the plea was rejected. (Para 103-129)
D. Distribution of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
The Issue: This was a central controversy. The NCLT had directed that EBITDA generated during the CIRP be distributed to creditors, a decision overturned by the NCLAT relying on the Supreme Court's judgment in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta ("Essar Steel"). The CoC, in a volte-face, filed an additional affidavit during the rehearing claiming a right to this EBITDA.
The Court's Analysis and Ruling: The Supreme Court firmly rejected the CoC's new claim. It reaffirmed the principle of finality enshrined in Section 31 of the IBC, as interpreted in Essar Steel and Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss ARC. The Court held that a successful resolution applicant cannot be faced with "hydra-headed" unforeseen claims after the plan is approved. Since the Request for Resolution Plan (RfRP) and the approved resolution plan were completely silent on the treatment of EBITDA, the question of its distribution did not arise. The Court criticized the CoC for its inconsistent stand and held that allowing such a claim would violate the core objective of the IBC to provide certainty and finality to the resolution process. (Para 153-171)
E. Treatment of Claims of Operational Creditors
Jaldhi Overseas Pte. Ltd.: Jaldhi's claim, based on foreign arbitral awards, was classified as a "contingent liability" by the resolution plan, entitling it to a lower payment. The Court upheld this classification, noting that Jaldhi had itself initially claimed to be a contingent creditor and had withdrawn its enforcement proceedings in India. The Court emphasized that the classification of claims falls within the commercial wisdom of the CoC, which is non-justiciable. (Para 172-180)
Medi Carrier and Darcl Logistics: These operational creditors claimed they were promised pre-CIRP dues by the Resolution Professional (RP) to continue services. The Court found no evidence of any CoC-approved agreement for such payments. It accepted the RP's explanation that payments made were an accounting error and were correctly adjusted against CIRP-period services. Pre-CIRP dues could only be settled as per the resolution plan. (Para 181-184)
5. Final Outcome and Supreme Court's Directions
The Supreme Court dismissed all the appeals and upheld the NCLAT's impugned judgment dated February 17, 2020. The resolution plan submitted by JSW Steel Limited was found to be valid and compliant with the law.
The Court's decision reinforces the following key principles:
The sanctity and finality of a duly approved resolution plan are paramount.
The commercial wisdom of the CoC is sacrosanct and extends to supervising the plan's implementation.
A successful resolution applicant starts with a clean slate and cannot be burdened with claims not part of the resolution plan.
The IBC is a beneficial legislation aimed at corporate revival, and its objectives should not be frustrated by allowing claims to be reopened after the fact.
6. Multiple Choice Questions (MCQs) Based on the Judgment
Question 1: According to the Supreme Court's judgment in Kalyani Transco vs. Bhushan Power and Steel Ltd. (2025 INSC 1165), what is the status of the Committee of Creditors (CoC) after the National Company Law Tribunal (NCLT) approves a resolution plan?
(a) It becomes functus officio and ceases to exist immediately.
(b) It continues to exist only to handle litigation related to the plan.
(c) It continues to exist until the plan is fully implemented or a liquidation order is passed.
(d) Its role is taken over entirely by the Resolution Professional for implementation.
Answer: (c) It continues to exist until the plan is fully implemented or a liquidation order is passed.
Question 2: The Supreme Court rejected the claim for distribution of EBITDA generated during the CIRP to the creditors primarily based on which legal principle?
(a) The creditors had waived their rights to the EBITDA in a written agreement.
(b) The Successful Resolution Applicant, JSW, had suffered losses due to implementation delays.
(c) The Request for Resolution Plan (RfRP) and the approved resolution plan were silent on the treatment of EBITDA.
(d) The EBITDA amount was insufficient to make a meaningful distribution to the creditors.
Answer: (c) The Request for Resolution Plan (RfRP) and the approved resolution plan were silent on the treatment of EBITDA.
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