The Bhushan Power Saga: What JSW's Ordeal Teaches About Resolution Plan Certainty

One Case, Two Dramatic Reversals

Few insolvency cases in India's history have generated as much judicial attention: or as much commercial anxiety: as the resolution of Bhushan Power and Steel Limited. With debts running into tens of thousands of crores and a resolution plan approved by the NCLT in 2019, the matter has spent years in extended litigation. What happened in 2025 crystallised a fundamental tension at the heart of the IBC: the tension between the sanctity of an approved resolution plan and the need for courts to correct errors made in the approval process.

The timeline of the key 2025 developments runs as follows:

What Drove the May 2025 Set-Aside

The May 2025 judgment's core concerns centred on compliance with Section 29A of the IBC: the provision that disqualifies certain categories of persons from submitting resolution plans. Section 29A was introduced by amendment in 2018 specifically to prevent promoters of defaulting companies, and connected parties, from acquiring distressed assets through the IBC at a discount, thereby benefiting from their own default.

The challengers in Kalyani Transco raised concerns that JSW Steel had not adequately demonstrated its independence from parties who fell within the Section 29A disqualification net. The May 2025 bench found these concerns sufficiently serious to warrant setting aside the plan: a dramatic outcome given that the plan had been approved by the NCLT in 2019 and JSW had been operating the company for several years.

The May judgment also raised process concerns about how the CoC had evaluated competing bids and whether the resolution professional had complied with all applicable procedural requirements. The accumulation of these findings led to the set-aside: and immediately created a practical crisis: if the JSW plan was void, what was the status of the company JSW had been running for years? What happened to the employees, the creditors who had received payment under the plan, the commercial contracts entered into post-approval?

Why the September Reversal Happened

The September 2025 reversal by the CJI's bench reflects a principle that Indian courts have begun to take more seriously in insolvency jurisprudence: the principle of irreversibility. When an insolvency resolution plan has been substantially implemented: when a company has been running under new management for years, employees have been paid, contracts have been honoured, assets have been integrated: the practical consequences of unwinding it are potentially more harmful than the original procedural errors that the plan might have contained.

The September bench appears to have weighed the May 2025 findings against the reality of what had happened on the ground over six years of implementation. The Section 29A concerns that drove the May set-aside were examined afresh, and the court appears to have reached a different conclusion on the facts regarding JSW's independence from disqualified persons.

"When a resolution plan has been substantially implemented over a significant period, courts must weigh the systemic consequences of unwinding against the nature and gravity of the infirmity alleged. Resolution certainty is not merely a commercial interest: it is a structural requirement for the insolvency ecosystem to function."

The Lessons for Resolution Applicants and Creditors

Due Diligence on Section 29A Must Be Exhaustive

The Section 29A eligibility analysis cannot be treated as a formality. Resolution applicants must trace connected persons across the full width of the provision: including promoters, connected parties, and related entities: and obtain careful legal opinions before submitting a plan. Failing to satisfy Section 29A scrutiny, even years after plan approval, can trigger litigation that undoes everything. The cost of a thorough 29A analysis at the front end is a fraction of the cost of contested litigation at the back end.

CIRP Process Integrity Matters Enormously

The procedural concerns raised in the Bhushan Power litigation: about how the resolution professional managed the process, how the CoC evaluated bids, and whether proper procedures were followed: reflect a broader principle. Courts will examine CIRP process compliance closely when a plan is challenged, even years after approval. Resolution professionals and CoCs must document their decisions meticulously and ensure that every procedural step is properly taken and recorded.

The Longer a Plan Is Implemented, the Harder to Unwind

The September reversal implicitly endorses a pragmatic principle: implementation creates facts on the ground that courts must take into account. This is not a licence for resolution applicants to rush implementation in order to create irreversibility: courts will see through that. But it does mean that creditors, resolution applicants, and courts all benefit from a system where valid plans are implemented quickly and where challenges are heard and disposed of expeditiously. A plan that sits in appeal for years, with uncertain status, serves no one well.

For Financial Creditors: Challenge Early or Accept the Outcome

The Bhushan Power litigation is also a cautionary tale for financial creditors who did not raise objections early in the process. Challenges to resolution plans that could have been raised before the CoC vote: or at the NCLT approval stage: become significantly harder to sustain, and are treated with less sympathy, when they are raised years into implementation. Creditors who have concerns about a resolution plan should raise them at the earliest possible stage.