In This Economy… How The Supreme Court Shocked The Entire Insolvency Ecosystem

Happy Tuesday! The last week in India’s financial services ecosystem was highlighted by some big bank results. Both State Bank of India and Kotak Mahindra Bank declared their fourth quarter and FY25 results on Saturday. The lenders saw their quarterly profits fall for distinct reasons, though. In the case of India’s largest lender, it was a math problem; last year the bank saw a one-time provisioning write-back, which was not available this year. For Kotak Mahindra Bank, the microfinance-related provisions played spoilsport.Overall, Indian banks are likely to see some amount of growth moderation in the financial year ending March 2026, with SBI estimating a slower 12-13% credit growth. This was largely because of the global tariff uncertainty. On to this week’s newsletter!.On Friday, the Supreme Court ordered the liquidation of Bhushan Power & Steel Ltd, shocking everyone in the insolvency and bankruptcy ecosystem. The reason for the shock was that one of India’s premier steelmakers, JSW Steel Ltd. had won the bid for the company under the insolvency and bankruptcy code in 2019, officially taking over the asset in 2021. As part of its order, the apex court said that JSW Steel must return Bhushan Power & Steel to the committee of creditors. The committee of creditors are expected to repay JSW Steel the Rs 19,350 crore they had received for the sale in 2021 within two months.Bhushan Power & Steel, originally owned by Sanjay Singhal, was one of 12 bad loan cases shortlisted by the RBI for immediate insolvency proceedings back in June 2017. It was also a hard-fought battle for JSW Steel, with other major players including Tata Steel bidding for the asset. Finally, the committee of creditors decided to go with JSW Steel’s Rs 19,700 crore offer, where operational creditors were set to receive Rs 350 crore and the rest would be with financial creditors.In the four years since JSW Steel took over the asset, it has spent a considerable amount of capex to revive the Odisha-based plant. Bhushan Power & Steel has a fully integrated steel plant in Sambalpur, which has the capacity to produce 3.5 million tonnes per annum of steel. This is also core to JSW Steel’s overall 45 MTPA target. Currently it accounts for about 14% of the revenue for the owner and 10% of its Ebitda.The Supreme Court order is harsh on JSW Steel for allegedly breaching tenets of the IBC. Specifically because of the two-year delay in implementing the resolution plan. The court has also taken to task the committee of creditors for first opposing such a delay and then quietly allowing it without a Supreme Court order allowing them to do so.On top of that, the apex court also had a few words to say about Nclat’s orders, which supposedly breached their ambit of powers.Apart from unwinding a long-approved transaction, the court has not imposed any other punishments. Not that this is not enough. But for the court to cancel a four-year-old transaction for poor application of law has irked many legal minds. Especially since the matters in which the order was passed were pending for as long.“If the SC is so punctilious about timelines under the IBC that a delay by the bidder can lead to liquidation of the corporate debtor, it is also incumbent on the courts/tribunals to also expeditiously decide matters in relation to IBC,” Suharsh Sinha, a legal practitioner and IBC expert, wrote for NDTV Profit here.JSW Steel and the lenders will likely contend against this order, but to what extent is something that needs to be watched..In an exclusive interview with Shrimi Choudhary, SEBI chairman Tuhin Kanta Pandey highlighted egregious behaviour at Gensol Engineering.Ola Electric might be in the crosshairs with the market regulator over insider trading concerns, Tushar Deep Singh and Charu Singh reported.Chinese firms are contacting Indian exporters to complete orders from their US clients so they can bypass the high tariffs, Rishabh Bhatnagar reports.Pallavi Nahata reports here that this year might see a good mango yield. Those are some sweet thoughts!DIPAM Secretary Arunesh Chawla detailed the government’s disinvestment plans to Shrimi Choudhary in this interview..Over the weekend the Oracle of Omaha announced that 2025 will be the last of his annual Berkshire Hathaway meets. Warren Buffett named Greg Abel to be the new CEO of the mega investment firm. The Berkshire Hathaway board followed Buffett’s announcement and made the regulatory disclosure..Until next week, this is Vishy signing off.

In This Economy… How The Supreme Court Shocked The Entire Insolvency Ecosystem

The top court’s verdict has triggered deep concern across IBC stakeholders.

NDTV Profit

NDTV Profit

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