The Supreme Court’s verdict in the Bhushan Power & Steel Ltd (BPSL) matter has brought back into focus a familiar but unresolved question: can procedural integrity be sacrificed in the name of commercial expediency?

The ruling has prompted concerns about delays in resolution timelines and uncertainty for investors. But these anxieties, while understandable, miss the deeper point. Due process is not a dispensable ideal — it is the source of legitimacy in commercial law.

A recent businessline opinion rightly underscored this dimension. I share that view, not only as a legal proposition but from institutional experience. The IBC may be a commercial statute, but it is not exempt from constitutional discipline.

A Brief Recap

In September 2019, the NCLT approved JSW Steel’s resolution plan for BPSL. A month later, the Enforcement Directorate provisionally attached the corporate debtor’s assets under the PMLA, alleging they were linked to offences committed by the erstwhile promoters. The NCLAT stayed the attachment and, in February 2020, upheld the plan while declaring the ED’s action to be without jurisdiction.

It relied on Section 32A of the IBC — introduced shortly after in December 2019 — which protects the corporate debtor from prosecution once control passes to a bona fide acquirer. NCLAT treated the provision as clarificatory and applied it retrospectively.

Stakeholder Concerns

The judgment has raised three concerns. Some argue that even if procedural lapses occurred, invalidating the entire plan was excessive, and that regulatory action against erring parties would have sufficed. Others cite the ₹19,000 crore infused by JSW Steel as evidence of commercial risk, warning that this may open the door for losing bidders to challenge settled outcomes.

A third concern relates to investor sentiment, particularly from overseas. The fear is that annulling a plan post-implementation may be seen as legal unpredictability. These concerns merit attention, but they must be weighed against the institutional consequences of condoning non-compliance.

Restoring Process Integrity

The judgment marks a return to first principles. Resolution plans are not exempt from the requirements of fair hearing, disclosure, and statutory compliance. Section 30(2) is not a procedural formality — it is the load-bearing wall of the resolution process, and it must be treated as such.

Transparency is not peripheral; it is the condition of legitimacy. Courts do not lightly set aside commercial outcomes. But when plans are secured through suppression or concealment, it is the breach that destabilises the process, not the bench.

This is not a precedent for aggressive scrutiny. It is a course correction. When the pressure of resolution timelines is used to justify overlooking statutory compliance, the legitimacy of the process is the first casualty.

The judgment reaffirms that judicial approval is not a routine endorsement. The Adjudicating Authority is not a post office for the Committee of Creditors; it is a statutory checkpoint. Where ineligibility is concealed or material facts are withheld, the process stands compromised from the start.

Section 32A

The Court’s reaffirmation of jurisdictional boundaries is important. But its treatment of Section 32A raises a separate concern.

Section 32A was brought in to protect the corporate debtor from past liabilities once it has been taken over by a genuine, unrelated buyer. Its purpose was to give the company a fresh start after resolution.

However, the Court declined to apply this protection retrospectively, saying that the ED’s attachment came before Section 32A came into force. With respect, this approach may overlook the fact that Section 32A was clarificatory in nature — it was meant to confirm the legal position, not change it.

The presence of a commencement date does not automatically prevent retrospective application. Section 238A of the IBC had a similar start date, but the Supreme Court still held that it applied from the beginning of the Code.

Promoters must of course face consequences for their own actions. But once a company is resolved and handed over to a new owner, it must not be burdened by past wrongdoing. If that protection is denied, the very purpose of resolution is defeated.

Compliance and Confidence

Commercial pragmatism is not a vice. It enables pace, predictability, and value preservation. But when invoked to excuse institutional lapses or statutory breaches, it corrodes the very framework it seeks to defend. The real question is not whether scrutiny deters investment —but whether inconsistency does.

A system that rewards compliance and penalises concealment is more credible to serious investors, not less. While some may prioritise speed, long-term capital values legal predictability. Due process is not a speed bump — it is the roadbed beneath institutional legitimacy.

A Necessary Intervention

This judgment does not generalise. It remains tethered to the facts of the case and does not suggest that all approved plans are vulnerable.

What it does say is that when statutory breaches are shown, courts will not remain silent.

The conduct of the resolution professional and the committee of creditors also comes under scrutiny — material irregularities were unflagged, and a non-compliant plan was approved.

Commercial wisdom was exercised by crashing through the guardrails of institutional vigilance. The resolution process under the IBC demands stewardship, not an autopilot. When gatekeeping fails, the Court does not stand aside. Its invocation of Article 142 in this case was not to bypass the Code, but to restore procedural integrity where it had been persistently undermined.

Process Is the Blueprint

In this light, the businessline opinion piece by Ajay Srivastava (May 7) was right in reminding readers that speed must not trump process. Due process is not a speed bump — it is the roadbed beneath institutional legitimacy.

In reaffirming that principle, the Court has not derailed the Code; it has steadied the track on which it must run. If resolution is to command respect, it must begin with respect for the process that enables it.

The writer is a former Judicial Member of the National Company Law Tribunal. He writes on insolvency law, institutional reform, and commercial adjudication

Published on May 20, 2025

This article first appeared on The Hindu Business Line

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