India’s banking sector is facing a major jolt following the Supreme Court’s recent decision to strike down JSW Steel’s ₹19,700-crore resolution plan for Bhushan Power and Steel Ltd (BPSL). The apex court’s verdict, delivered on May 2, 2025, has ordered the liquidation of BPSL, disrupting the recovery hopes of Indian banks that collectively hold over ₹31,300 crore in outstanding claims.
JSW Steel’s acquisition of BPSL initially approved by creditors and executed through a combination of equity and optionally convertible debentures (OCDs), has now been deemed non-compliant with the Insolvency and Bankruptcy Code (IBC). The Supreme Court cited issues with the payment structure and delays in implementing the resolution plan, ultimately rendering it invalid.
This ruling not only voids one of the country’s most high-profile insolvency deals but also reopens a complex legal battle. The decision follows a long chain of complications, including BPSL’s involvement in a ₹47,204 crore fraud and money laundering case flagged by the Enforcement Directorate (ED).
Although the Delhi High Court had previously dismissed ED’s case, the Supreme Court’s new ruling nullifies JSW Steel’s 83.3% stake in BPSL.
With liquidation now the only remaining option, Indian lenders, particularly public sector banks, are staring at deep haircuts. Here’s a snapshot of the key claims and likely recoveries, as per CNBC-TV 18 news report.
The move toward liquidation is expected to significantly reduce the actual recovery for banks, as asset sales typically fetch lower returns compared to a resolution plan. This could lead to increased provisioning and impact bank profitability in the upcoming quarters.
While public sector banks are likely to take the biggest hit, the broader financial sector may also feel the ripple effects of this precedent-setting judgment. It brings back concerns around the effectiveness of India’s bankruptcy resolution framework, especially in high-stakes corporate insolvency cases.
Read More: JSW Steel Shares Tumble Over 6% After Supreme Court Ruling on Bhushan Power & Steel Deal.
The Bhushan Power case is a reminder of the risks still looming in India’s bad loan ecosystem. Despite significant strides in banking reform, the legal and structural challenges in resolving large defaults remain.
For lenders, this setback emphasises the importance of timely resolution and regulatory clarity to avoid prolonged uncertainty and financial loss.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in securities market are subject to market risks, read all the related documents carefully before investing.
Published on: May 6, 2025, 3:32 PM IST
Neha Dubey
Neha Dubey is a Content Analyst with 3 years of experience in financial journalism, having written for a leading newswire agency and multiple newspapers. At Angel One, she creates daily content on finance and the economy. Neha holds a degree in Economics and a Master’s in Journalism.
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