India’s Insolvency and Bankruptcy Code (IBC), introduced in 2016, was envisioned as a game-changer for resolving corporate distress and tackling the nation’s non-performing asset crisis. By consolidating fragmented laws, prioritizing creditor rights, and enforcing strict timelines, the IBC promised swift, value-maximizing resolutions. Early successes, such as the resolutions of Essar Steel and Binani Cement, fueled optimism.
Yet, nearly a decade later, the system grapples with persistent challenges—prolonged litigation, judicial interventions, procedural lapses, and stakeholder conflicts. The Supreme Court’s May 2, 2025, ruling annulling JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Ltd. (BPSL) has brought these issues into sharp focus, raising questions about the IBC’s efficacy and future. This piece explores these challenges, drawing on reported anecdotes and a table of key cases to illuminate the IBC’s turbulent path.
The JSW-BPSL case has become a flashpoint for the IBC’s struggles. In 2019, the National Company Law Tribunal (NCLT) approved JSW Steel’s bid to acquire BPSL, a resolution hailed as a milestone for recovering ₹19,700 crore of the ₹47,000 crore owed to creditors. However, in 2025, the Supreme Court, invoking Article 142, overturned the plan, citing procedural violations by the Resolution Professional (RP) and the Committee of Creditors (CoC).
The court found the plan’s funding structure—mixing equity and optionally convertible debentures instead of equity alone—non-compliant with IBC norms. Justices Bela M. Trivedi and Satish Chandra Sharma ordered BPSL’s liquidation, a rare move that nullified years of legal and financial efforts. A senior banker, speaking anonymously to LiveMint, expressed dismay: “We believed the deal was final. Liquidation could slash recoveries significantly.” The ruling triggered a 7% drop in JSW’s stock, as noted by X user
@BhartiyNiveshak, who questioned whether it delays justice or erodes investor trust.
The JSW verdict exposes deep-seated issues in the IBC framework. A primary challenge is the failure to adhere to the mandated 180-day resolution timeline, extendable to 330 days. Cases routinely stretch over years due to legal disputes. The BPSL resolution, initiated in 2017, remained unresolved until 2025.
Similarly, Business Today reported that Ind-Barath Energy’s resolution took nearly four years, recovering just ₹1,047 crore of ₹5,500 crore owed. Litigation over creditor claims, promoter challenges, and appeals to the National Company Law Appellate Tribunal (NCLAT) and Supreme Court often paralyze proceedings, undermining the IBC’s time-bound ethos.
Judicial interventions further complicate the landscape. The Supreme Court’s 2022 ruling in Vidarbha Industries Power Ltd. v. Axis Bank granted NCLT discretion to reject insolvency applications even when defaults are proven, a decision Pratik Datta in The Indian Express warned could revive the inefficiencies of the Sick Industrial Companies Act. The JSW case amplifies this concern, as the court’s override of NCLT and NCLAT approvals introduces uncertainty for investors.
A lawyer quoted in LiveMint highlighted the ripple effect: “If settled resolutions can be scrapped years later, bidders will think twice.” This unpredictability deters investment, as echoed by @bsindia on X, which called the ruling a “serious setback” for the IBC.
Procedural non-compliance is another recurring issue. In the JSW case, the Supreme Court criticized the RP and CoC for failing to exercise due diligence, a problem also evident in the 2024 Jet Airways resolution. There, the court ordered liquidation after the Jalan-Kalrock Consortium failed to implement its plan, citing similar lapses. A lawyer involved in Jet’s case told LiveMint, “RPs are often caught between aggressive creditors and tight deadlines, leading to rushed decisions.” Such flaws compromise the IBC’s goal of equitable asset distribution and erode stakeholder confidence.
Recovery rates, a key metric of the IBC’s success, have also disappointed. While early cases like Essar Steel achieved significant recoveries, Business Today notes that financial creditors now recover only 34% of claims on average. Videocon Industries yielded a mere 5% recovery, and the JSW ruling raises fears that BPSL’s liquidation will further diminish returns for creditors owed over ₹47,000 crore. This trend threatens banks’ balance sheets and the broader financial ecosystem.
Stakeholder conflicts add another layer of complexity. Operational creditors, such as Kalyani Transco in the BPSL case, often receive negligible payouts, prompting legal challenges that delay resolutions. In real estate insolvencies, homebuyers face uncertainty due to inadequate provisions for project-specific resolutions, as seen in Supertech’s 2022 case. The Odisha government’s ₹139 crore claim against BPSL illustrates how government dues further complicate matters. A resolution professional in a real estate case told The Indian Express, “Balancing homebuyers, banks, and local authorities is a nightmare. The IBC lacks clear guidance for such conflicts.”
Anecdotes from stakeholders underscore these challenges. A former BPSL employee, quoted in a LawChakra report, voiced frustration over renewed uncertainty: “JSW’s takeover promised stability, but liquidation puts our livelihoods at risk again.” On X,
@SpangleAdvisors warned that the ruling could make IBC resolutions “more difficult,” deterring investors wary of retrospective changes. A senior advocate, speaking to NDTV Profit, offered a nuanced view: “The IBC isn’t broken, but it’s bending under its own weight. It needs reinforcement.”
The following table summarizes significant IBC cases impacted by Supreme Court rulings, highlighting their outcomes and implications:
| Case | Year of Ruling | Key Issue | Outcome |
|---|---|---|---|
| Bhushan Power & Steel | 2025 | Procedural non-compliance, illegal funding structure | Resolution plan scrapped, liquidation ordered |
| Jet Airways | 2024 | Failure to implement resolution plan | Liquidation ordered |
| Essar Steel | 2019 | Clean slate principle, creditor claims | Resolution upheld, set precedent for successful applicant immunity |
| Vidarbha Industries | 2022 | Discretionary admission of insolvency applications | NCLT given discretion to reject applications despite defaults |
| Supertech | 2022 | Project-wise insolvency for real estate | Project-specific resolution allowed, interim ruling |
The JSW ruling has far-reaching implications. For creditors, liquidation risks lower recoveries than resolution, straining bank finances. For investors, the prospect of retrospective judicial reversals dampens confidence, potentially reducing bidder participation. The decision also questions the sanctity of CoC approvals and NCLT processes, critical pillars of the IBC. To restore the system’s credibility, experts advocate strengthening RP accountability through better training, streamlining judicial processes with dedicated IBC benches, clarifying stakeholder rights to protect operational creditors and homebuyers, and amending the IBC to codify project-wise insolvency and cross-border frameworks.
India’s IBC remains a cornerstone of economic reform, but its promise hinges on addressing these systemic flaws. The JSW-BPSL case serves as a critical juncture, urging stakeholders to recalibrate the framework to ensure it delivers swift, equitable, and predictable resolutions. Without reform, the IBC risks losing its transformative potential, leaving creditors, investors, and employees in limbo.