CoC’s Post‑Approval Continuity and No Ex‑Post EBITDA Claims: Supreme Court’s Blueprint for Finality and Implementation under the IBC

Case: KALYANI TRANSCO v. M/S BHUSHAN POWER AND STEEL LTD. & Ors.

Citation: 2025 INSC 1165

Court: Supreme Court of India

Date: 26 September 2025

Introduction

This judgment resolves a long‑running and high‑stakes contest over the resolution of Bhushan Power and Steel Ltd. (BPSL), one of the RBI’s “dirty dozen” accounts that triggered early marquee applications under the Insolvency and Bankruptcy Code, 2016 (IBC). Punjab National Bank initiated CIRP; JSW Steel’s plan emerged successful and was approved by the NCLT (5 September 2019) subject to conditions. The NCLAT (17 February 2020) substantially allowed JSW’s appeal, modifying certain conditions. Multiple stakeholders appealed to the Supreme Court under Section 62 IBC—erstwhile promoters (as personal guarantors), operational creditors (OCs) including Kalyani Transco, Jaldhi Overseas, Medi Carrier, and Darcl Logistics. The case also intersected with ED attachments under the PMLA, and an earlier Supreme Court judgment (2 May 2025) directing liquidation was recalled on review (31 July 2025).

The Supreme Court now upholds the NCLAT’s approval of the plan and lays down critical clarifications on: the continuing existence and remit of the Committee of Creditors (CoC) post‑approval; the legality of plan clauses permitting CoC‑approved extensions for implementation; the treatment of EBITDA generated during CIRP; compliance with Regulation 38 priority for OCs; the characterization of Compulsorily Convertible Debentures (CCDs) as equity; and the status of foreign award‑based operational claims as “contingent” within the CoC’s commercial wisdom.

Summary of the Judgment

Appeals dismissed; NCLAT judgment upheld. The Supreme Court dismissed all appeals and affirmed the NCLAT’s 17 February 2020 order approving JSW’s resolution plan.
CoC continues post‑approval. The CoC is not functus officio upon NCLT approval. It continues until the plan is implemented or an order of liquidation is passed (Section 33), supported by Explanation to Regulation 18(2) (IBBI (CIRP) Regulations) and the 2025 amendments mandating consideration of a Monitoring Committee (Regulation 38(4)).
Extension clause is lawful. A clause allowing the CoC (by 66% vote) to extend plan implementation timelines is valid. It is not an impermissible post‑approval renegotiation (distinguished from Ebix and Amtek Auto).
Delay in implementation justified. Delays were attributable to NCLAT’s interim stay, ED’s provisional attachment under PMLA, and uncertainty pre‑Section 32A clarity; CoC and SRA acted in tandem. The case is unlike the long non‑implementation in SBI v. Murari Lal Jalan (Jet Airways).
Priority to OCs under Reg 38 applied prospectively. As on approval (5 September 2019), the applicable amendment (5 October 2018) required priority only for “amount due” to OCs under the plan. Where the plan provided an ex gratia (despite nil liquidation value), paying OCs after FCs did not contravene the law. The later 27 November 2019 amendment did not apply retrospectively.
CCDs count as equity for plan compliance. JSW’s infusion via CCDs satisfied its upfront equity infusion commitments; CCDs are equity‑equivalent (Narendra Kumar Maheshwari; IFCI Ltd v. Sutanu Sinha). The Court respected CoC’s commercial assessment.
EBITDA during CIRP is not distributable absent a process‑document provision. Applying Committee of Creditors of Essar Steel v. Satish Kumar Gupta (2020) and Ghanshyam Mishra (2021), the Court held that no “hydra head” claims can arise post‑approval; since the RfRP/plan was silent, EBITDA remains with the company. The CoC’s 2025 volte‑face claim to EBITDA was impermissible.
Foreign award‑based OC claims can be “contingent.” Jaldhi’s claims based on foreign awards remained contingent absent enforcement under Section 49 of the Arbitration & Conciliation Act; after withdrawing enforcement, claims had not crystallized. The CoC’s sub‑classification was upheld as a matter of commercial wisdom.
No special payment of pre‑CIRP dues to logistics OCs. Medi and Darcl failed to establish CoC approval or plan‑based entitlement to pre‑CIRP payments; accounting misclassifications were corrected and amounts adjusted against CIRP services. Pre‑CIRP payments must align with the plan.
Erstwhile promoters’ locus recognized but conduct deprecated. As personal guarantors, they are “persons aggrieved” (Vijay Kumar Jain), but their obstructive conduct and dilatory tactics were recorded by NCLT.

Detailed Analysis

Precedents Cited and Their Influence

Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531:
- Anchors the “clean slate” principle: no undecided claims post‑approval; bars hydra‑headed claims emerging after plan approval.
- Holds that treatment of profits during CIRP must follow the process document; where silent, there is no creditor entitlement.
- Decisive in rejecting EBITDA distribution to creditors in this case.
Ghanshyam Mishra and Sons (2021) 9 SCC 657:
- Sanctifies finality: once approved under Section 31(1), claims outside the plan stand extinguished and bind all stakeholders.
- Used to preclude fresh EBITDA claims and other post‑approval innovations.
K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150; Kalpraj Dharamshi (2021) 1 SCC 401; Ngaitlang Dhar (2022) 6 SCC 172:
- Reaffirm the non‑justiciability of CoC’s commercial wisdom; Courts cannot substitute business judgments.
- Framed the limited appellate window under Section 61(3) and the narrower question‑of‑law standard under Section 62.
Ebix Singapore (2022) 2 SCC 401 and Amtek Auto (2021) 4 SCC 457:
- Prohibit post‑approval withdrawal/modification of plans; here distinguished as the clause at issue allowed only timeline extension with CoC approval, not substantive renegotiation.
IFCI Ltd v. Sutanu Sinha (2023 SCC OnLine SC 1529) and Narendra Kumar Maheshwari (1990 Supp SCC 440):
- Confirm that CCDs are equity‑type instruments when compulsorily convertible; applied to uphold JSW’s infusion structure.
SBI & Ors. v. Consortium of Murari Lal Jalan & Florian Fritsch (2024 SCC OnLine SC 3187):
- Distinguished: that case involved sustained non‑implementation and repeated breaches; here, delays were justified by ED proceedings and judicial stays.
Vijay Kumar Jain v. Standard Chartered Bank (2019) 20 SCC 455 and Glas Trust Co. LLC v. Byju Raveendran (2024 SCC OnLine SC 3032):
- Support a purposive understanding of “persons aggrieved,” recognizing promoters/guarantors’ limited locus; used to hear appeals on merits while noting conduct.
Innoventive Industries (2018) 1 SCC 407, Karad Urban (2020) 9 SCC 729, K.N. Rajakumar (2022) 4 SCC 617, Ruchi Soya (2022) 6 SCC 343, Greater Noida (2024) 6 SCC 767, Vaibhav Goel (2025 SCC OnLine SC 592), Electrosteel (2025 SCC OnLine SC 829):
- Reinforce plan finality and extinguishment of non‑plan claims; collectively bolster the ruling against ex‑post EBITDA claims and other later demands.

Legal Reasoning: Issue‑wise

1) Locus of Erstwhile Promoters

The Court accepted that promoters who are personal guarantors are “persons aggrieved” under Section 62 (and Section 61) (Vijay Kumar Jain), especially where pure questions of law arise. Nonetheless, the Court recorded their limited and obstructive engagement during CIRP (NCLT’s adverse observations and costs), tempering the weight of their submissions.

2) Does the CoC become functus officio post‑approval?

No. The Court held the CoC continues to exist until (a) plan implementation, or (b) an order of liquidation under Section 33, whichever occurs; and practically until appellate finality. This aligns with:

Explanation to Regulation 18(2) (as amended 16 September 2022) permitting meetings “till the plan is approved under Section 31(1) or liquidation under Section 33”, while not deciding issues that alter the plan submitted to NCLT.
Regulation 38(4) (amended 15 February 2024 and substituted 3 February 2025) requiring the CoC to consider setting up a Monitoring Committee; the 2025 iteration makes this consideration mandatory and permits inclusion of representatives of CoC and RA.

Rationale: CoC’s vital interest subsists until actual disbursals and covenants are performed. Accepting functus officio would leave creditors in a “state of limbo” if implementation is delayed or appeals are pending.

3) Scope of Appeals and Deference to Concurrent Findings

Section 61(3) restricts grounds of appeal from NCLT to NCLAT; Section 62 confines Supreme Court appeals to “questions of law.” The Court stressed that concurrent findings by NCLT and NCLAT are not to be disturbed absent clear legal error (citing Uttar Haryana Bijli v. Adani Power (2023) 14 SCC 731). Even so, given the longevity and stakes, the Court addressed all key issues on merits.

4) Legality of a CoC‑approved extension clause

Clause 3.1 allowed the CoC (66% vote) to extend the plan’s “Effective Date” beyond 30 days from NCLT approval. The Court found this lawful because:

It neither permits withdrawal nor substantive modification; it only deals with implementation timelines.
It is an implementation/supervision mechanism contemplated by Section 30(2)(d) and the IBBI framework.
Distinguished from Ebix/Amtek Auto, where RAs sought to alter the plan itself.

5) Delay in Implementation

The Court attributed delay to extraneous legal impediments: NCLAT’s interim stay (14 October 2019–17 February 2020), ED’s Provisional Attachment Order and prosecution under PMLA, and the evolving legal position culminating in Section 32A’s insertion (28 December 2019). CoC and JSW jointly sought clarity and ultimately implemented the plan (26 March 2021) after a CoC vote (97.25%) extended the Effective Date to 31 March 2021. On 11 December 2024, the Supreme Court directed ED to hand over assets. In this context, claims of opportunism tied to steel prices and demands for interest were rejected.

6) Priority to OCs and Retroactivity of Regulation 38

The applicable regime on 5 September 2019 (NCLT approval date) was the 5 October 2018 amendment to Regulation 38(1), which prioritized the “amount due” under the plan to OCs over FCs. Since liquidation value for OCs was nil, the plan granted OCs an ex gratia amount. Paying FCs before disbursing this voluntary ex gratia to OCs did not violate the regulation. The later 27 November 2019 amendment (requiring priority for “amount payable”) did not apply retrospectively.

7) Upfront Equity Infusion: Are CCDs “equity”?

JSW’s infusion of Rs. 100 crore as equity and the balance via CCDs satisfied upfront equity obligations. The Court treated CCDs as equity‑type instruments, because they are compulsorily convertible (no repayment obligation) and have been recognized as equity in corporate jurisprudence (Narendra Kumar Maheshwari; IFCI v. Sutanu Sinha). The CoC’s acceptance reinforced this conclusion.

8) EBITDA earned during CIRP: Who gets it?

Applying Essar Steel and Ghanshyam Mishra, the Court held:

A successful RA cannot be confronted with post‑approval claims (“hydra heads”).
Distribution of profits generated during CIRP must be governed by the process documents (RfRP). Here, both RfRP and plan were silent—hence, no creditor entitlement.
CoC’s 4 July 2020 minutes recorded that EBITDA should remain with the company; a 2025 volte‑face to claim EBITDA (and attempts to link it to personal guarantor proceedings) was impermissible.

Result: EBITDA remains with BPSL/JSW absent an RfRP/plan provision to the contrary.

9) Jaldhi Overseas: Contingent OC Claims based on Foreign Arbitral Awards

Foreign awards are deemed decrees only upon a court being satisfied of enforceability (Section 49, Arbitration Act). Jaldhi withdrew its enforcement proceedings in the Calcutta High Court; thus, claims had not crystallized. CoC sub‑classification of OCs (crystallized vs contingent) is permissible (and recognized in Essar Steel), and falls within commercial wisdom. The Court therefore upheld the plan’s treatment.

10) Pre‑CIRP Dues of Medi and Darcl

No written CoC‑approved arrangement was shown promising payment of pre‑CIRP dues to incentivize services. Accounting misclassifications were corrected by the RP, treating amounts against CIRP services. Under IBC discipline, pre‑CIRP dues must be paid only per the plan and with CoC approval. The appeals were rejected.

Impact and Prospective Significance

CoC’s post‑approval authority clarified. CoC is alive and functional—through a Monitoring Committee—until completion or liquidation. Practically, this enables responsive decision‑making during implementation without returning to NCLT for every logistical adjustment, provided the plan is not altered.
Plan bankability strengthened. The ruling deters ex‑post claims (like EBITDA) not contemplated by the RfRP/plan, bolstering RA confidence, transaction certainty, and implementation speed.
EBITDA rule‑of‑thumb. Absent an explicit process document provision, EBITDA/profits earned during CIRP are not distributable to creditors. CoCs should draft RfRPs with deliberate clarity if a different treatment is intended.
Structured flexibility is permitted. Clauses allowing CoC‑approved extensions of Effective Dates are valid. A nuanced balance between rigidity (to prevent plan withdrawal/modification) and practical flexibility (for implementation) is endorsed.
Regulatory timing matters. Amendments to the IBBI (CIRP) Regulations do not apply retrospectively absent express language. The plan’s compliance is assessed under the regime prevailing at the point of approval.
Funding instruments. CCDs may be deployed to meet “equity infusion” requirements, if genuinely compulsorily convertible, aiding structuring of complex turnarounds.
Foreign award OCs must enforce. OCs relying on foreign awards should diligently pursue enforcement to crystallize claims. Withdrawal or delay can justify contingent classification with lower recovery.
IBC–PMLA interface. While not deciding Section 32A’s contours, the Court acknowledged that PMLA attachments and prosecutions can impede implementation; CoCs and RAs can, and should, seek clearances early.

Complex Concepts Simplified

CoC (Committee of Creditors): A body of financial creditors that decides on resolution plans based on commercial wisdom; its business judgments are not open to judicial review except on limited statutory grounds.
CIRP: Corporate Insolvency Resolution Process—time‑bound process to resolve insolvency with the aim of keeping the corporate debtor as a going concern.
RfRP (Request for Resolution Plan): The process document that sets the rules, evaluation matrix, and terms; provisions in the RfRP can control issues like treatment of profits during CIRP.
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization—an operating metric indicating cash‑proxy profit; under this ruling, not distributable to creditors unless RfRP/plan so provides.
CCDs (Compulsorily Convertible Debentures): Debt instruments that must convert to equity—treated as equity‑equivalent for plan compliance when genuinely compulsorily convertible.
Functus officio: A body that has exhausted its mandate. The Court held the CoC is not functus officio upon NCLT approval, and remains active through implementation.
Section 32A IBC: Provides immunity to the corporate debtor and its property for offences prior to CIRP once there is a change of control under an approved plan, subject to conditions.
Ex gratia payments: Voluntary payments not legally due under the plan; they do not trigger mandatory priority rules meant for amounts due under the plan.
Foreign award enforcement (Section 49, Arbitration Act): A foreign award is deemed a decree only after a court holds it enforceable; until then, it is not a crystallized claim for IBC distributions.
“Hydra head” metaphor: The Court’s description in Essar Steel of post‑approval claims sprouting unpredictably, undermining plan finality and deterring resolution applicants.

Conclusion

This judgment is a strong reaffirmation—and a refinement—of core IBC architecture:

Continuity of the CoC post‑approval ensures accountable and efficient implementation, dovetailing with the Monitoring Committee framework.
Sanctity and finality of the plan is preserved: absent explicit RfRP/plan terms, creditors cannot subsequently claim EBITDA or similar windfalls.
Prospective application of IBBI regulation changes maintains legal certainty, while structured flexibility (CoC‑approved extensions) supports practical implementation.
Commercial structuring via CCDs is validated, easing capital planning for resolution applicants.
Classification discipline is reinforced: foreign award claims must be enforced to crystallize; sub‑classification of OCs is permissible within CoC’s wisdom.

By dismissing the appeals and upholding the NCLAT’s approval of JSW’s plan, the Supreme Court consolidates a pragmatic and predictable framework: creditors’ commercial judgments, expressed through process documents and plans, govern; courts safeguard legality and finality, not business re‑writes. The ruling will likely influence future RfRPs to address EBITDA and similar issues explicitly and embolden resolution applicants who invest in turnarounds without fear of ex‑post claims.

Key Takeaways

Include clear EBITDA/profits provisions in the RfRP if creditor distribution is intended.
Build monitoring and timeline‑extension mechanisms into the plan; ensure CoC voting thresholds are compliant.
Treat CCDs as acceptable equity infusion tools where compulsorily convertible.
OCs relying on foreign awards should pursue enforcement promptly to avoid “contingent” classification.
Expect strict adherence to the plan as approved; late‑stage claims or stance shifts (even by the CoC) are unlikely to be entertained.

Note: This commentary is an analytical summary for informational purposes and does not constitute legal advice.

CoC’s Post‑Approval Continuity and No Ex‑Post EBITDA Claims: Supreme Court’s Blueprint for Finality and Implementation under the IBC in Kalyani Transco v. BPSL (2025 INSC 1165)