The Strict-Compliance Doctrine under the Insolvency and Bankruptcy Code, 2016
(Kalyani Transco v. Bhushan Power & Steel Ltd., 2025 INSC 621)

1. Introduction

The Supreme Court’s judgment dated 2 May 2025 in Kalyani Transco v. M/s Bhushan Power and Steel Ltd. & Ors. has reset the compass of insolvency jurisprudence in India. Arising from a cluster of appeals against a 2020 order of the National Company Law Appellate Tribunal (NCLAT), the Court:

• Discarded the approved resolution plan of JSW Steel for Bhushan Power and Steel Ltd. (BPSL), despite partial implementation and payment of ₹19,350 crore to financial creditors.
• Enunciated a Strict-Compliance Doctrine—any departure from mandatory timelines, eligibility conditions, or payment hierarchies under the Insolvency and Bankruptcy Code, 2016 (IBC) vitiates the entire Corporate Insolvency Resolution Process (CIRP).
• Clarified the limited jurisdiction of NCLT/NCLAT vis-à-vis public-law decisions such as provisional attachment under the Prevention of Money-laundering Act, 2002 (PMLA).
• Directed liquidation of BPSL and reopened questions about treatment of monies already paid under the disallowed plan.

Parties at a Glance

• Corporate Debtor (CD): Bhushan Power and Steel Ltd. (“dirty dozen” NPA – ~₹47,000 crore).
• Successful Resolution Applicant (SRA): JSW Steel Ltd.
• Appellants: Operational creditors (Kalyani Transco, CJ Darcl Logistics, Jaldhi Overseas, Medi Carrier), ex-promoters (Sanjay Singal), and Government of Odisha (tax dues).
• Respondents: Committee of Creditors (CoC), Resolution Professional (RP), Enforcement Directorate (ED), JSW Steel.

2. Summary of the Judgment

3. In-Depth Analysis

3.1 Precedents Cited and Their Influence

• ArcelorMittal v. Satish Kumar Gupta (2019) – Established that Section 12 timelines are mandatory; Court relies heavily to strike CIRP that exceeded 270 days.
• Essar Steel (CoC) v. Satish Kumar Gupta (2020) – Discussed permissible extension to 330 days post-amendment; distinguished because BPSL’s CIRP commenced before the 2019 amendment.
• Embassy Property v. State of Karnataka (2020) – Reiterated that NCLT/NCLAT cannot adjudicate public-law disputes; used to annul NCLAT’s interference with ED attachment.
• State Bank of India v. Murari Lal Jalan (2024) – Warned against lax plan-implementation; Court quotes para 176 to censure JSW and CoC.
• Glas Trust v. Byju (2024) – Defines “any person aggrieved” broadly, enabling operational creditors and ex-promoters to appeal.
• Other references: Ghanashyam Mishra (finality of plan), Rainbow Papers (priority of statutory dues), though plan ultimately rejected, making these questions academic.

3.2 Court’s Legal Reasoning

1. Time-bar under Section 12
   • CIRP began on 26-Jul-2017. • No valid extension application filed within first 180 days. • Application for plan approval (Feb 2019) crossed 270-day cap; therefore, entire process “hit by Section 12.”
2. Breach of Mandatory Content Requirements (Section 30(2) & Reg. 38)
   • Plan inverted payment waterfall—financial creditors paid before operational creditors. • No evidence of priority to CIRP costs. • RP failed to certify Section 29A eligibility (Form H missing).
3. CoC’s Dereliction & Shifting Stance
   • 18th–19th meetings show objections were raised but ignored. • After NCLAT judgment, CoC first attacked JSW for non-payment, then unexpectedly accepted money, indicating absence of coherent commercial rationale.
4. SRA’s Abuse of Process
   • JSW filed appeals and “clarification” IAs to stall payments. • Paid financial creditors only in March 2021 (540 days delay) and operational creditors in March 2022 (900 days delay). • Court brands this a fraudulent strategy to ride favourable steel-price cycle.
5. Jurisdictional Overreach on PMLA
   • NCLAT’s stay of ED’s Provisional Attachment Order (PAO) violated Embassy Property; insolvency fora cannot nullify statutory enforcement under PMLA.
6. Liquidation as Inevitable Consequence
   • Section 33(1)(a) mandates liquidation when no valid plan exists within timeline. • Court invokes Article 142 to shortcut remand and order immediate liquidation.

3.3 Impact Assessment

• Tougher Discipline for RPs & CoCs – Failure to comply with procedural minutiae (Form H, avoidance applications, timeline tracking) will now risk personal scrutiny, possible professional penalties, and vitiation of the entire process.
• SRA Accountability – Partial payment cannot create immunity; plan can still be voided if statutory parameters not met. This will push SRAs to perform due diligence upfront and honour timelines.
• Liquidation Surge? – By demonstrating willingness to scrap defective plans even post-payment, the Court may inadvertently increase liquidations. Expect a recalibration of bidder behaviour and more proactive engagement with timelines.
• Limited Insolvency Jurisdiction – Reinforces firewall between insolvency courts and criminal/economic-offence enforcement agencies (ED, SFIO etc.).
• Operational Creditors’ Voice – Recognition of their right to appeal strengthens their bargaining position and could influence future CoC negotiations.
• EBITDA Question Left Open – By expressly keeping the law on CIRP-period profits unresolved, the Court invites future clarification.

4. Complex Concepts Simplified

Corporate Insolvency Resolution Process (CIRP)

A statutory, time-bound framework (normally 180 + 90 days) to either revive a stressed company through a resolution plan or push it into liquidation.

Committee of Creditors (CoC)

All financial creditors voting by value. They decide which plan to approve, exercising “commercial wisdom.”

Resolution Professional (RP)

Licensed insolvency professional who runs the debtor as a going concern during CIRP and vets resolution plans.

Section 29A Eligibility

Blacklist of disqualifications (related-party, NPA, wilful defaulter etc.) to keep tainted entities from bidding.

Section 30(2) / Regulation 38

Mandatory contents of a plan: priority of CIRP costs and operational creditors, feasibility, implementation schedule.

Provisional Attachment Order (PAO)

Order by ED under PMLA freezing “proceeds of crime.” Insolvency tribunals cannot annul these.

EBITDA during CIRP

Profits earned while RP runs the debtor. Who gets them—creditors or purchaser—is a live controversy; Court kept issue open.

Article 142

Constitutional power that allows the Supreme Court to do “complete justice,” here used to straightaway order liquidation.

5. Conclusion

The Supreme Court has sounded a clarion call: the IBC is a stringent, schedule-driven statute whose commands are not optional. Key lessons include:

• CIRP timelines are sacrosanct; violation without valid extension nullifies the entire exercise.
• Compliance certificates, eligibility affidavits and priority payment rules are not paperwork formalities but jurisdictional prerequisites.
• NCLT and NCLAT cannot stray into public-law disputes such as PMLA attachments.
• Partial or delayed plan implementation affords no safe harbour to SRAs; the Court will not ratify “faits accomplis” erected on statutory breach.
• Liquidation remains the default outcome when the resolution architecture is abused.

This judgment will reverberate across boardrooms, insolvency professionals’ offices, and tribunal halls, compelling all stakeholders to adopt a culture of meticulous compliance, transparent conduct, and expedited resolution. The newly articulated Strict-Compliance Doctrine is poised to become a benchmark in future insolvency litigation and policy deliberations.