JSW Steel Share Price: Stock Falls By More Than 7% - Legal Advisor Decodes

The shares of JSW Steel Ltd declined more than 7% on Friday, as the Supreme Court named the resolution plan of Bhushan Power & Steel Ltd, 'illegal'.

What Is The Case?

JSW Steel, which was also the winning bidder for Bhushan Power & Steel Ltd, had acquired a stake of 49% in Bhushan Power and Steel through an insolvency resolution process in 2021, getting a 2.75 MTPA steel-making capacity in Odisha .

JSW Steel had managed to increase that stake to 83% by October 2021.

According to the Supreme Court, there are two grounds for striking down JSW's plan and has directed the liquidation of Bhushan Power and Steel.

The first one is for completing the takeover with a mix of equity and optionally convertible debentures, especially when the Supreme Court had maintained that this should be done only via equity.

The second ground is failing to complete the resolution plan within the stipulated timeline.

How Can JSW Steel Salvage The Situation?

According to Dinkar Sharma, Legal Advisor and Company Secretary & Partner at Jotwani Associates, "The ruling marks a dramatic turn in one of the most high-profile insolvency cases under the Insolvency and Bankruptcy Code (IBC), 2016.
JSW Steel had acquired a 49% stake in BPSL in 2021, following approval of its Rs.19,700 crore resolution plan by the National Company Law Tribunal (NCLT). The resolution plan had received endorsements from the Committee of Creditors (CoC) and was implemented after overcoming legal challenges, including asset attachment by investigative agencies. However, the Supreme Court has now concluded that the approval process itself suffered from legal infirmities that invalidate the entire transaction."

Sharma said that while the scope for legal reversal is narrow, the company can still consider the following avenues:

1. Filing a Review Petition in the Supreme Court: A review petition can be filed under Article 137 of the Constitution if there are errors apparent on the face of the record. However, the Review petitions are rarely entertained unless the error is manifest and grave. The bar is high, and mere disagreement with the verdict is not sufficient.
2. Curative Petition (Only in Exceptional Cases): A curative petition may be filed after the dismissal of a review petition to prevent miscarriage of justice.
3. Re-entering the Liquidation Process as a Bidder:  JSW Steel can participate in the liquidation process under IBC Section 33.
4. Claiming Refund or Adjustment of Funds Invested:  JSW may attempt to seek refund of the ₹19,700 crore paid as part of the resolution, arguing that it was paid under a now-invalidated plan. However, there is no precedent under the IBC for a refund post-implementation.

JSW Steel Share Price Today

At 3:17 pm the shares of JSW Steel were trading Rs 55.80 or 5.43% lower at Rs 972.50 apiece on Friday, as compared to its previous close of Rs 1,028.30 apiece on Thursday.

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