Calibrating Article 142: Enforcing the IBC’s Creditor-Centric Architecture in Bhushan Power & Steel

Aditya Singh*

Introduction

The Supreme Court’s May 2025 ruling in Kalyani Transco v. Bhushan Power & Steel did what the Insolvency & Bankruptcy Code, 2016 (“IBC”) never expressly contemplated: it invoked Article 142 to bypass the National Company Law Tribunal (“NCLT”) and ordered liquidation directly from the Apex bench. On its face, the intervention seemed pragmatic—after thirty-three months of missed deadlines, defective plans, and mounting value erosion, liquidation seemed the only realistic end state. Yet the judgment also exposed a fault-line: when an open-textured equity power meets the IBC’s tightly sequenced, creditor-led architecture, predictability for investors and procedural discipline for stakeholders can fray. This commentary accepts the Court’s fact-specific outcome and argues that future equity forays should be screened through a structured four-part “IBC-congruence” test: necessity, proportionality, least intrusive means, and sunset, so that speed does not blur the Code’s guardrails.

The IBC’s Remedial Framework

The IBC outlines a three-stage process that balances creditor recovery with corporate rescue and rehabilitation. Under Sections 10-31, resolution begins when the corporate debtor or a financial creditor files an insolvency application. A Resolution Professional (“RP”) takes control, invites bids, and the Committee of Creditors (“CoC”) votes on plans. The Corporate Insolvency Resolution Process (“CIRP”) is time-bound, with a duration of 180 days, which can be extended by 90 days. Any approved plan must prioritise insolvency costs, meet the operational creditors’ entitlements (at least the liquidation value), and satisfy the Section 29A eligibility requirements.

Second, if no viable plan emerges within this 330‐day cap (including extensions), Section 33 directs the Adjudicating Authority (the NCLT) to commence liquidation. Importantly, only after a plan is either rejected or is absent altogether does the NCLT issue a liquidation order and appoint a liquidator, providing stakeholders with notice and an opportunity to file their claims.

Third, Sections 61-62 provide for appeals on questions of law to the NCLAT and, finally, to the Supreme Court.

Background of the Case

Bhushan Power and Steel Limited defaulted in 2017, prompting a CIRP under the IBC. The RP ran a bid process, and in 2019, the CoC approved a resolution plan submitted by JSW Steel.

In parallel, the Central Bureau of Investigation registered first information reports for alleged pre-insolvency offences, and the Enforcement Directorate provisionally attached certain assets under the Prevention of Money Laundering Act, 2002. Multiple parties appealed, challenging JSW Steel’s alleged procedural non-compliance, the scope of the ED’s attachment vis-à-vis assets under insolvency, and the approvals granted by the NCLT and the National Company Law Appellate Tribunal.

Owing to litigation and compliance disputes, the 330-day outer limit for completing the CIRP elapsed without a plan taking effect. In May 2025, the Supreme Court of India held the appeals maintainable, stayed the ED’s attachment to prevent the frustration of the insolvency forum, set aside the NCLT/NCLAT approvals due to procedural lapses, and, exercising powers under Article 142 of the Constitution of India, directed immediate liquidation.

The Bhushan Steel Article 142 Turn

The Supreme Court explained why it resorted to Article 142 to order immediate liquidation. The bench noted that, at that point, no valid resolution plan remained—the CoC’s proposal had failed all statutory requirements, and the CIRP time-frame had long since expired, leaving nothing more for the NCLT to adjudicate upon.

Further, remanding the matter to the NCLT would only replicate hearings and appeals, undermining the IBC’s “time is of the essence” imperative. The Court also observed that every stakeholder had already participated in the proceedings, thereby satisfying the requirement of a fair hearing. Finally, it clarified that Article 142 was being used not to invent a new remedy, but to give effect to the Code’s own consequence—namely, liquidation—more efficiently.    

This approach marked a departure from pre-Bhushan Steel precedents such as Swiss Ribbons (2019) and Essar Steel (2019). In Swiss Ribbons, the Court used Article 142 to permit a creditor-agreed withdrawal of a CIRP petition, only when the entire CoC unanimously consented, before remanding it back to the NCLT, thereby preserving the CIRP’s collective integrity. In Essar Steel, Article 142 granted a two-week “cure window” so that disqualified resolution applicants could clear parent-company Non-Performing Assets; if they succeeded, the resolution continued under normal CoC/NCLT oversight, but if not, liquidation followed. By contrast, Bhushan Steel represents the first instance where the apex bench used its wide equity power to leapfrog the NCLT and instruct immediate liquidation.

Brief Constitutional Context

Article 142 of the Constitution of India empowers the Supreme Court to do complete justice. The Supreme Court has cautioned that this power cannot be used to override unambiguous legislative provisions, including those in the IBC.

Systemic Consequences for IBC Architecture

When the Supreme Court bench exercises Article 142 to order liquidation, it introduces a layer of unpredictability into India’s insolvency framework. The IBC’s inherent architecture is intentionally creditor-centric: Parliament’s intention in designing the Code was to place decision-making power in the hands of the CoC, creating a deliberate opportunity for a resolution plan to move through.

In Bhushan Steel, the Court invoked Article 142 in pursuance of the IBC’s strict CIRP timelines, as the 330-day period had already passed throughout the case due to procedural lapses in framing the resolution plan.    

In practical terms, the Article 142 route reshapes stakeholder outcomes. Under the IBC, the CoC retains the commercial prerogative on resolution plans, while courts confine themselves to a limited review aimed at maximising value and preserving going concern. Moving straight to liquidation cuts off bidding and triggers the statutory order of payment (Section 53), which typically lowers recoveries for lower-ranked creditors, and therefore ends jobs rather than preserving them. Because bidders lose the opportunity to improve their offers, their future participation may be weakened.

The Court has already cautioned that Article 142 cannot override clear statutory schemes, so any use in insolvency should reinforce the Code’s framework rather than replace it. 

The author opines that the jurisprudence would benefit from a structured, circumstance-specific test for similarly situated cases, which can balance IBC’s time-compliance requirements (as the Court prioritised) with the deliberate opportunity for a resolution plan to move through. This resonates with the view of Rajasekhar V.K., Former Member (Judicial), NCLT, who has warned against the emerging trend of liquidation orders despite residual prospects for resolution.

Towards a Structured Article 142 Test

To preserve the IBC’s creditor-centric, time-bound design while allowing essential equitable intervention and ensuring certainty, the author proposes a four-part “IBC-congruence” test whenever Article 142 is invoked: (1) Necessity – Confirm that the statutory forum (NCLT/NCLAT) cannot effectively enforce the Code’s mandatory outcome within a practicable, court-directed deadline. For example, if no valid resolution plan exists and the CIRP clock has irreversibly run out, direct liquidation may be necessary; (2) Proportionality – Assess whether bypassing the tribunal prevents demonstrable, quantifiable harm (such as value erosion from further delay) that outweighs the loss of procedural safeguards. If a minimal delay would not meaningfully damage stakeholder interests, a remand may be more appropriate than a direct liquidation order; (3) Least Intrusive Means – Determine whether the same result can be achieved by remanding the case to the NCLT with a short, firm deadline for action. In most cases, sending the matter back with strict timelines and clear directions (e.g., allowing seven days to record a compliant plan) will satisfy both speed and creditor-driven resolution objectives; and (4) Sunset & Handover – If immediate equity intervention is still warranted, the Court’s order should (a) transfer execution to the NCLT or appointed liquidator at once, (b) require a compliance report within a specified timeframe, and (c) explicitly terminate the Supreme Court’s supervisory role once the statutory process is back on track, similar to what as the Court demonstrated in this instance.

The author opines that the Court in Bhushan Steel would have been strengthened by a structured application of the four-part analysis, such as exploring the possibility of allowing a procedurally compliant plan within a short period, to determine whether an immediate liquidation was the only viable solution available. Moreover, this approach would help allay concerns regarding the permissible scope of Article 142.

Conclusion

The Supreme Court’s decision in Bhushan Steel demonstrated that, when facing flagrant CIRP lapses, Article 142 can serve as a pragmatic enforcement mechanism to uphold the IBC’s strict timelines. On the facts, a direct liquidation order was understandable because no valid resolution plan existed, the statutory window had closed, and stakeholders had already been heard.

Yet, because the IBC’s architecture deliberately vests decision-making power in the CoC and follows a creditor-centric, step-by-step process that creates a deliberate opportunity for a successful resolution plan, any equity intervention must be carefully calibrated.    

By adopting the four-part “IBC-congruence” test, i.e., examining necessity, proportionality, least intrusive means, and sunset/handover, future benches can ensure that Article 142 is used only when remanding to the NCLT is genuinely impracticable. In most cases, a tightly supervised remand would preserve both the Code’s emphasis on speed and the CoC’s right to propose and refine resolution plans. Such disciplined equity oversight maintains predictability for creditors and investors while still providing a safety valve against indefinite CIRP extensions.    

In short, Bhushan Steel should stand as a fact-specific example rather than a new default. A clear and structured test will help strike the right balance between enforcing time-compliance and honouring Parliament’s vision of a creditor-led insolvency regime.    

Looking ahead, the proposed test situates Article 142 within the Court’s broader constitutional practice, which already employs similar tests to calibrate exceptional powers. Using the same structure in insolvency would harmonise Article 142 practice with statutory fidelity, separation of powers, and certainty for market participants.

*The author is a Third-year B.A., LL.B. (Hons.) student at Rajiv Gandhi National University of Law, Patiala.