The Indian government is working on its response after the Supreme Court cancelled the deal between JSW Steel and Bhushan Power & Steel, according to a senior official.
JSW Steel had signed up to buy Bhushan Power & Steel, a debt-ridden firm. The deal was a part of a government initiative to allow banks to recover money from defaulting companies under the Insolvency and Bankruptcy Code (IBC). JSW Steel had planned to invest over ₹19,000 crore in the deal.
But the Supreme Court has recently invalidated this transaction, asserting that some part of the bankruptcy process was not followed. This decision has put other firms in doubt about trying to buy faltering firms under the same process.
The government is examining the court judgment carefully, an official stated, and is mulling how to respond. They would like to see to it that the law of bankruptcy operates smoothly without any disruptions and such deals are not left in limbo in the future. The government might even amend the law if the need arises, the official further added.
The JSW-Bhushan deal was seen as one of the biggest success tales of the IBC. Its cancellation has put investors and lenders in a dilemma, and now they are worried about delays and losses.
The government wants to maintain the trust of investors and banks and is considering steps to protect deals settled under the IBC.
More details are being awaited when the government makes up its mind in the coming days.
