JSW Steel and the Bhushan Steel IBC Fiasco: A Loophole or a Lesson?

Ever heard of buying something at a discount… and still getting penalized later? That’s exactly what JSW Steel is going through after acquiring Bhushan Power & Steel under India’s bankruptcy law, the IBC. But the mess that followed has opened up a debate — is the IBC really as “clean” as it was meant to be?

 The Background — A Steel Giant in Trouble

Bhushan Power & Steel was once a prominent player in India’s steel sector. But with unpaid loans worth over ₹47,000 crore, it was dragged into Insolvency and Bankruptcy Code (IBC) proceedings. JSW Steel, one of India’s biggest private steelmakers, won the bid to acquire Bhushan Power by offering ₹19,700 crore to creditors.

It seemed like a textbook IBC success story — until it wasn’t. Enter the ED and the Legal Tangles

Just as JSW Steel was about to take over Bhushan, the Enforcement Directorate (ED) came knocking. They had attached assets worth ₹4,000 crore belonging to Bhushan, citing money laundering under the Prevention of Money Laundering Act (PMLA).

This raised a big question: If a company is sold under IBC, do its legal liabilities (especially criminal ones) go away? The Legal Drama: IBC vs PMLA JSW Steel argued: “Hey, we’re buying a clean asset. We shouldn’t be dragged into Bhushan’s past sins.”But the ED replied: “The assets were used in a crime, so we have a right to freeze them.”

This tug-of-war between two major laws — IBC (to clean up bankrupt companies) and PMLA (to punish financial crimes) — left businesses confused and scared. If the buyer can be pulled into past legal mess, will anyone bid for bankrupt companies at all?

Financial Impact & Broader Implications

JSW’s ₹19,700 crore bid was at risk of being devalued. Other potential acquirers started demanding full immunity from prosecution if they bought bankrupt firms. The case eventually reached the Supreme Court, which had to clarify the boundaries between IBC and PMLA. The Skeptical Take

• Why didn’t the IBC framework anticipate this overlap with criminal laws?

• Is the system transparent enough for buyers to know all hidden liabilities?

• Are we just reshuffling bad companies without fixing the root causes?

The Optimistic View

• The ruling eventually gave more clarity and confidence to future IBC bidders.

• JSW still went through with the deal, showing resilience.

• It forced policymakers to patch legal grey areas in India’s insolvency law.

Bottom Line: The JSW-Bhushan fiasco is a classic case of policy clash in India’s evolving economy. Good intent, bad execution — but a much-needed learning moment.