From Byju’s to Bhushan: Analyzing the Insolvency and Corporate Restructuring Trajectories in India

[Suhana is a student at Hidayatullah National Law University.]

Recently, on 6 June 2025, the National Company Law Appellate Tribunal (NCLAT) dismissed Byju’s plea on Aakash shareholding which was previously ordered to remain unchanged by the National Company Law Tribunal (NCLT). On the other hand, there was another case which made it to the news headline wherein the Supreme Court of India ordered a status quo on the liquidation proceedings of Bhushan Power and Steel Limited (BPSL), granting relief to JSW Steel Limited. The latter was permitted to file a review petition against the court’s earlier order which invalidated its resolution plan worth INR 19,300 crore. The author’s objective of highlighting these two cases is to reflect the diverse trajectory within the Indian corporate restructuring framework. India has witnessed a number of cases in this area wherein restructuring aims to revive a financially distressed company by altering its financial and operational structure. With the introduction of Insolvency and Bankruptcy Code 2016 (IBC), India’s insolvency framework evolved by the coming up of a time-bound, creditor friendly mechanism to settle disputes. However, it is pertinent to note that insolvency is just one pathway. With increasing complexities in corporate legal battles, disputes swing between formal insolvency proceedings and out of court settlement for restructuring. The author aims to draw a comparison between the two aforementioned ways in the corporate realm with the help of the two cases, emphasizing the tensions between strict formal compliance and commercial pragmatism. 

Factual Matrix of the Cases

Coming the first case, it stems from the petition filed by RP Ajmera, Byju’s under Section 241 and 242 of the Companies Act 2013 accusing Aakash of “oppression and mismanagement”. On 27 March, 2025, the NCLT had passed an interim order mandating no changes to be made to Aakash’s shareholding but this was soon set aside by the Karnataka High Court, directing NCLT to conduct a fresh review. However, the same stance on freezing shareholding changes was reiterated in the subsequent NCLT hearing. Lastly, on 6 June, 2025, the NCLAT stated that the interim order was “interlocutory in nature” and “consensual”, making it unfit for appellate review. The origin of this dispute can be traced back to 2021, when Byju’s acquired Aakash and there were subsequent suggested changes made in the articles of association for raising INR 500 crores following insolvency proceedings against the latter and a 40% stake acquisition by Ranjan Pai’s Manipal Group. 

Coming to the second case, BPSL was a part of the Reserve Bank of India’s dirty dozen list with an outstanding liability of INR 47,825.90 crores. The Enforcement Directorate had attached BPSL’s assets only after the passing and approval of its resolution plan but JSW Steel Limited challenged the same before NCLAT and the Supreme Court of India in 2019. On 2 May 2025, under Chapter III of IBC, the Supreme Court of India passed a judgement for the liquidation of BPSL. This order was against the appeal by BPSL which was itself against the NCLAT’s order in 2020 which had confirmed the approval of the resolution plan. The court has also ordered all the payments made to financial and operational creditor by JSW Steel Limited be returned. Thus, it has rejected the resolution plan due to non-compliance with IBC regime and alleged failure by the committee of creditors to exercise commercial wisdom by approving a plan which was against IBC. Following the Supreme Court of India’s 2 May 2025 judgment that cancelled JSW Steel’s resolution plan and ordered BPSL’s liquidation, Singhal (JSW’s former promoter) had approached the NCLT to immediately commence liquidation. In its application, JSW Steel requested a 60-day deferment of the liquidation process to allow time for filing a review petition. The interim relief granted by the Supreme Court of India now permits JSW Steel to pursue its review petition without concurrent liquidation proceedings before the NCLT.

Identifying the Problems

The former case represents private restructuring where the primary forum is NCLT and NCLAT under the Companies Act 2013. Contrary to this, the JSW-Bhushan case reflects the statutory insolvency mechanism where the forum is limited to NCLT and NCLAT under IBC. The JSW Steel-Bhushan Power case highlights the first problem, that is, the statutory adherence usually defeats commercial sensibility in an IBC process. Although the IBC focuses on the commercial judgment of creditors, the eligibility limitations, such as Section 29A disqualifications, may thwart resolution plans well after they have been approved by creditors. The judicial strictness over the adherence to the eligibility criteria can be seen as the expression of the genuine interest of the judiciary to maintain the integrity of the insolvency procedure. It also, however, subjects resolution applicants to protracted uncertainty, and the question arises as to whether the pendulum of strict legality has swung too far in the face of the practical aim of breathing life into failed businesses. 

Coming to the second problem, the Aakash-Byju’s dispute was not strictly an insolvency matter but still came before the NCLT due to overlapping areas between shareholder rights and corporate governance provisions under the Companies Act 2013. It also reflects how governance related legal battles are increasing even in the non-insolvency realm. Complicated shareholder agreements that regulate exit rights, board control, voting percentages and valuation disagreements are withering, and such issues are quickly becoming a significant cause of litigation in corporate India. This brings us to the last problem: such controversies blur the line between a case of pure financial distress and governance deadlock cases. This indicates that the corporate dispute resolution system in India requires development to allow the smooth handling of cases involving financial restructuring as well as governance stalemates.

Possible Solutions

India needs to shift from the traditional binary system of resolution which includes formal insolvency under IBC and out of court settlements to a framework which integrates both the restructuring mechanisms. Thus, to solve the first problem, India can take inspiration from Chapter 11 of the US Bankruptcy Code which allows companies to reorganize its debt to continue its operation in order to become solvent. This process of “reorganization” gives struggling companies the required time to start afresh and repay its debt rather than forgiving them. However, the company cannot take certain decisions without the court’s approval; for instance, it cannot sell its assets not specified in the reorganization plan or take new loans after filing bankruptcy. This permits them to reorganize themselves under court’s supervision without initiating liquidation by giving them a more flexible platform to negotiate debt restructuring while protecting stakeholder’s interests. A similar voluntary regime that allows companies to seek a court-monitored restructuring of their governance without activating the insolvency waterfall, and preserving business continuity whilst disputes are determined can help resolve the third problem. 

After discussing the second problem, there is a need to establish specialized benches in NCLT and NCLAT which are to handle restructuring and insolvency matters, thereby strengthening the institutional capacity. Alternate dispute resolution mechanisms can be made mandatory before resorting to NCLT or NCLAT and insolvency professionals, mediators, and regulators can be equipped with the necessary skills and knowledge to manage multi-faceted restructuring cases effectively. There is also a need for the courts to develop some guidelines which balance statutory compliance with business realities. The guidelines must state the range of commercial wisdom emphasizing that once the committee of creditors has used its business judgment in accepting resolution plans, courts must interfere only in instances of grave legal breaches, fraud or matters of public policy. This will also urge courts to focus on the substance of the restructuring transactions as opposed to punishing technical or procedural failures that have no material impact on the recoveries of creditors or legal rights. As an example, minor shareholding arrangements or irregularities in procedure ought not to disqualify applicants to resolutions automatically where they do not amount to undue enrichment, fraud or prejudice to creditors. 

Conclusion

The divergent fate of Byju’s-Aakash and BPSL indicate the increasing complexities of corporate restructuring in India, where the inflexible requirements of statutory compliance frequently come into conflict with the exigencies of business rescue. Although it is certainly true that the IBC has introduced long-overdue discipline, predictability and creditor protection, its inflexible application, especially with respect to disqualifications of eligibility, can at times threaten to defeat commercially viable solutions. Conversely, flexible but on the other hand, private restructuring processes are becoming more susceptible to governance conflicts, shareholder stalemates, and protracted litigation. The legal environment has to match the growing scope of the corporate Indian environment. One way to find this delicate balance is by developing hybrid restructuring models, early intervention mechanisms and best practice guidelines for courts and professionals. This will ensure that necessary space is given to commercial pragmatism without impairing the integrity of the statutory scheme. The lessons that emanate out of these high-profile cases are both cautionary and opportunistic:  to improve, enhance and upgrade India restructuring regime to keep up with the more dynamic economy that it supports.