The Supreme Court of India has overturned JSW Steel’s Rs197bn ($2.35bn) bid to acquire Bhushan Power and Steel, an acquisition that was completed in 2021.

The court ordered the liquidation of Bhushan Power, citing failures in the insolvency process managed by the insolvency administrator and the lenders’ panel, reported Reuters, citing sources.

According to two lawyers involved in the case, who requested anonymity, the Supreme Court delivered a verbal order stating that the insolvency administrator and the lenders’ panel did not adhere to legal obligations.

The full judgment is expected to be detailed on the court’s website, the report said.

The decision’s rationale was not immediately disclosed. However, a report by CNBC-TV18 quoted the Supreme Court labelling JSW Steel’s acquisition plan as “illegal” and that it should not have been approved by Bhushan Power’s committee of creditors.

Following the announcement, JSW Steel’s stock price fell by nearly 7%.

JSW Steel has indicated that it awaits a formal copy of the order to comprehend the reasons for the rejection and its consequences.

A company spokesperson was quoted by the news agency as saying: “Once we receive the order… we will decide on our further course of action.”

Bhushan Power, which owed over Rs470bn ($5.6bn) to its creditors, was one of the companies identified by the Reserve Bank of India for insolvency proceedings under the Insolvency and Bankruptcy Code in 2017.

Punjab National Bank initiated criminal proceedings against Bhushan Power’s former board of directors in 2019, uncovering a fraud of approximately $453m.

Neither Punjab National Bank nor State Bank of India, leaders of the committee of creditors, have responded to requests for comment, the report said.

In a related development, JSW Energy, another arm of the JSW Group, received approval in January to acquire KSK Mahanadi Power Company’s 3.6GW coal-fired thermal power plant in Chhattisgarh, as part of its resolution plan under the Insolvency and Bankruptcy Code 2016.

The operational segment of the plant includes three units with a total capacity of 1.8GW, which are secured under long and medium-term power purchase agreements.