NCLT Allows Government’s Bhushan Power Recovery Case to Proceed, Without Finding Fraud

What the tribunal decided

The National Company Law Tribunal has allowed the Union government's civil proceedings concerning an alleged diversion of ₹5,431 crore from Bhushan Power and Steel Limited to move past a preliminary challenge. Its order of 30 October 2026 dismissed eight applications filed by former promoters and other respondents who argued that the petition could not be maintained after the company's insolvency resolution. The decision concerns the tribunal's power to entertain and examine the case. It does not decide whether any respondent diverted funds, retained assets or owes the amount claimed. That distinction is central to understanding the order. The government must still prove its allegations through the process that now follows.

The claim and the insolvency background

The government, acting through the Serious Fraud Investigation Office, invoked Sections 241(2), 242, 246 and 339 of the Companies Act, 2013. It relied on an SFIO investigation report dated 6 May 2022 and sought personal liability for at least ₹5,431 crore, interest, attachment and realisation of assets. The allegations concern transactions said to have routed company funds through entities connected with former promoters, including transactions affecting financing ratios and property purchases. These are the government's allegations, not findings accepted as proved by the tribunal. Bhushan Power entered the corporate insolvency resolution process in 2017. A resolution plan brought the company under JSW Steel's control in 2021. The respondents argued that the old management's removal and the completed resolution prevented a public-interest petition over historical affairs.

Why the maintainability objection failed

The tribunal read the statutory reference to a company's affairs as extending to the custody, ownership and possible recovery of its assets. In its view, a change in management does not necessarily cure the alleged consequences of a past diversion if value remains outside the company with identifiable recipients. It therefore rejected the proposition that the government could only act while the people accused still controlled day-to-day operations. The order also distinguished the protection that Section 32A of the Insolvency and Bankruptcy Code can give a resolved corporate debtor and its property from a claim pursued against other people and their assets. On the tribunal's account, the government is seeking relief for the benefit of the company and stakeholders, not relief against the reorganised company itself. Whether continuing prejudice actually exists remains a matter for proof.

Parallel proceedings and the risk of double recovery

The respondents also pointed to applications under Section 66 of the Insolvency and Bankruptcy Code concerning fraudulent or wrongful trading. The tribunal did not treat those applications as an automatic bar to the government's Companies Act petition. The possibility that different legal routes concern overlapping transactions nevertheless required a safeguard. It directed that credit be given for sums recovered or recoverable in the insolvency proceedings on the same transactions. This qualification matters because allowing more than one route to seek restoration does not authorise the same loss to be collected twice. The order leaves questions of overlap, attribution and actual recovery to be worked out on the evidence rather than assuming at the threshold that every claim is identical.

What happens next

The NCLT required the government to identify each respondent's alleged part in the transactions and to point to the supporting portions of the investigation material. The respondents have an opportunity to file replies on the merits. The case is next listed for 26 November 2026. These directions show why the order should be reported as a maintainability ruling, not as a final recovery decree. An investigation report may justify bringing a claim, but the tribunal expressly said that fraud must be pleaded with particulars and proved. The government will have to establish both the alleged conduct and a basis for the relief sought against the particular respondents. The defence may contest the evidence, the claimed loss and the continuing public-interest prejudice.

Practical significance

The ruling addresses a recurring tension after an insolvency resolution: a new owner may take over the company while allegations about old transactions remain unresolved. The tribunal's approach preserves the possibility of pursuing people who allegedly retained value, without undoing the resolution merely because a separate claim continues. Its reasoning is tied to the nature of the relief sought and the requirement to avoid duplicate recovery. It should therefore not be read as deciding every interaction between the Companies Act and insolvency law. Nor does it imply that accusations against former promoters are true. For creditors and other stakeholders, the immediate consequence is procedural: the government petition remains alive and will now be tested on its specific facts.