Swiss Ribbons Pvt Ltd v Union of India

Facts

• Multiple petitions challenged the constitutional validity of the Insolvency and Bankruptcy Code, 2016.
• Key challenges: (a) discrimination between financial and operational creditors, (b) financial creditor dominance in Committee of Creditors, (c) mandatory timelines as arbitrary, (d) S.29A (ineligibility of promoters to bid) as excessive restriction.

Issue

1. Whether the IBC and its distinction between financial creditors and operational creditors is constitutionally valid under Articles 14 and 19.

Held

• The Supreme Court unanimously upheld the IBC's constitutional validity. The distinction between financial and operational creditors is rational: financial creditors take long-term risk, have larger exposure, and can assess viability, justifying their dominance in CoC. Operational creditors are protected through minimum payment guarantees (not less than liquidation value under S.30(2)(b)). The time-bound framework serves legitimate public purpose (preserving asset value through speed).

Ratio Decidendi

The IBC is constitutionally valid. Financial creditor-dominated CoC is not discriminatory (rational classification under Art.14). Operational creditors are adequately protected (minimum liquidation value guarantee). S.29A (promoter ineligibility) is valid: prevents malfeasant promoters from buying back their own companies at discount. Time-bound resolution is a legitimate state objective.