In Brief
The Supreme Court upheld the constitutional validity of the Insolvency and Bankruptcy Code, 2016, dismissing petitions challenging multiple provisions. The Court held that the distinction between financial and operational creditors is rationally related to the Code's objective of timely corporate revival and asset maximization. Operational creditors are adequately protected through mandatory inclusion in resolution plans and priority in liquidation. Section 12A (requiring 90% committee approval for withdrawal), Section 29A (restricting ineligible persons from submitting resolution plans), and Section 53 (distribution waterfall) were all found constitutionally valid. The Court emphasized that economic legislation deserves judicial deference and that the Code represents a legitimate legislative experiment. Practical results—with significant credit flow increases and high recovery rates—demonstrate the Code's beneficial operation.
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