SWISS RIBBONS PVT. LTD. & ANR. versus UNION OF INDIA & ORS.

Citation: [2019] 3 S.C.R. 535 · Decided: 25-01-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 57 judgment(s) · cites 14 · see the full citation network in Lexace

Judgment (excerpt)

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535
[2019] 3 S.C.R. 535
SWISS RIBBONS PVT. LTD. & ANR.
v.
UNION OF INDIA & ORS.
(Writ Petition (Civil) No. 99 of 2018)
JANUARY 25, 2019
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Insolvency and Bankruptcy Code, 2016:
Constitutional validity of – Held: Provisions of the Code passes
constitutional muster.
ss. 5(7), 5(8), 5(20), 7(1), 7(4), 7(5), 8 and 9 – Classification
between financial creditor and operational creditor – Whether
discriminatory, arbitrary, and violative of Art. 14 – Held: Preserving
the corporate debtor as a going concern, while ensuring maximum
recovery for all creditors being the objective of the Code, financial
creditors are clearly different from operational creditors – Thus,
there is an intelligible differentia between the two which has a direct
relation to the objects sought to be achieved by the Code – Thus,
there is no discrimination – Constitution of India – Art. 14.
ss. 3, 3(9)(c), 214(e), 60, 65, 75, 7, 8 and 9 – Notice, hearing,
and set-off or counterclaim qua financial debts – Triggering of
insolvency resolution process by financial creditors and operational
creditors – Submission that the difference in the triggering process
at behest of financial creditors and operational creditors is
discriminatory and arbitrary – Held: A financial creditor has to
prove “default” as opposed to an operational creditor who merely
“claims” a right to payment of a liability or obligation in respect of
a debt which may be due – In view thereof, the differentiation in the
triggering of insolvency resolution process by financial creditors
u/s. 7 and by operational creditors u/ss. 8 and 9 becomes clear –
Insolvency and Bankruptcy Board of India (Information Utilities)
Regulations, 2017 – Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016 – Form I.
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SUPREME COURT REPORTS
[2019] 3 S.C.R.
ss. 21, 24, 28 and 30(2)(b) r/w s. 31 – Operational creditors
– Right to vote in the committee of creditors – Plea that operational
creditor do not have even a single vote in committee of creditors –
Held: Financial creditors are best equipped to assess viability and
feasibility of the business of the corporate debtor and evaluate the
contents of a resolution plan – On the other hand, operational
creditors, who provide goods and services, are involved only in
recovering amounts that are paid for such goods and services, and
are typically unable to assess viability and feasibility of business –
Resolution plan cannot pass muster u/s. 30(2)(b) rw s. 31 unless a
minimum payment is made to operational creditors, being not less
than liquidation value – Regulation 38 strengthens the rights of
operational creditors by statutorily incorporating the principle of
fair and equitable dealing of operational creditors’ rights, together
with priority in payment over financial creditors – Thus, the
operational creditors are not discriminated against nor Art. 14 has
been infracted either on the ground of equals being treated unequally
or on the ground of manifest arbitrariness – Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 – Regulation 38 –
Constitution of India – Art. 14.
ss.12A(as amended) and 60 – s. 12A wherein withdrawal of
application admitted u/ss 7, 9 or 10, with approval of ninety per
cent voting shares of the committee of creditors – s. 12A if violative
of Art. 14 – Held: s. 12A is not violative of Art. 14 – ILC Report has
explained that as all financial creditors have to put their heads
together to allow such withdrawal as, ordinarily, an omnibus
settlement involving all creditors ought, ideally, to be entered into –
In any case, the figure of ninety per cent, in the absence of anything
further to show that it is arbitrary, must pertain to the domain of
legislative policy – Also, if the committee of creditors arbitrarily
rejects a just settlement and/or withdrawal claim, the NCLT, and
thereafter, the NCLAT can always set aside such decision u/s. 60 –
Insolvency and Bankruptcy (Second Amendment) Act, 2018 –
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 – Reg 30A.
 s. 210 – Private Information Utilities – Evidence provided
by private information utilities – Plea that Private Information
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Utilities not governed by proper norms and evidence of loan default
in records of such utility not conclusive evidence – Held: Regulations
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