The Supreme Court has upheld the constitutional validity of the Insolvency & Bankruptcy Code. The petitioners had questioned the Insolvency & Bankruptcy Code based on the following grounds:-
1. The constitutional validity of IBC was questioned as a violation of Article 14 of the Constitution.
2. Petitioners claimed that Operational creditors provide services to companies and have the right to initiate insolvency proceedings if their payments are defaulted upon. But the code bars them for participating in the resolution process through the committee of creditors.
3. The petitioners argued that IBC doesn’t make an intelligible differentiation in the classification of a financial creditor and operational creditor, and hence violates Article 14.
4. Petitioners also argued against barring promoters from bidding for their own companies forces them to undertake the sale of the company to new bidders. This violates the fundamental rights of promoters of a company.
5. As per IBC, the committee can only consist of financial creditors who assess and vote on resolution plans submitted by interested bidders.