The classification amongst the creditors of a company into financial and operational creditor made in Insolvency and Bankruptcy Code, 2016 (‘Code’) is on reasonable differentia and differentia introduced by the Code in respect of a creditor of a company does not offend any provisions of the Constitution of India.
Whether the treatment of a financial creditor on pedestal higher than an operational creditor and bestowing a higher or better right, so to speak, to a financial creditor is just and proper or whether the same offends any provisions of the Constitution of India requires consideration.
The Bankruptcy Committee gives a rationale to the financial creditors being treated in a particular way vis-à-vis an operational creditor in an insolvency proceeding with regard to a company. The rationale is a plausible view taken for an expeditious resolution of an insolvency issue of a company. Courts are not required to adjudge a legislation on the basis of possible misuse or the crudities or inequalities that may be perceived to be embedded in a legislation. The rationale of giving a particular treatment to a financial creditor in the process of insolvency of a company under the Code of 2016 cannot be said to offend any provisions of the Constitution of India.