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On January 25, 2019, the Supreme Court upheld the constitutionality of the Insolvency and Bankruptcy Code, 2016 (Code henceforth), in its entirety. The scheme of the Code, as a whole, was challenged on the ground that it violated Article 14 of the Constitution. The main argument was that the Code unfairly discriminated between operational and financial creditors. While the court’s judgment brings respite to the financial sector, we argue that the judgment is partly inconsistent with the legislative intent underlying the Code, and may end up diluting the Code’s effectiveness.
First, the judgment repeatedly emphasises that the objective of the law is reorganisation of the debtor, and that liquidation is a “last resort”. For instance, relying on the preamble of