Summary of Swiss Ribbons Pvt Ltd v. Union of India Case

Swiss Ribbons Pvt Ltd v. Union of India is a landmark case in Indian constitutional and corporate law that pertains to the Insolvency and Bankruptcy Code, 2016 (IBC). The case was heard by a five-judge bench of the Supreme Court of India and the judgment was delivered on January 25, 2019.

Here’s a detailed summary of the case:

Background

Swiss Ribbons Pvt Ltd, a company engaged in the business of infrastructure and construction, filed a petition challenging the constitutional validity of certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). The primary contention was regarding the vires of sections 3, 4, 5(2), 6, 7, and 12-32 of the IBC.

Contentions

• Swiss Ribbons Pvt Ltd argued that various provisions of the IBC violated the Constitution of India, particularly Articles 14, 19(1)(g), and 21.
• They contended that the IBC, by prescribing strict timelines for resolution and liquidation, infringed upon the rights of the corporate debtor and its promoters.
• The petitioner argued that the classification made by the IBC between operational creditors and financial creditors was arbitrary and discriminatory.

Constitutional Validity

• The Supreme Court analyzed the constitutional validity of the provisions in question in light of the principles of reasonableness, proportionality, and fairness.
• The Court held that the IBC was enacted to address the issue of non-performing assets (NPAs) and to provide a time-bound process for resolving insolvency, which was in the interest of all stakeholders, including creditors, debtors, and the economy as a whole.
• It was observed that the classification between operational and financial creditors was based on intelligible differentia and had a rational nexus with the object sought to be achieved by the IBC.

Presumption of Constitutionality:

• The Court emphasized the principle of presumption of constitutionality and held that unless a provision of law is shown to be manifestly arbitrary, unjust, or unfair, the courts should refrain from interfering with the legislative policy.
• It was noted that economic legislation involves complex policy choices, and the wisdom of such choices is primarily within the domain of the legislature.

Conclusion

• The Supreme Court upheld the constitutional validity of the challenged provisions of the IBC, ruling that they were not violative of Articles 14, 19(1)(g), or 21 of the Constitution.
• The Court held that the IBC struck a balance between the interests of various stakeholders and was a necessary legislation to address the problem of insolvency and promote economic growth.

Overall, the Swiss Ribbons case affirmed the constitutional validity of the Insolvency and Bankruptcy Code, 2016, establishing a robust legal framework for resolving corporate insolvency in India.