The Cinderella of insolvency

Undermining operational creditors is against the basic spirit of IBC

The Insolvency and Bankruptcy Code (IBC) 2016, aims at resolution of stress of a company, among others. It envisages three key benefits from resolution, namely, (a) promotion of entrepreneurship, (b) improvement of availability of credit, and (c) balancing interests of stakeholders. These benefits, particularly the last two, accrue only if the resolution safeguards interests of creditors, and balances their interests inter se.

Unlike most jurisdictions, IBC puts a committee of creditors (CoC) comprising only financial creditors (FCs) to drive the resolution process. The Bankruptcy Law Reforms Committee (BLRC), which conceptualised IBC, had reasoned that as compared to operational creditors (OCs), the