# In the matter of Akshay Jhunjhunwala & Anr. Vs. Union of India through the Ministry of Corporate Affairs & Ors. W P No. 672-2017

> HC judgment dated 2018-02-02. Citation: TCN-2018-HC-00021. This writ petition challenges the vires of Sections 7, 8, and 9 of the Insolvency and Bankruptcy…

- **Court:** HC
- **Order date:** 2 Feb 2018
- **Citation:** TCN-2018-HC-00021
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-chandigarh-bench/akshay-jhunjhunwala-anr-vs-union-of-india-through-the-ministry-of-corporate-affa-644f2711

## Summary

### Background

This writ petition challenges the vires of Sections 7, 8, and 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioners argue that the IBC's distinction between financial and operational creditors lacks a rational basis and unduly favors financial creditors. They contend that the Code does not adequately empower the adjudicating authority to scrutinize claims by financial creditors, while imposing stricter scrutiny on operational creditors. The petitioners also argue that the IBC limits the corporate debtor's ability to challenge claims and seek injunctions against proceedings. The respondents, including the Union of India, oppose the petition, arguing that the IBC introduces necessary reforms to insolvency proceedings, provides for a paradigm shift in the

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## Facts

Akshay Jhunjhunwala & Anr. filed a writ petition challenging the vires of Sections 7, 8, and 9 of the Insolvency and Bankruptcy Code, 2016. The petitioners argued that the IBC's distinction between financial and operational creditors is discriminatory and lacks a rational basis. They claimed that the IBC unduly favors financial creditors by granting them greater influence in the Committee of Creditors (COC) and imposing less stringent scrutiny on their claims. The petitioners also argued that the IBC restricts the corporate debtor's ability to challenge claims and seek injunctions. The Union of India and other respondents opposed the petition, asserting that the IBC introduces necessary reforms to insolvency proceedings and that the classification of creditors is

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## Issues and analysis

### Issue 1: Whether the distinction between financial and operational creditors under Sections 7, 8, and 9 of …

**Ratio:** Classification amongst similarly situated persons is permissible if the classification is

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**Reasoning:** The court reasoned that the Code of 2016 segregates creditors of a company into two broad

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**Interpretation:** The court interprets that the classification made by the Code of 2016 amongst

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**Application:** The court applied the ratio to the facts by stating that the classification of

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## Parties

- **Judges:** Debangsu…
- **Appellants:** Akshay Jhunjhunwal…
- **Respondents:** Union of…

## Timeline

- **2017-12-15 — Hearing concl…**: The hearing in the writ…
- **2018-02-02 — Judgment…**: The judgment was delivered…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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