Subhankar Bhowmik had approached the Tripura High Court by way of a PIL, contending that the Insolvency and Bankruptcy Code, 2016 (IBC) and the Regulations framed thereunder, did not prescribe any class of creditors to which the term "decree holder" belonged and therefore, without such prescription in the IBC, the class of "decree holders" fell into the residual class of "other creditors", which was clearly arbitrary and therefore violative of Article 14.
Hence, Bhowmik sought Section 3(10) of the Insolvency and Bankruptcy Code 2016, to be declared as ultra vires as it failed to define the term “other creditors” and the impugned provisions may be interpreted harmoniously to include words “decree holders” as existing in Section 3(10) to be at par with “financial creditors” under Regulation 9A. Bhowmik also sought directions to issue an appropriate Writ, Order or Direction more particularly in the nature of Writ of Certiorari declaring that claims filed under a CIRP (Corporate Insolvency Resolution Process ('CIRP') is a recovery mechanism for the creditors of a corporate debtor.
The High Court while considering the matter referred to the word “creditor” as defined under Section 3(10) of the IBC which reads as, “creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder;” and observed that IBC had indeed recognized and given a statutory status, to the decree-holder as a ‘creditor’ under Section 3(10) of the IBC, by virtue of the decree. Since the decree cannot be executed by operation of the moratorium under Section 14, the IBC makes a provision to protect the interests of a decree holder by recognizing it as a creditor.
Bhowmik further contended that the decree holders as a class of creditors have been discriminated as they do not find a place on the Committee of Creditors in terms of Section 21 of the IBC and in terms of Regulation 16 of the CIRP Regulations. The High Court had rejected all the contentions and arguments of Bhowmik and held that IBC treats decree holders as a separate class.
Against this, Bhowmik preferred a Special Leave Petition in the Hon’ble Supreme Court of India. However the Apex Court said, "To put the steering wheel of a non-adversarial process to revive a corporate debtor, in the hands of an adversarial claimant, would defeat the very purpose of the IBC.”
Having found no merit in the contentions raised by Bhowmik, the Hon’ble Supreme Court of India upheld the order passed by Tripura High Court thereby reiterating that the distinction of decree holders as creditors from “financial creditors” and “operational creditors” is an intelligible purpose of the IBC, and the same could not be stated to be either “discriminatory” or “arbitrary”.
