Swiss Ribbons explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SLP (Civil) No. 28623 of 2018, decided on 25 January 2019, is the judgment that settled whether the Code could stand at all. Every major structural feature was challenged, and every one was upheld.
What was challenged
The petitioners in Swiss Ribbons contended that aspects of the Code were unconstitutional and violated principles of equality and fairness, including the centralisation of appellate authority in New Delhi. The issues framed were:
- whether the Code is constitutionally valid;
- whether the distinction between financial and operational creditors is arbitrary and unconstitutional under Article 14;
- whether section 12A is void under Article 14;
- whether the powers given to information utilities in determining default are excessive;
- whether the powers of resolution professionals are adjudicatory in nature;
- whether section 29A is void under Article 14; and
- whether section 53 is void under Article 14.
The Court's approach
- Constitutionality affirmed. The Court upheld the Code's provisions, emphasising their role in facilitating timely resolution and revival of corporate debtors, and recognised the Code as a significant advancement aimed at maximising asset value and balancing stakeholder interests.
- Judicial restraint. The judgment illustrated a measured approach to economic legislation, acknowledging limited judicial review in economic matters while reinforcing legislative intent.
- The Preamble. The Court treated the Preamble as fundamental to understanding the Code's objectives, which include promoting entrepreneurship and ensuring fair treatment for all creditors.
Swiss Ribbons is quoted for its individual holdings, but the reasoning underneath them is the more durable contribution. The Court treated the Code as economic legislation, where the legislature is entitled to considerable latitude in choosing between policy options and courts do not substitute their own commercial judgment.
That frame explains why so many later challenges — to the committee's commercial wisdom, to differential creditor treatment, to the section 29A disqualifications — have failed. The question is not whether a different design would be fairer, but whether the design chosen is within the legislature's competence.
The specific rulings
| Challenge | Ruling |
|---|---|
| Financial vs operational creditors | Financial creditors are clearly different from operational creditors, and a plan cannot be passed unless a minimum payment is made to operational creditors. No discrimination and no manifest arbitrariness — Article 14 is not infringed |
| Section 12A | Not arbitrary — the NCLT and NCLAT have power under section 60 to set aside a committee decision on withdrawal of a petition under sections 7 and 9 |
| Role of the resolution professional | A facilitator of the process, whose administrative functions are overseen by the committee of creditors and the Adjudicating Authority — not adjudicatory |
| Section 29A | A person unable to repay a loan, in whole or in part, within one year and three months is ineligible to be a resolution applicant |
The minimum payment answer to the Article 14 challenge
The most substantial challenge was that operational creditors are treated worse than financial creditors on the same debt. The Court's answer had two parts, and both matter.
First, the two classes are different — financial creditors lend money and are equipped to assess viability; operational creditors supply goods and services in the course of trade. Second, the Code does not leave operational creditors unprotected: a plan cannot be passed unless a minimum payment is made to them. Differential treatment with a statutory floor is not the same as discrimination.
Where Swiss Ribbons is cited today
- For the proposition that the Code's primary focus is revival and continuation of the corporate debtor, protecting it from its own management and from corporate death by liquidation — the passage relied on in the Gujarat NRE Coke matter to keep ineligible promoters out of Companies Act schemes.
- For the characterisation of the resolution professional as a facilitator, which underpins the limits on the professional's role.
- For the one year and three months formulation of section 29A ineligibility.
- For judicial restraint in reviewing the committee's commercial decisions.
Common mistakes
- Citing Swiss Ribbons for a proposition that operational creditors must be treated equally with financial creditors.
- Arguing that the resolution professional exercises adjudicatory power.
- Treating section 12A as unreviewable because the committee decides.
- Reading the judgment as inviting merits review of economic legislation.