Article 14 challenge to insolvency transition upheld where classification, remedial order, and cut-off date were all found rational.

A transitional classification under the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 was upheld because sanctioned rehabilitation schemes were treated differently from pending draft schemes on the basis of a real and substantial distinction, and the distinction furthered the shift to the time-bound insolvency regime under the Insolvency and Bankruptcy Code, 2016. The Removal of Difficulties Order, 2017 was also sustained as a clarificatory and remedial measure issued within the statutory framework, rather than an impermissible enlargement of power. The notified cut-off date for abatement of pending proceedings was held lawful because it operated as a rational demarcation for implementation of the new regime and was not arbitrary or discriminatory.

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Issues: (i) Whether the classification under Section 4(b) read with Section 5(1)(d) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, which distinguishes between sanctioned rehabilitation schemes and pending draft schemes, violates Article 14 of the Constitution of India; (ii) Whether the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017 and the substituted provisions inserted through Section 242(1) and Section 252 of the Insolvency and Bankruptcy Code, 2016 are ultra vires; (iii) Whether the cut-off date notified for abatement of pending proceedings is arbitrary or discriminatory.

Issue (i): Whether the classification under Section 4(b) read with Section 5(1)(d) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, which distinguishes between sanctioned rehabilitation schemes and pending draft schemes, violates Article 14 of the Constitution of India.

Analysis: The statutory scheme was read harmoniously so that pending proceedings before the Board or Appellate Authority abate on the notified date, while sanctioned schemes are preserved and treated as approved resolution plans under the Insolvency and Bankruptcy Code, 2016. The distinction was found to rest on a real and substantial difference between finally sanctioned schemes and mere pending drafts. The object of the legislation was to replace the earlier sick-company regime with a time-bound insolvency framework, and the classification furthered that object.

Conclusion: The classification was held valid and not violative of Article 14.

Issue (ii): Whether the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017 and the substituted provisions inserted through Section 242(1) and Section 252 of the Insolvency and Bankruptcy Code, 2016 are ultra vires.

Analysis: The impugned order was treated as having been issued within the statutory framework of the Insolvency and Bankruptcy Code, 2016. Section 252 expressly amended the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 in the manner specified in the Eighth Schedule, and Section 242(1) empowered the Central Government to remove implementation difficulties. The order was viewed as clarificatory and remedial, not as an impermissible enlargement of power.

Conclusion: The challenge to the Removal of Difficulties Order was rejected and the provisions were upheld.

Issue (iii): Whether the cut-off date notified for abatement of pending proceedings is arbitrary or discriminatory.

Analysis: The notified date was treated as a necessary legislative and administrative demarcation for implementation of the new insolvency regime. The Court applied the settled principles that a cut-off date is valid if it has a rational nexus with the statutory object and is not palpably arbitrary. The date selected for enforcement of the repealing and substituting framework was found to be linked to the transition from the earlier regime to the Code.

Conclusion: The cut-off date was held to be lawful and non-arbitrary.

Final Conclusion: The statutory transition from the sick-industrial-company regime to the insolvency code was upheld in full, and the petitioner's constitutional and vires challenges failed.

Ratio Decidendi: A legislative classification and transitional cut-off will withstand Article 14 scrutiny where it is founded on intelligible differentia, bears a rational nexus to the statutory object, and operates within the framework of valid delegated or remedial powers.

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