IBC: Preference Shareholders Not Financial Creditors, Can’t File Insolvency: Supreme Court

The Supreme Court held that preference shareholders or investors are not ‘financial creditors’ under the Insolvency and Bankruptcy Code (IBC) and cannot initiate insolvency proceedings. The Court clarified that preference shares differ from debt instruments and do not create a debtor-creditor relationship. Their rights are limited to dividends or redemption per company terms, not repayment under IBC. This decision affirms that insolvency proceedings are not meant for recovery of investment losses and protect genuine creditors’ rights under the IBC framework.