The Bombay High Court has set aside the show cause notices issued to Kairav Anil Trivedi by the Insolvency & Bankruptcy Board of India (IBBI). The court ruled that the notices lacked jurisdiction and declared certain regulatory clauses under the Insolvency and Bankruptcy Code, 2016, as ultra vires. The suspension of Trivedi's Authorization for Assignment (AFA) was also deemed unlawful, as it was carried out without adherence to the principles of natural justice.

1. Introduction

The case involves a writ petition filed by Kairav Anil Trivedi challenging the show cause notices issued by the Insolvency & Bankruptcy Board of India (IBBI) under the Insolvency and Bankruptcy Code, 2016.

2. Background

The petitioner, registered as an Insolvency Professional (IP) with the IBBI, received two show cause notices on October 26, 2023, and April 10, 2024, alleging violations under the Insolvency and Bankruptcy Code. The notices led to the suspension of Trivedi's Authorization for Assignment (AFA).

3. Petitioner's Arguments

• Lack of Jurisdiction: The petitioner argued that the IBBI had no jurisdiction to issue the show cause notices as there was no written order authorizing the investigation.
• Violation of Natural Justice: The petitioner contended that the suspension of AFA without prior notice or opportunity to be heard was a violation of natural justice.
• Ultra Vires Clauses: It was argued that Clause 23A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, and similar provisions in the ICSI Bye-Laws were ultra vires the Code.

4. Respondent's Defense

The IBBI defended its actions by stating that the show cause notices were valid and based on proper investigations authorized under the Code. It argued that the suspension of the AFA was in line with the regulations and not punitive.

5. Court's Ruling

The court ruled in favor of the petitioner, quashing the show cause notices and declaring the suspension of the AFA unlawful. The court found that the IBBI had overstepped its jurisdiction and failed to comply with the principles of natural justice.

6. Conclusion

The judgment reinforces the importance of adhering to statutory limits and upholding the principles of natural justice in regulatory proceedings. The court's decision has significant implications for the governance of insolvency professionals under the Insolvency and Bankruptcy Code, 2016.