Case Note & Summary
The petitioner, Amit Gupta, a chartered accountant and registered insolvency professional, challenged a circular dated 28 September 2023 issued by the Insolvency and Bankruptcy Board of India (IBBI). The circular purported to clarify the usage of certain terms in Regulation 4(2)(b) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (LP Regulations). The petitioner argued that the circular, in the guise of clarification, effectively amended the LP Regulations by introducing new substantive requirements and applying them retrospectively to all pending liquidation processes. The court analyzed the scope of Regulation 4(2)(b) and found that the circular went beyond mere clarification, imposing additional conditions not present in the regulation. The court held that the circular was ultra vires the LP Regulations and could not have retrospective effect without express statutory authority. The petition was allowed, and the impugned circular was quashed. The court emphasized that a regulator cannot amend regulations through circulars and that any clarification must be consistent with the parent regulation.
Headnote
A) Insolvency Law - Ultra Vires Circular - Clarification vs Amendment - Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Regulation 4(2)(b) - The court examined whether a circular issued by IBBI purporting to clarify terms in Regulation 4(2)(b) actually introduced new substantive requirements with retrospective effect. Held that the circular was ultra vires the LP Regulations and amounted to an impermissible amendment, not a mere clarification (Paras 1-60). B) Administrative Law - Retrospective Effect - Circular cannot have retrospective effect without statutory authority - The court held that the Impugned Circular, by applying to all pending liquidation processes, had retrospective effect which was not authorized by the LP Regulations. Held that such retrospective operation is invalid (Paras 30-45).
Issue of Consideration
Whether the Impugned Circular dated 28.09.2023 issued by IBBI purporting to clarify Regulation 4(2)(b) of the LP Regulations is ultra vires the LP Regulations and amounts to an illegal retrospective amendment.
Final Decision
The Writ Petition is allowed. The Impugned Circular dated 28.09.2023 is quashed and set aside.
Law Points
- Circular cannot amend regulations
- Clarification must be within scope of parent regulation
- Retrospective effect invalid without express power
- Ultra vires doctrine
- Regulation 4(2)(b) LP Regulations interpretation
