Case Note & Summary
The Bombay High Court considered four writ petitions challenging Regulation 31A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The petitioners included successful resolution applicants, a bank depositor, and a homebuyer affected by corporate insolvency resolution processes (CIRPs). The regulation introduced a regulatory fee payable to the Board calculated at 0.25% of realisable value to creditors under resolution plans approved under Section 31 of the Insolvency and Bankruptcy Code, 2016, effective 01.10.2022. Petitioners contended that the regulation was ultra vires the parent statute, beyond the Board's powers under Section 196, amounted to a tax without authority, lacked quid pro quo, operated retrospectively, was disproportionate, and violated Articles 14, 19, and 21 of the Constitution. The court recorded the procedural history including transfer of two writ petitions from Madhya Pradesh and Delhi High Courts by Supreme Court order dated 21.11.2023 in Transfer Petition Nos.2124-2126 of 2023. It detailed specific CIRPs: Hazel Mercantile Limited as successful resolution applicant for Reliance Naval and Engineering Limited; Vineet Shrivastava as a bank depositor challenging the regulation; Yadubir Singh Sajwan as a homebuyer in CIRP of Som Resorts Private Limited; and Suraksha Realty Limited as successful resolution applicant for Jaypee Infratech Limited. The court heard preliminary submissions from senior counsel for petitioners arguing that Section 196(1)(c) only permits fees on service providers and amendment w.e.f. 06.06.2018 did not alter its nature. The judgment text available ends with submissions and does not include the final analysis or decision.
Headnote
A) Constitutional Law - Delegated Legislation - Ultra Vires Regulation - Insolvency and Bankruptcy Code, 2016, Sections 196, 240; Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regulation 31A - The petitions sought declaration that Regulation 31A introducing regulatory fee is beyond the regulation-making power of the Board under Section 196 and ultra vires the parent statute. The petitioners contended that the Board may levy fees only on service providers under Section 196(1)(c) and that the amendment w.e.f. 06.06.2018 did not expand this power. (Paras 1-5, 17) B) Constitutional Law - Article 14 - Arbitrariness - Constitution of India, Article 14 - Regulation 31A challenged as arbitrary and violative of Article 14 because regulatory fee of 0.25% of realisable value to creditors is grossly disproportionate and without rational basis. (Paras 1, 4, 11) C) Insolvency Law - Corporate Insolvency Resolution Process - Resolution Plan Approval and Regulatory Fee - Insolvency and Bankruptcy Code, 2016, Sections 30(2)(a), 31(1), 53(1)(a); IBBI Regulations, Regulation 31A - Regulation 31A requires payment of 0.25% of realisable value to creditors under resolution plan approved under Section 31, where realisable value exceeds liquidation value. Petitioners alleged this conflicts with payment waterfall and resolution plan requirements under Sections 30(2)(a) and 53(1)(a). (Paras 3-4) D) Taxation - Fee vs Tax - Quid Pro Quo - Constitution of India, Article 14 - Petitioners argued regulatory fee is in substance a tax, not a fee, because Board provides no service to successful resolution applicants or CoC, hence no quid pro quo. (Paras 4, 17) E) Statutory Interpretation - Retrospective Operation - Proviso to Regulation 31A - IBBI Regulations, Regulation 31A - The proviso to Regulation 31A allegedly made the fee retrospective, affecting resolution plans already approved but not yet sanctioned, rendering it illegal. (Paras 4, 9, 13, 16)
Issue of Consideration
Whether Regulation 31A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, introducing regulatory fee on successful resolution applicants, is ultra vires the Insolvency and Bankruptcy Code, 2016 and Sections 196, 240, etc., and violative of Articles 14, 19, 21 of the Constitution.
Law Points
- Regulatory fee must be within Board's powers under Section 196 IBC
- Fee cannot be tax without legislative authority
- Regulatory fee requires quid pro quo
- Retrospective operation invalid
- Arbitrariness violates Article 14
