A regulatory circular cannot retroactively amend established rules without formal procedures; clarifications must not introduce new legal standards.

JUDGMENT

Somasekhar Sundaresan, J. - Rule. By consent, rule is made returnable forthwith, and the Writ Petition is taken up for final hearing and disposal.

Factual Matrix:

2. The challenge in this Writ Petition is to a Circular dated 28 th September, 2023 ('Impugned Circular'), issued by Respondent No. 1, the Insolvency and Bankruptcy Board of India ('IBBI'), purporting to clarify the usage of certain terms contained in Regulation 4(2)(b) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (' LP Regulations'). The challenge is primarily on the ground that in the garb of clarifying certain terms contained in Regulation 4(2)(b), the IBBI has effectively, by a back-door method, amended the LP Regulations by stipulating new substantial requirements, and that too, with retrospective effect. Put differently, it is alleged that the Impugned Circular is ultra vires the LP Regulations, which it purports to clarify, and that far from being clarificatory, it is an instrument that illegally amends the LP Regulations.

3. The Petitioner is a Chartered Accountant by profession and is registered as an 'Insolvency Professional' ('IP') with the IBBI. In his capacity as an IP, the Petitioner has acted as a liquidator in respect of a number of companies (' Corporate Debtors') under the Insolvency and Bankruptcy Code, 2016 ('IBC').

4. The IBBI issued to the Petitioner, a Show Cause Notice dated 14 th March, 2023 ('First Show Cause Notice'), alleging that the Petitioner had charged excessive fees in the course of liquidating a company by the name Hindustan Dorr Oliver Limited (' HDOL'). The Petitioner replied to the First Show Cause Notice on 3rd April, 2023, and attended a personal hearing on 11th April, 2023. A Disciplinary Committee of the IBBI did not pass a final order on the First Show Cause Notice, but instead, the IBBI directed that a wider inspection of the Petitioner's assignments be conducted.

5. Accordingly, on 22nd May, 2023, the IBBI issued a notice to the Petitioner communicating its decision to inspect certain liquidation assignments handled by the Petitioner, and directed him to submit various documents in connection with such assignments. After inspection, a draft Inspection Report, dated 27th July, 2023 came to be served upon the Petitioner, seeking his comments. The Petitioner provided an issue-wise response on 4th September, 2023, and a final

Inspection Report dated 15th September, 2023 was prepared by the IBBI.

6. Thereafter, on 28th September, 2023, the IBBI issued the Impugned Circular, invoking Section 196 of the IBC, purporting to clarify the interpretation of the terms 'amount realised'; 'other liquidation costs'; and 'amount distributed to stakeholders', as used in Regulation 4(2)(b) of the LP Regulations. The Impugned Circular also purported to clarify how the time periods applicable for computing fees towards realization and distribution should be computed under Regulation 4(2)(b).

7. After the Final Inspection Report, and based on its findings, the IBBI issued to the Petitioner another Show Cause Notice dated 4th December, 2023 ('Second Show Cause Notice'). The Second Show Cause Notice found fault with eight liquidation assignments handled by the Petitioner. Although the Impugned Circular was issued after the Final Inspection Report, and the actions