Back
2020 Supreme(Mad) 2203
IN THE HIGH COURT OF MADRAS
Amreshwar Pratap Sahi, Senthilkumar Ramamoorthy, JJ.
Venkata Siva Kumar – Appellant
Versus
Insolvency and Bankruptcy Board of India and Ors. – Respondents
W.P. No. 9132 of 2020 and W.M.P. No. 11134 of 2020
Decided On : 28-07-2020
Advocate Appeared:
For the Appellant : Party-in-Person
For the Respondent: R. Sankaranarayanan, Additional Solicitor General of India assisted by K. Jaiganesh
Headnote:
Insolvency and Bankruptcy Code, 2016 - Sections 196, 207 and 208 r/w 240 - Right to Information Act, 2005 - Power to make regulations - Registration of insolvency professionals - Levy of fees - Whether quid pro quo is absent in the levy of fees as a percentage of the annual remuneration/turnover and whether Regulation 7(2)(ca) is liable to be set aside for such reason - Petitioner obtained a certificate of registration as an IP from the IBBI on 07.08.2017 and has been appointed as a resolution professional thereafter by National Company Law Tribunal (NCLT) - An IP who is appointed to conduct corporate insolvency resolution process is defined as a resolution professional (RP) as per Section 5(27) of IBC - Held, Quid pro quo is not a condition precedent for levy of regulatory fees and that it is sufficient if there is a broad correlation as between services provided and fee charged - It is evident that Parliament enacted IBC by drawing on BLRC Report and the bill prepared by BLRC - In both FSLRC and BLRC Reports, it was recommended that regulator should be self-sufficient at least with regard to operational expenses by collecting fees to finance its activities - Thus IBBI does provide significant services, including in relation to IPs and that there is broad correlation between fees and services - Section 241 of IBC provides for laying of all rules and regulations made thereunder before each House of Parliament and further provides for either modification or annulment thereof by Parliament - Writ petition dismissed
ORDER :
Senthilkumar Ramamoorthy, J.
1. The Petitioner is a chartered accountant and has registered himself as an insolvency professional (IP) with the Insolvency and Bankruptcy Board of India (the IBBI). The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (the IP Regulations), were framed by the IBBI under Sections 196, 207 and 208 read with Section 240 of the Insolvency and Bankruptcy Code, 2016 (the IBC). Regulation 7 of the IP Regulations provides that the registration of the IP with the IBBI is subject to the conditions stipulated therein. Regulation 7(2)(ca) thereof stipulates the requirement that the IP should pay a fee calculated at 0.25% of the professional fee earned for services rendered as an IP in the preceding financial year to the IBBI. Regulation 12 of the IP Regulations provides for the recognition of a company, registered partnership firm or a limited liability partnership as an insolvency professional entity (IPE) subject to the conditions set out therein. Regulation 13(2)(ca) stipulates payment of a fee at 0.25% of the turnover of the IPE in the preceding financial year to the IBBI. Both Regulation 7(2)(ca) and 13(2)(ca) are under challenge in this writ petition whereby the Petitioner seeks a declaration that the said IP Regulations violate Articles 14, 19 and 21 of the Constitution and are, therefore, liable to be struck down.
2. The power to levy fees on IPs is conferred on the IBBI under Section 196 and 207 of the IBC. In Section 196, Sub-section (1)(a), (aa) and (c) are relevant and are set out below:
"(1) The Board shall, subject to the general direction of the Central Government, perform all or any of the following functions, namely:-
(a) register insolvency professional agencies, insolvency professionals and information utilities and renew, withdraw, suspend or cancel such registrations;
(aa) promote the development of, and regulate, the working and practices of, insolvency professionals, insolvency professional agencies and information utilities and other institutions, in furtherance of the purposes of this Code;
(c) levy fee or other charges for carrying out the purposes of this Code, including fee for registration and renewal of insolvency professional agencies, insolvency professionals and information utilities."
Section 207 of the IBC deals with the registration of IPs and for the payment of fees in respect thereof. The said provision is as under:
"207. Registration of insolvency professionals
(1) Every insolvency professional shall, after obtaining the membership of any insolvency professional agency, register himself with the Board within such time, in such manner and on payment of such fee, as may be specified by regulations.
(2) The Board may specify the categories of professionals or persons possessing such qualifications and experience in the field of finance, law, management, insolvency or such other field, as it deems fit."
Section 208 deals with the broad functions and obligations of IPs and stipulates that an IP shall undertake such actions as may be necessary in respect of the different forms of insolvency resolution processes, bankruptcies and liquidation. Section 240 contains the general power to make regulations and reads, inter alia, as under:
"240. Power to make regulations
(1) The Board may, by notification, make regulations consistent with this Code and the rules made thereunder, to carry out the provisions of this Code."
The IP Regulations were framed in the year 2016 and were amended subsequently with regard to the conditions for registration of an IP and IPE, respectively, by inserting clause (ca) in regulations 7(2) and 13(2). This amendment was made by Notification No. IBBI/2018-19/GN/REG036 dated 11.10.2018 with effect from even date and the provisos thereto were inserted by a subsequent amendment with effect from 28.03.2020. Regulation 7(2) (ca) is as under:
"7(2) the registration shall be subject to the conditions that the insolvency professionals
