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HIGH COURT OF JUDICATURE AT MADRAS
SANJAY V. GANGAPURWALA, D. BHARATHA CHAKRAVARTHY, JJ.
CA V. Venkata Sivakumar - Appellant
Versus
Insolvency and Bankruptcy Board of India(IBBI) Represented by Deputy General Manager, 7th Floor, Mayur Bhawan, Shankar Market Connaught Circus, New Delhi & Ors. - Respondents
Writ Petition Nos.16650 of 2020 & 14448 of 2021 & W.M.P.No.24548 of 2020
Decided On : 22-01-2024
Insolvency and Bankruptcy Code - Constitutional Validity of Regulation 23A - Section 204 (a) (b) (c) (d) and (e) - Summary of Acts and Sections
Fact of the Case:
The petitioner, a practicing Chartered Accountant and member of the Institute of Chartered Accountants of India, challenged the constitutional validity of Regulation 23A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, and Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016. The petitioner alleged that the regulations and sections were arbitrary, unreasonable, and violated fundamental rights.
Finding of the Court:
The court found that Regulation 23A, which provides for the suspension of authorization for assignment upon initiation of disciplinary proceedings, was not manifestly arbitrary and did not violate principles of natural justice. The court also upheld the constitutional validity of Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016, stating that the provisions did not confer unbridled power and were not violative of Article 20(2) of the Constitution of India.
Issues: The issues involved the constitutional validity of Regulation 23A and Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016, and the maintainability of the writ petitions.
Ratio Decidendi: The court held that Regulation 23A and Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016, were not manifestly arbitrary, did not violate principles of natural justice, and did not confer unbridled power. The court also found that the repeated filing of writ petitions challenging the same provisions was barred by the principles of res judicata.
Final Decision: The court dismissed the writ petitions and held them to be without merit. The court also declared Regulation 23A and Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016, to be intra vires.
JUDGMENT
(Prayer in W.P.No.16650 of 2020 : Writ Petition filed under Article 226 of the Constitution of India, praying to issue a Writ of Declaration that the provisions of Chapter III of the Insolvency and Bankruptcy Code, 2016, more particularly, Section 204 (a) (b) (c) (d) and (e) of the Act, as ultra vires, the provisions of Article 14, 19 (1) (g) and 21 of the Constitution, manifestly arbitrary, substantively unreasonable, excessive legislation and repugnant to the objectives of Insolvency and Bankruptcy Code, 2016.
In W.P.No.14448 of 2021 : Writ Petition filed under Article 226 of the Constitution of India, praying to issue a Writ of Declaration that the impugned Regulation 23A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, which was subsequently amended by the 2nd respondent vide Notification No.IBBI/2016-17/GN/REG0001 dated 23.07.2019 as ultra vires the Constitution and consequentially direct the 1st and 2nd respondents to pay the compensation for the financial loss and mental agony suffered by the petitioner which may be paid to Tamil Nadu “Chief Minister's Public Relief Fund” (CMPRF).)
Common Order
D. Bharatha Chakravarthy
1. The W.P.No.16650 of 2020 is filed by the petitioner for declaring the provisions of Chapter III of the Insolvency and Bankruptcy Code, 2016, more particularly, Section 204 (a) (b) (c) (d) and (e) of the Act as ultra vires the provisions of Article 14, 19 (1) (g) and 21 of the Constitution, manifestly arbitrary, substantively unreasonable, excessive legislation and repugnant to the objectives of Insolvency and Bankruptcy Code 2016.
1.1 The W.P.No.14480 of 2021 is filed for declaring the Regulation 23 A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, which was subsequently amended by the 2nd respondent vide Notification No.IBBI/2016-17/GN/REG0001 dated 23.07.2019 as ultra vires the Constitution and consequentially direct the 1st and 2nd respondents to pay compensation for the financial loss and mental agony suffered by the petitioner which may be paid to Tamil Nadu “Chief Minister's Public Relief Fund” (CMPRF).
1.2 Since both the Writ Petitions are filed by the same writ petitioner and interlinked the same are taken up and disposed by this common order.
1.3 In these Writ Petitions since the ranking of the respondents differ, the Insolvency and Bankruptcy Board of India is referred as 'IBBI', the Indian Institute of Insolvency Professional of ICAI is referred as 'IIIPI' and the Union of India, Ministry of Corporate Affairs is referred as 'UoI'.
B. The Case of the Petitioner:
2. The case of the petitioner is that he is a practicing Chartered Accountant for the past 30 years and is a member of the Institute of Chartered Accountants of India (ICAI). He became a member of the IBBI, which is a statutory body established under the Insolvency and Bankruptcy Code (IBC) vide membership No.IBBI/IPA-001/IP-P00184/2017-18/10852 and carrying on the profession as Insolvency Professional from the year 2018. Since the Regulation 7 (A) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, requires the Insolvency Professional to obtain Authorisation for Assignment (hereinafter referred to as 'AFA') from the Insolvency Professional Agencies, the petitioner made an application to the IIIPI on 31.12.2019. By an order dated 14.01.2020, the said application was rejected by the IIIPI. The petitioner also challenged the constitutional validity of the Regulations 7A and 13 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulation 2016, by W.P.No.9132 of 2020. By an order dated 28.07.2020, the said Writ Petition was dismissed upholding the validity of the Regulations. Thereafter, the petitioner filed an app
The main legal point established in the judgment is that Regulation 23A and Section 204 (a) (b) (c) (d) and (e) of the Insolvency and Bankruptcy Code, 2016, were found to be constitutional and not vi....
The court affirmed that the IBBI's issuance of show cause notices and the suspension of the Authorization for Assignment were valid under the Insolvency and Bankruptcy Code, 2016 and its regulations.
Rules and regulations which are framed by Central Government or IBBI are to be placed before Parliament in terms of Section 241 of IBC.
A Disciplinary Committee under Section 220 of the Insolvency and Bankruptcy Code can be constituted with a single whole-time member without violating statutory provisions.
The court emphasized that disciplinary penalties must be proportionate to the misconduct and factors such as prior penalties and delays in proceedings must be considered.
Resolution Professionals must ensure strict compliance with the Insolvency and Bankruptcy Code, as failure to do so justifies suspension of their registration.
The Court does not interfere with the findings of a fact-finding body if the process adopted in the enquiry is fair, reasonable, and transparent.
The court upheld the constitutional validity of Sections 95 to 100 of the IBC, affirming the role of the resolution professional as facilitators, and emphasized the necessity of adhering to natural j....
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