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of <h1>Automatic suspension of resolution professionals during disciplinary proceedings under Section 204 IBC upheld as constitutional</h1> <h3>CA V. Venkata Sivakumar Versus Insolvency and Bankruptcy Board of India (IBBI), Indian Institute of Insolvency Professionals of ICAI, ICSI Institute of Insolvency Professionals, Insolvency Professional Agency of Institute of Cost, Dr. MS. Sahoo, The Union of India</h3> CA V. Venkata Sivakumar Versus Insolvency and Bankruptcy Board of India (IBBI), Indian Institute of Insolvency Professionals of ICAI, ICSI Institute of ... Issues Involved:1. Constitutional Validity of Regulation 23A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.2. Constitutional Validity of Section 204 of the Insolvency and Bankruptcy Code (IBC), 2016.3. Maintainability of the Writ Petitions.Summary:Issue 1: Constitutional Validity of Regulation 23ARegulation 23A states that 'The authorization for assignment shall stand suspended upon initiation of disciplinary proceedings by the Agency or by the Board, as the case may be.' The petitioner argued that this regulation grants uncontrolled powers to the Board and the Agency, depriving the member of carrying out his profession without notice or opportunity of being heard, thus violating fundamental rights and being manifestly arbitrary and substantively unreasonable.The court held that Regulation 23A is not manifestly arbitrary nor does it confer unbridled power. The suspension of Authorization for Assignment (AFA) upon initiation of disciplinary proceedings is an ad-interim measure, not a punishment, and does not violate principles of natural justice. The court upheld the constitutional validity of Regulation 23A.Issue 2: Constitutional Validity of Section 204 of IBCSection 204 outlines the functions of an insolvency professional agency, including granting membership, laying down standards of professional conduct, monitoring performance, safeguarding rights, and suspending or canceling membership. The petitioner contended that Section 204 enables multiple disciplinary agencies, leading to parallel proceedings and repetitive punishments, thus violating Article 20(2) of the Constitution of India and being manifestly arbitrary and substantively unreasonable.The court found that the twin-tire regulatory structure is based on the Bankruptcy Law Reform Committee Report and is intended to ensure effective regulation and development of the insolvency profession. The existence of more than one authority with regulatory or disciplinary control does not inherently violate constitutional principles. The court upheld the constitutional validity of Section 204 of IBC.Issue 3: Maintainability of the Writ PetitionsThe petitioner had previously challenged the vires of Regulation 7A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, which was dismissed. The court held that the petitioner cannot challenge different regulations of the same statute in separate writ petitions on the same grounds, as it would be barred by the principles of constructive res judicata. The court dismissed the writ petitions as barred by res judicata and without merit.Conclusion:The writ petitions challenging the constitutional validity of Regulation 23A and Section 204 of IBC were dismissed. The court upheld the constitutional validity of both provisions, finding no merit in the petitioner's arguments.
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