2020 (11) TMI 357 - HC - Insolvency and Bankruptcy

Court Validates Insolvency Regulations, Urges Flexibility in Appeal Time Limits

CA V. Venkata Sivakumar Versus Insolvency and Bankruptcy Board of India (IBBI), IPA/ICAI (The Institute of Chartered Accountants of India), Dr. M.S. Sahoo, Mr. Susanta Kumar Sahu COO – IIIPI

CA V. Venkata Sivakumar Versus Insolvency and Bankruptcy Board of India (IBBI), IPA/ICAI (The Institute of Chartered Accountants of India), Dr. M.S. ... Issues Involved:1. Constitutional validity of Regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.2. Constitutional validity of Bye-Law 12A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.3. Alleged violation of Articles 14, 19, and 21 of the Constitution of India.4. Alleged excessive delegation of powers.5. Reasonableness of the seven-day time limit for filing an appeal under Regulation 12A(7).Detailed Analysis:1. Constitutional Validity of Regulation 7A and Bye-Law 12A:The Petitioner challenged the constitutional validity of Regulation 7A and Bye-Law 12A, arguing that these regulations impose an undue burden on insolvency professionals (IPs) by requiring them to obtain an Authorization for Assignment (AFA) annually. The court examined the powers conferred on the Insolvency and Bankruptcy Board of India (IBBI) under Sections 196, 207, 208, and 240 of the Insolvency and Bankruptcy Code (IBC) and found that the IBBI is empowered to frame such regulations. The court concluded that the delegation of power to IPAs to issue AFAs is valid and does not constitute excessive delegation.2. Alleged Violation of Articles 14, 19, and 21:The Petitioner argued that the impugned regulations violate Articles 14, 19, and 21 of the Constitution by imposing additional requirements on registered IPs. The court noted that IPs perform a distinct function and constitute a distinct class, and the regulations treat all IPs alike. The court also found that the criteria for obtaining an AFA are not arbitrary or unreasonable but are intended to ensure high standards among IPs. Therefore, the court concluded that the impugned regulations do not violate Articles 14, 19, and 21.3. Alleged Excessive Delegation of Powers:The Petitioner contended that the IBBI's delegation of power to IPAs to issue AFAs constitutes excessive delegation. The court examined the relevant sections of the IBC and found that the IBBI is expressly empowered to frame model bye-laws and that IPAs are authorized to frame bye-laws consistent with the model bye-laws. The court concluded that the delegation of power is not excessive and is in line with the principles laid down in judgments such as P.K. Roy and Nargesh Meerza.4. Reasonableness of the Seven-Day Time Limit for Filing an Appeal:The Petitioner argued that the seven-day time limit for filing an appeal under Regulation 12A(7) is arbitrary and unreasonable. The court noted that a right of appeal is purely statutory and must be exercised in accordance with the conditions prescribed by statute. The court also observed that the rejection of an application for an AFA is not final, and the IP can remedy the non-compliance and re-apply. However, the court suggested that the IBBI may consider revisiting the time limit to provide for a larger time limit or to confer power to condone delay for sufficient cause.Conclusion:The court found that the Petitioner failed to make out a case to declare the impugned regulations as unconstitutional. The court dismissed the writ petition but noted that the Petitioner could prosecute the pending appeal regarding the rejection of his AFA application or submit a fresh application upon remedying the stated defects.