TaxTMI 
TaxTMI 
2020 (11) TMI 357
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Institute of Chartered Accountants of India. In addition, he is an insolvency professional (IP) under the IP Regulations. In order to qualify as an IP, as required, he is enrolled as a professional member of the Indian Institute of Insolvency Professionals of the ICAI (IIIPI), which is an Insolvency Professional Agency(IPA). The IIIPI is a not-for-profit company incorporated under Section 8 of the Companies Act 2013 and functions in terms of Regulation 12(2) of the IP Regulations. The Petitioner is also registered as an IP by the Insolvency and Bankruptcy Board of India (the IBBI) under the IP Regulations. By Notification No.IBBI/2019- 20/GN/REG045, dated 23.07.2019, Regulation 7A was introduced in the IP Regulations. The said Regulation 7A deals with authorisation for assignment (AFA) and reads as under: "IBBI (INSOLVENCY PROFESSIONALS) REGULATIONS, 2016 7A. Authorisation for assignment. An insolvency professional shall not accept or undertake an assignment after 31st December, 2019 unless he holds a valid authorization for assignment on the date of such acceptance or commencement of such assignment, as the case may be: Provided that provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or renew, as the case may be, an authorization for assignment to the professional member in Form B or reject the application with a reasoned order. (5) If the authorization for assignment is not issued, renewed or rejected by the Agency within fifteen days of the date of receipt of application, the authorisation shall be deemed to have been issued or renewed, as the case may be, by the Agency. (6) An authorisation for assignment issued or renewed by the Agency shall be valid for a period of one year from the date of its issuance or renewal, as the case may be, or till the date on which the professional member attains the age of seventy years, whichever is earlier. (7) An applicant aggrieved of an order of rejection of his application by the Agency may appeal to the Membership Committee within seven days from the date of receipt of the order. [Provided that, where an application for issue of authorisation for assignment has been rejected by an insolvency professional agency, on and from the date of commencement of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Meanwhile, a show cause notice was issued by the first Respondent to call upon the Petitioner to show cause as to why action should not be taken against him for accepting an assignment without a valid AFA. A second application for AFA was also filed and rejected in the meantime. The present writ petition has been filed in these facts and circumstances. 4. We heard Mr. V.Venkata Sivakumar, the Petitioner, as a partyin- person, and Mr.R.Sankaranarayanan, the learned Additional Solicitor General of India, assisted by Mr.C.V.Ramachandramoorthy for the first Respondent. 5. The first contention of the party-in-person is that the impugned regulations are contrary to Article 14 of the Constitution of India. In order to substantiate this contention, Mr.Venkata Sivakumar pointed out that he possesses all the necessary qualifications to practice as an IP. Therefore, upon application, he was enrolled as a professional member by the IIIPI (the second Respondent), i.e. the IPA, and registered as an IP by the IBBI under the IP Regulations. Once a person is registered as an IP, he cannot be called upon to continually obtain an AFA on an ongoing annual basis. By drawing the analogy of advoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as Ankan Kumar v. Union of India, AIR 2006 SC 1177. For all these reasons, he submits that the impugned regulations are liable to be declared as invalid. 8. The learned ASGI made submissions in response and to the contrary. His first contention is that Regulation 7A was framed by the IBBI pursuant to powers conferred by Sections 196, 207, 208 and 240 of the Insolvency and Bankruptcy Code 2016 (the IBC). As per Section 196 of the IBC, the IBBI is empowered to specify minimum eligibility requirements for registration of IPAs and IPs and to specify, by regulations, standards for the functioning of IPAs and IPs. Similarly, under Section 208(2)(e), the IP is required to perform functions in such manner and subject to such conditions as may be prescribed. Therefore, there can be no doubt as regards the power of the IBBI to frame Regulation 7A. With regard to the object and purpose of the insertion of Regulation 7A, he invited the attention of the Court to the Report of the Bankruptcy Law Reforms Committee (the BLRC Report). In particular, he referred to paragraph 4.4.1 and 4.4.3 of the aforesaid Report wherein it is stated that IPs play a significant role in insolvency resolution.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....39;ble Supreme Court in Kalinga Mining Corporation v. Union of India and others (2013) 5 SCC 252 and, in particular, paragraph 71 thereof. For all these reasons, he submits that the writ petition is liable to be dismissed. 10. We considered the oral and written submissions of the partyin- person and the learned Additional Solicitor General of India and examined the materials on record. 11. The first question that arises for consideration is with regard to the power to frame the impugned regulations and bye-laws, and whether there is excessive delegation. On perusal of the IP Regulations, it is clear that the said regulations were framed under the power conferred by Sections 196, 207 and 208 read with 240 of the IBC. In an earlier judgment, namely, V. Venkata Sivakumar v. IBBI, 2020-4-L.W. 161, this Court rejected a challenge by the Petitioner herein to Regulation 7(2)(ca) of the IP Regulations as regards the power of the IBBI to charge a fee from IPs by using the annual turnover as a measure, including the allegation that there was excessive delegation. In this case, in addition to Regulation 7A of the IP Regulations, Regulation 12A of the Model Bye-Laws IPA Regulations is un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re, it certainly cannot be said that principles or norms have not been laid down in respect of the exercise of power by IPAs. Hence, the delegation of power is not in derogation of principles laid down in judgments such as P.K. Roy and Nargesh Meerza. 12. This leads to the next question as to whether the impugned regulations violate Article 14, 19 and 21 of the Constitution of India. The primary ground on which the regulations are assailed is that it subjects registered IPs to the added requirement of obtaining an AFA from the IPA. Therefore, the question arises as to whether the imposition of the AFA requirement violates the aforesaid provisions of the Constitution. Chartered Accountants are subject to the regulatory and disciplinary control of the Institute of Chartered Accountants of India. In the exercise of audit functions, they are also subject to the supervisory control of the National Financial Reporting Authority under Section 132 of the Companies Act, 2013 (CA 2013) and, in the event of the commission of or abetment of fraud, they may be removed by the NCLT even suo motu under Section 140(5) of CA 2013. Upon challenge, including on the ground of being subject to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the IPA is required to examine as to whether the IP concerned is eligible for an AFA as per the criteria stipulated in Regulation 12A(2). The criteria are, inter alia, that such person should be registered with the IBBI as an IP; he should be a fit and proper person in terms of the explanation to Regulation 4(g) of the IP Regulations; he should not be debarred by any direction or order of the Agency or the Board; he should not have attained the age of seventy years; there should be no disciplinary proceedings pending against him before the Agency or the Board; and he should have complied with requirements with regard to the payment of fees to the IPA and the IBBI, filings and disclosures, continuous professional education and other requirements as stipulated in the IBC, regulations, circulars, directions and guidelines of the IPA and the IBBI. We do not find anything ex facie arbitrary about the specified criteria. Mr. Venkata Sivakumar focused on the fact that circulars, directions or guidelines do not constitute law. Although it may be correct that non-statutory circulars/directions and guidelines do not constitute law, these expressions are used in juxtaposition to compliance wi....