TMI Blog2020 (11) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... I 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 under challenge. On perusal of the Model Bye-Laws IPA Regulations, we find that the said regulations were framed by the IBBI under the power conferred by Sections 196, 203 and 205 read with Section 240 of the IBC. Given the fact that the IBBI has framed the Model Bye- Laws IPA Regulations and IPAs, such as the IIIPI, have framed bye-laws in consonance with the model bye-laws, it cannot be said that there is excessive delegation. Indeed, Section 205 of the IBC expressly stipulates that, subject to the provisions of the IBC and rules and regulations thereunder, after obtaining the approval of the IBBI, an IPA should frame bye-laws that are consistent with the model bye-laws framed by the IBBI - as regards the criteria for accepting or rejecting an application for an AFA, Regulation 12A(2) of the Model Bye-Laws IPA Regulations stipulates the criteria. Therefore, it certainly cannot be said that principles or norms have not been laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake out a case to declare the impugned regulations as unconstitutional - Petition dismissed. - W.P.No.13229 of 2020 - - - Dated:- 3-11-2020 - Mr. A.P. Sahi, The Chief Justice And Mr. Justice Senthilkumar Ramamoorthy For the Petitioner : Mr.CA.V.Venkata Sivakumar (Party in person) For the Respondents : Mr.R.Sankaranarayanan, ASGI, Assisted by Mr.C.V. Ramachandramoorthy ORDER SENTHILKUMAR RAMAMOORTHY J., In this writ petition, the Petitioner challenges the constitutional validity of Regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (the IP Regulations) read with Bye-Law 12A of the Insolvency and Bankruptcy Board of India (IBBI) (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye-Laws IPA Regulations). 2. The Petitioner is a practicing chartered accountant who is a member of 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 (III ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Agency and the Board; (ii) filings and disclosures to the Agency and the Board; (iii) continuous professional education; and (iv) other requirements, as stipulated under the Code, regulations, circulars, directions or guidelines issued by the Agency and the Board, from time to time. (3) An application for issue or renewal of an authorization for assignment shall be in such form, manner and with such fee, as may be provided by the Agency: Provided that an application for renewal of an authorization for assignment shall be made any time before the date of expiry of the authorization, but not earlier than forty-five days before the date of expiry of the authorization. (4) The Agency shall consider the application in accordance with the bye-laws and either issue 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion cited a few instances of non-filling up of Corporate Insolvency Resolution Process (CIRP) forms in respect of a few assignments, which had been completed one year ago. According to the Petitioner, the CIRP forms could not be filled-up because the forms contain about 120 columns, which is unnecessary because the Petitioner functioned as an interim resolution professional for only about three days. The Petitioner further states that the rejection of the application for AFA was communicated to him on 16.07.2020 when the third Respondent informed the Registry of the National Company Law Tribunal at Chennai that the Petitioner was not authorized to act as an IP. The appeal filed by the Petitioner to the Membership Committee of IIIPI is still pending. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principal is invalid. 7. The third contention of Mr.Venkata Sivakumar is that Regulation 12A(7) stipulates a seven day time limit for filing an appeal before the Membership Committee. This time limit is so short as to render the right of appeal as illusory. On this issue, he also points out that there is no provision to condone delay. In addition, the criteria prescribed under Regulation 12A(2) are unreasonable, vague and arbitrary, particularly the requirement, in Regulation 12A(2)(g)(iv), that the IP should comply with other requirements, as stipulated in the circulars, directions or guidelines issued by the Agency and the Board from time to time. He contended that circulars, guidelines and directions do not constitute law by relying upon judgments such 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 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised in accordance with the conditions prescribed by statute. Without prejudice, he submitted that Section 238A of the IBC specifies that the Limitation Act, 1963 (the Limitation Act) is applicable to proceedings under the IBC. Therefore, an application under Section 5 of the Limitation Act may be filed to condone the delay in filing the appeal under Regulation 12A(7). Mr.Sankaranarayanan also pointed out that the IBBI has framed Grievances and Complaint Handling Procedures 2018 and that, therefore, it is possible to redress grievances and iron out wrinkles and creases by following the procedures specified therein. In support of the contention that an institutional hearing by the IPA should not be interfered with, he relied upon the Judgment of the Hon'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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e empowered to frame bye-laws in consonance with the model bye-laws. Given the fact that the IBBI has framed the Model Bye- Laws IPA Regulations and IPAs, such as the IIIPI, have framed bye-laws in consonance with the model bye-laws, it cannot be said that there is excessive delegation. Indeed, Section 205 of the IBC expressly stipulates that, subject to the provisions of the IBC and rules and regulations thereunder, after obtaining the approval of the IBBI, an IPA should frame bye-laws that are consistent with the model bye-laws framed by the IBBI. Moreover, as regards the criteria for accepting or rejecting an application for an AFA, Regulation 12A(2) of the Model Bye-Laws IPA Regulations stipulates the criteria. Therefore, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n IP should be non-discriminatory. To put it differently, all IPs are required to enrol as professional members of an IPA, register themselves with the IBBI and also obtain an AFA from the IPA concerned before accepting assignments, with effect from 01.01.2020, and, thereafter, on an annual basis. In every case, such AFA is required to be obtained from the appropriate IPA in which such IP is enrolled as a professional member. The admitted position is that there are only three IPAs in India, and the Petitioner has admittedly obtained membership from the IIIPI. Accordingly, as per Regulation 12A of the Model Bye-Laws IPA Regulations, he is required to apply for and obtain the AFA from the IIIPI. 14. Upon submission of such application, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Adjudicating Authority under the IBC and to proceedings under the IBC before the NCLT, NCLAT, DRT and DRAT. Therefore, Section 238 A of the IBC does not apply in this situation. However, the time limit under Regulation 12 A(7) of the Model Bye-Laws IPA Regulations clearly runs from the date of receipt of the order, and the Petitioner would be entitled to reckon limitation from 16.07.2020 if that were indeed the date of receipt of the order of rejection as alleged. More importantly, in contrast to a withdrawal of registration or loss of professional membership as an IP, the rejection of the application for an AFA is not final and apart from the appellate remedy, it is always open to the IP concerned to remedy the non-compliance, as cited in the order of rejection, and re-apply. For all the reasons set out above, we conclude that Regulation 12A is not unconstitutional. Nonetheless, we are of the view that the time limit prescribed in Regulation 12A(7) may be revisited by the IBBI by considering an appropriate amendment either providing for a larger time limit or by conferring power to condone delay for sufficient cause. 16. In light of the aforesaid discussion an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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