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2024 (4) TMI 241 - BOMBAY HIGH COURTConstitutional Validity of Circular issued by issued by the Insolvency and Bankruptcy Board of India (IBBI). - clarification of usage of certain terms contained in Regulation 4(2)(b) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - illegal amendment in the LP Regulations by the circular - computation of the liquidator’s fee before and after the 2019 Amendments. The challenge is primarily on the ground that in the garb of clarifying certain terms contained in Regulation 4(2)(b), the IBBI has effectively, by a back-door method, amended the LP Regulations by stipulating new substantial requirements, and that too, with retrospective effect. Whether the Impugned Circular simply clarifies Regulation 4(2)(b), or whether it effects substantive amendments to the term in the garb of clarification? HELD THAT:- The Impugned Circular positively introduces a new position that an act of court would indeed prejudice the liquidator, unless he gets the court to confirm his fee computation, on a case to case basis. The liquidator may even have to approach different courts since according to Paragraph 2.5, only the forum that stayed a disposal of an asset can confirm if the suspension of the time can be availed of, and that too only for such asset as that court protected from being liquidated. Such a detailed and complicated matrix of regulatory requirements cannot constitute a “guideline” that merely clarifies the existing regulatory framework. The only way to make regulations towards this end would be to do so under Section 240 and comply with the Law-Making Regulations. That not having been done, Paragraph 2.5 of the Impugned Circular is indeed a substantive amendment masquerading as a clarification. There are no hesitation in striking it down as being ultra vires the LP Regulations and the IBC. A close review of the material on record also reveals that the IBBI has indeed issued a Discussion Paper on 20th October, 2023 on “Strengthening the Liquidation Process” and has proposed amendments to the LP Regulations in this regard. In the proposed amendment, it appears that the IBBI’s desire is to empower the Stakeholders’ Committee to approve an adjustment to the liquidator’s fees, on account of court-inflicted delays. Even while the standard sought to be introduced in the garb of clarification is different from the standard under active consideration for an amendment to the LP Regulations, what is clear is that Paragraph 2.5 can simply not be upheld as a clarification. Paragraph 2.1 and Paragraph 2.5 of the Impugned Circular are hereby struck down as being ultra vires the LP Regulations and the IBC. They introduce substantive amendments to statutory legislation even while purporting to be mere clarifications. The changes they seek to bring in are not even covered by the IBC and the LP Regulations. Due process by way of compliance with the statutory requirements of the Law-Making Regulations is missing. Therefore, in the course of conducting the quasi-judicial proceedings, the IBBI is prohibited from placing any reliance on Paragraph 2.1 and Paragraph 2.5 of the Impugned Circular in determining if any fee charged by the Petitioner in the liquidation assignments in question, was in excess of permissible thresholds. The IBBI must discharge the First Show Cause Notice since it evidently has been subsumed by the Second Show Cause Notice, in substance and content. Multiplicity of proceedings on the same cause of action before the same regulator against the same noticee on the same facts is inappropriate. The IBBI must issue a written communication reconciling the coverage of the two show cause notices and in any case dispose of the proceedings as expeditiously as possible and in accordance with law. Petition disposed off.
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