Madras HC dismisses petition against insolvency professionals requiring authorization for assignment
The Madras High Court has dismissed a writ petition challenging the constitutional validity of the regulation requiring an insolvency professional to seek authorization for assignment from the insolvency professional agency (IPA) before accepting any new insolvency case.
The high court dismissed almost all the contentions of the petitioner – V Venkata Sivakumar, who is a chartered accountant and an Insolvency Professional – and maintained that the Insolvency and Bankruptcy Board of India (IBBI) is empowered to frame Regulation 7A of the IP Regulations and Regulation 12A of the Model Bye-Laws IPA Regulations.
Regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, says that an insolvency professional will accept or undertake an assignment after 31 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.
Regulation 12A of themodel Bye-Laws Insolvency Professional Agency (IPA) Regulations says that an IPA, on an application by its professional member, may issue or renew an authorization for assignment.
Excessive Delegation
The court did not find merit on the petitioner’s contention that letting IPAs frame bye-laws is a case of excessive delegation. The court said that Section 196 of the IBC deals with the powers and functions of the IBBI and sub-section (2) thereof expressly empowers the IBBI to frame model byelaws to be adopted by an IPA.
The High Court further contended that Section 205 of the IBC deals with the power of the IPA to frame bye-laws in accordance with the model bye-laws. On examining the said Sections of the IBC, the undoubted position that emerges is that the IBBI is empowered to frame Regulation 7A of the IP Regulations and Regulation 12A of the Model Bye-Laws IPA Regulations. In turn, the IPAs, including the second Respondent, are empowered to frame bye-laws in consonance with the model bye-laws.
Violation of constitutional provisions
On the question as to whether the imposition of the AFA requirement violates Article 14, 19 and 21 of the Constitution of India, the court contended that the existence of more than one authority with regulatory or disciplinary control over a professional is per se not a ground to hold that the regulations are unconstitutional.
In the specific context of IPs, the court held that the registration of an enrolled professional member as an IP and the cancellation of such registration are within the domain of the IBBI, whereas the grant of or cancellation of membership and the issuance, renewal and cancellation of an AFA are within the domain of the IPA, which functions under the supervisory control of the IBBI.
The court also concluded that the multiple regulatory and requirement for AFA measures intended to regulate the profession and not to deprive a person of the right to practice the profession.
