Bombay High Court Dismisses Challenges to IBBI Regulatory Fee Under Regulation 31A of CIRP Regulations
Background and Context
Four writ petitions came before the Bombay High Court seeking to invalidate Regulation 31A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The central grievance across all petitions was the introduction of a regulatory fee pegged at 0.25% of the realisable value payable to creditors under an approved resolution plan, applicable where such realisable value exceeded the liquidation value. The challenge was mounted primarily by successful resolution applicants who had submitted and received approval for their resolution plans prior to the regulation coming into force, yet found themselves subject to the fee following NCLT approval.
The Supreme Court had earlier consolidated the proceedings by transferring petitions originally filed before the Madhya Pradesh High Court at Indore and the Delhi High Court to the Bombay High Court, recognising that Writ Petition No.703 of 2023 had been filed first in point of time.
The Four Writ Petitions: Key Facts
Writ Petition No. 703 of 2023 — Hazel Mercantile Limited & others vs. Insolvency and Bankruptcy Board of India & ors.
The petitioners were successful resolution applicants in the Corporate Insolvency Resolution Process (CIRP) of Reliance Naval and Engineering Limited. The NCLT, Ahmedabad Bench admitted the company petition filed by IDBI Bank Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) on 15.01.2020. The Committee of Creditors (CoC), comprising 22 financial creditors, approved the petitioners' resolution plan on 17.03.2022 with a voting share of 94.86%. The resolution professional filed the application for sanction under Section 31 of the Insolvency and Bankruptcy Code, 2016 on 24.03.2022.
Regulation 31A was notified on 20.09.2022 and brought into force with effect from 01.10.2022. The NCLT approved the resolution plan on 23.12.2022, after which the Board directed the resolution professional to ensure compliance with the regulatory fee provision.
Writ Petition No. 243 of 2024 — Vineet Shrivastava vs. IBBI and another
Originally filed before the Madhya Pradesh High Court at Indore and transferred to the Bombay High Court, this petition was filed by an individual who contended that the regulatory fee adversely affected the financial health of banking institutions, indirectly threatening the security of his fixed deposits. The petition sought invalidation of Regulation 31A as violative of Articles 14, 19 and 21 of the Constitution of India.
Writ Petition No. 244 of 2024 — Yadubir Singh Sajwan vs. IBBI and another
Originally filed before the Delhi High Court and transferred to Bombay, this petition was brought by a buyer/allottee of a residential unit from the corporate debtor Som Resorts Private Limited. The CIRP commenced pursuant to an NCLT order dated 02.08.2022 on an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The CoC approved the resolution plan submitted by Casa Italia Social Welfare Association — an association of home buyers — on 08.04.2023. The petitioner challenged Regulation 31A as ultra vires the IBC and arbitrary.
Writ Petition No. 1560 of 2025 — Suraksha Realty Limited and another vs. IBBI and another
The petitioners were successful resolution applicants in the CIRP of Jaypee Infratech Limited, which was triggered on an application filed by IDBI Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT, Allahabad Bench. The CIRP was admitted on 09.08.2017. An earlier resolution plan submitted by NBCC (India) Limited and approved by the NCLT on 03.03.2020 was subsequently set aside by the Supreme Court, and the matter was remanded to the CoC. The CoC eventually approved the petitioners' plan on 10.06.2021 with 98.66% voting share.
During the pendency of the NCLT sanction proceedings, Regulation 31A was notified on 20.09.2022. The NCLT, Allahabad Bench granted sanction to the plan on 07.03.2023. The resolution professional thereafter communicated the regulatory fee liability to the petitioners by email dated 20.05.2024, prompting the filing of this writ petition.
Grounds of Challenge Raised by the Petitioners
The petitioners collectively advanced the following grounds:
- Lack of statutory authority — Regulation 31A was beyond the Board's regulation-making powers under
Section 196of the Insolvency and Bankruptcy Code, 2016, which empowers the Board to levy fee only in the context of service providers such as insolvency professionals, insolvency professional agencies, and information utilities.