Court affirms that the Insolvency and Bankruptcy Board of India’s levy of regulatory fee as part of insolvency resolution process costs is constitutionally valid, not a tax, and prospective in operation
In a landmark judgment dated August 19, 2026, the Bombay High Court (Division Bench of Justices Manish Pitale and Shreeram V. Shirsat) dismissed four writ petitions challenging the introduction of Regulation 31A in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“IBBI Regulations”). The petitions primarily contended that the regulatory fee imposed by the Insolvency and Bankruptcy Board of India (“IBBI” or “Board”) was ultra vires the Insolvency and Bankruptcy Code, 2016 (“IBC”), arbitrary, amounted to a tax rather than a fee, and was retrospective in nature.
The regulatory fee, introduced by a notification dated September 20, 2022 and effective from October 1, 2022, requires successful resolution applicants to pay 0.25% of the realizable value to creditors under an approved resolution plan, where such value exceeds the liquidation value. The petitioners, including successful resolution applicants Hazel Mercantile Limited and Suraksha Realty Limited, argued that the fee was imposed without authority, lacked any quid pro quo as the Board did not provide direct services to them, and violated constitutional protections under Article 14.
Rejecting these contentions, the Court held that:
1. Broad Regulatory Role of the IBBI: The Board’s regulatory powers under Sections 196 and 240 of the IBC extend beyond merely supervising insolvency professionals, agencies, and information utilities. The Board plays an integral role throughout the Corporate Insolvency Resolution Process (CIRP), including regulating the Committee of Creditors’ (CoC) voting, resolution plan submission, and other procedural aspects. The Bankruptcy Law Reforms Committee report and multiple judicial precedents were cited to underscore the Board’s expansive function in ensuring CIRP efficiency and transparency.
2. Authority to Levy Regulatory Fee: Section 196(1)(c) empowers the Board to levy fees or other charges “for carrying out the purposes of the Code,” a phrase introduced by amendment in 2018, which broadens the Board’s fee-levying powers beyond registration fees for service providers. The Court found that Regulation 31A, read with Section 5(13)(e) defining insolvency resolution process costs and Section 240(2)(d) empowering regulations for such costs, is well within the Board’s legislative authority.
3. Validity of Regulation 31A and No Ultra Vires: The petitioners’ argument invoking the principle of ejusdem generis to restrict the scope of costs under Section 5(13)(e) was rejected. The Court held that the various clauses of Section 5(13) relate to distinct types of costs and the residuary clause (e) cannot be narrowly confined. The Board’s power to specify “other costs” includes the regulatory fee introduced by Regulation 31A.
4. Regulatory Fee is Not a Tax: While the petitioners claimed the fee was a disguised tax, the Court traced the evolution of legal principles distinguishing tax and fee. It reaffirmed that a regulatory fee need not have a strict quid pro quo or direct proportionality with services rendered. The Board provides broad ecosystem services facilitating efficient CIRP for all stakeholders, including resolution applicants. Hence, the fee is a valid regulatory fee, not a tax, and does not violate Article 14.
5. Fee is Not Excessive or Disproportionate: The Court examined audited accounts and submissions, finding no evidence that the regulatory fee is excessive or confiscatory. The Board’s financial self-sufficiency is necessary for operational independence and effectiveness. The surplus generated does not convert the fee into a tax.
6. Prospective Operation and Role of Adjudicatory Authority: The proviso to Regulation 31A applies to resolution plans approved on or after October 1, 2022, and is thus prospective. The petitioners’ claim of retrospective imposition was based on an erroneous view that the National Company Law Tribunal (NCLT) merely performs a ministerial function when approving resolution plans. The Court clarified that the NCLT has a pivotal adjudicatory role, including ensuring compliance with insolvency resolution process costs under Section 30(2)(a) of the IBC, and can direct rectification of defects in resolution plans before approval. Hence, the regulatory fee’s application to pending approvals does not amount to retrospective operation.
7. No Colourable Exercise or Excessive Delegation: The petitioners’ allegation that Regulation 31A is a colourable exercise of power was dismissed. The regulation is validly framed under delegated legislative powers in the IBC without lack of competence or mala fide intent.
In conclusion, the Bombay High Court upheld the validity of Regulation 31A of the IBBI Regulations, confirming the Board’s authority to levy the regulatory fee as part of insolvency resolution process costs. The petitions seeking to strike down the regulation were dismissed.
This judgment reinforces the Board’s role as a comprehensive regulator of the insolvency process and affirms the legality of its fee structure aimed at ensuring financial independence and effective regulation of CIRP under the IBC.
Bottom Line :
Insolvency and Bankruptcy Code - Introduction of Regulation 31A in the IBBI Regulations, 2016, which imposes a regulatory fee, is not ultra vires the parent statute or violative of Article 14 of the Constitution of India.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 5(13)(e), 30(2)(a), 31, 53(1)(a), 188, 189-195, 196(1)(a), 196(1)(c), 196(1)(t), 240(2)(d), 241, 197, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 Regulation 31, Regulation 31A
