Bombay High Court

VINEET SHRIVASTAVAversusINSOLVENCY AND BANKRUPTCY BOARD OF INDIA

Decided: 19 August 2026
Disposal: DISPOSED OFF

Holding

Regulation 31A is within the statutory powers of the IBBI, is a valid regulatory fee, and the petitions challenging it are dismissed.

Summary

The petitioners, successful resolution applicants in several corporate insolvency cases, challenged Regulation 31A of the Insolvency and Bankruptcy Board of India (IBBI) Regulations, which introduced a 0.25% regulatory fee on the realisable value of creditors, alleging it was ultra vires the Insolvency and Bankruptcy Code (IBC), amounted to an illegal tax, violated Article 14, was retrospective and excessive. The respondents, the IBBI and the Union of India, contended that the Board has statutory power under Sections 196(1)(c) and 240 of the IBC to levy such fees and that the fee is a regulatory charge, not a tax, with a reasonable nexus to services provided during the CIRP. The Court examined the statutory scheme, the scope of the Board’s powers, the applicability of ejusdem generis, and the evolving jurisprudence on tax versus fee distinctions, concluding that Regulation 31A falls within the Board’s authority and is a valid regulatory fee. It also held that the regulation is prospective, not retrospective, and not excessive or arbitrary. Consequently, the Court dismissed all four writ petitions and upheld the validity of Regulation 31A.

Issues considered

Whether Regulation 31A of the IBBI Regulations is ultra vires the Insolvency and Bankruptcy Code, 2016.
Whether the Board has authority under Section 196(1)(c) and Section 240 of the IBC to levy the regulatory fee.
Whether the regulatory fee constitutes a tax rather than a fee, thereby violating Article 14 of the Constitution.
Whether the proviso to Regulation 31A operates retrospectively.
Whether the fee is excessive, disproportionate, or a colourable exercise of power.
Whether the principle of ejusdem generis applies to Section 5(13)(e) of the IBC.

Legislation cited

Insolvency and Bankruptcy Code, 2016 — s. 196(1)(c), 240(2)(d), 30, 31, 5(13), 53

Subjects

Insolvency
Regulatory fee
IBBI
Ultra vires
Article 14
Ejusdem generis
Tax vs fee
CIRP
Financial independence
Retrospectivity

Judgment

WP703_23 & ors.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 703 OF 2023

Hazel Mercantile Limited & others … Petitioners
vs.
Insolvency and Bankruptcy Board of India & ors. … Respondents

WITH
WRIT PETITION NO. 243 OF 2024

Vineet Shrivastava … Petitioner
vs.
Insolvency and Bankruptcy Board of India & anr. … Respondents

WITH
WRIT PETITION NO. 244 OF 2024

Yadubir Singh Sajwan … Petitioner
vs.
Insolvency and Bankruptcy Board of India & anr. … Respondents

WITH
WRIT PETITION NO. 1560 OF 2025

Suraksha Realty Limited & another … Petitioners
vs.
Insolvency and Bankruptcy Board of India & anr. … Respondents
---
Mr. Vikram Nankani, Senior Advocate, a/w. Mr. Sumeet Nankani, Mr. Amir
Arsiwala (through V.C.) and Ms. Vaishnavi Dhure for petitioners in
WP/703/2023.

Ms. Khushboo D. Rohra for petitioner in WP/243/2024.

Ms. Meghna Talwar a/w. Ms. Princi Jaiswal and Ms. Janhavi Hirlekar, i/b.
Mr. Kanishk Khetan for petitioner in WP/244/2024.

Mr. Ravi Kadam, Senior Advocate, a/w. Mr. Rohan Kelkar, Ms. Meghna
Talwar, Ms. Princi Jaiswal and Ms. Janhavi Hirlekar, i/b. Ms. Sonal Verma
for petitioners in WP/1560/2025.

Mr. Darius J. Khambata, Senior Advocate, a/w. Mr. Tushar Hathiramani
and Mr. Ashish Mehta, i/b. Ethos Legal Alliance for respondent No.1 – IBBI
in all petitions.

1/96
WP703_23 & ors.doc

Mr. Ashok R. Varma a/w. Mr. Vinit Jain for respondent No.2 – UOI in
WP/703/2023.

Mr. D. P. Singh for respondent No.2 – UOI in WP/1560/2025.

CORAM : MANISH PITALE &
SHREERAM V. SHIRSAT, JJ
Reserved on : JUNE 30, 2026
Pronounced on : AUGUST 19, 2026

JUDGMENT (Per Manish Pitale, J.) :

. These petitions seek a declaration for striking down of
Regulation 31A of The Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016 [IBBI Regulations] as being ultra vires the parent statute i.e.
The Insolvency and Bankruptcy Code, 2016 (IBC). The petitioners
also claim that the said Regulation introducing ‘regulatory fee’, is
beyond the powers and functions of the Insolvency and Bankruptcy
Board of India (Board) under Section 196 of the IBC and that the
said Regulation is arbitrary, thereby violating Article 14 of the
Constitution of India.

2. Writ Petition Nos.703 of 2023 and 1560 of 2025 were filed in
this Court, raising the aforesaid challenge. Writ Petition No.243 of
2024 was originally filed before the High Court of Madhya Pradesh,
Bench at Indore and Writ Petition No.244 of 2024 was originally filed
before the Delhi High Court. On 21.11.2023, the Supreme Court
allowed Transfer Petition Nos.2124 – 2126 of 2023, transferring the
aforementioned two writ petitions to this Court, to be heard along
with Writ Petition No.703 of 2023. The Supreme Court observed that
the said Writ Petition No.703 of 2023 was filed first in point of time.
Hence, the records pertaining to the said writ petitions originally
filed before the High Court at Madhya Pradesh at Indore and Delhi

2/96
WP703_23 & ors.doc

High Court, were directed to be transferred to this Court.
Accordingly, the records were received and the said two writ
petitions were re-numbered as Writ Petition Nos.243 of 2024 and
244 of 2024.

3. The petitioners in Writ Petition Nos.703 of 2023 and 1560 of
2025 are successful resolution applicants. They are aggrieved by
introduction of regulatory fee as per Regulation 31A introduced in
the IBBI Regulations with effect from 01.10.2022. The said
Regulation 31A of the IBBI Regulations specified that the regulatory
fee would be calculated at 0.25% of the realisable value to creditors
under the resolution plan approved under Section 31 of the IBC,
which shall be payable to the Board, where such realisable value was
more than the liquidation value. According to the petitioners, the
said regulatory fee based on the aforesaid Regulation 31A introduced
in the IBBI Regulations, is without authority of law on various
grounds.

4. According to the petitioners these include:

(i) the said Regulation 31A of the IBBI Regulations is beyond
the powers and functions of the Board under Section 196
of the IBC;

(ii) the said regulatory fee is ultra vires the provisions of the
parent statute i.e. the IBC, particularly Sections 5(13)
read with Section 30(2)(a), 31(1), 53(1)(a) and 240 of
the IBC;

(iii) in actual terms, the regulatory fee is a tax and not a fee as
per settled position of law and hence, it is rendered illegal
and unsustainable;

(iv) the Board does not provide any service to the said

3/96
WP703_23 & ors.doc

petitioners, who are successful resolution applicants or
even to the Committee of Creditors (CoC) during the
Corporate Insolvency Resolution Process (CIRP), thereby
showing that there is no quid pro quo at all;

(v) the proviso to Regulation 31A makes it retrospective in
operation, thereby further rendering it illegal and
unsustainable;

(vi) the amount charged as regulatory fee, in effect being a
tax, is grossly disproportionate, and

(vii) imposition of regulatory fee by introduction of Regulation
31A in the IBBI Regulations, by way of amendment, is
wholly arbitrary and hence, it violates Article 14 of the
Constitution of India.

5. Apart from these, certain other issues were also raised on
behalf of the petitioners, which will be adverted to during the course
of dealing with the rival submissions.

6. In order to properly appreciate the rival submissions, it would
be necessary to briefly refer to the chronology of events concerning
these four writ petitions, leading to challenge to the validity of the
aforesaid Regulation 31A of the IBBI Regulations.

BRIEF CHRONOLOGY OF EVENTS

Writ Petition No.703 of 2023
(Hazel Mercantile Limited and others vs. IBBI and others):

7. The petitioners in this petition are the successful resolution
applicants. On 15.01.2020, the National Company Law Tribunal
(NCLT), Ahmedabad Bench, passed an order admitting Company

4/96
WP703_23 & ors.doc

Petition No.418 of 2018 filed by the IDBI Bank Limited, under
Section 7 of the IBC, against the corporate debtor Reliance Naval and
Engineering Limited. The CoC comprised of 22 financial creditors of
the corporate debtor. On 05.05.2020, the NCLT, Ahmedabad Bench
passed an order appointing respondent No.3 as resolution
professional of the corporate debtor. Resolution plans were submitted
by three prospective resolution applicants.

8. On 17.03.2022, the CoC approved the resolution plan of the
petitioners by majority members of the CoC having 94.86% of the
total voting share. On 24.03.2022, respondent No.3 - resolution
professional filed an application under Section 31 of the IBC before
the NCLT for sanction of the resolution plan submitted by the
petitioners and approved by the CoC.

9. At this stage, on 20.09.2022, the respondent – Board published
a notification in the gazette introducing the aforementioned
Regulation 31A in the IBBI Regulations pertaining to regulatory fee,
stating that it would come into force with effect from 01.10.2022.
Thereafter, on 23.12.2022, the NCLT, Ahmedabad Bench passed an
order allowing the application filed by the resolution professional,
thereby approving the resolution plan submitted by the petitioners.
On 30.12.2022, the respondent - Board sent an email to respondent
No.3 – resolution professional, asking for compliance to be made
with the said Regulation 31A of the IBBI Regulations and to make
payment of regulatory fee. In this backdrop, the petitioners filed the
said writ petition, wherein pleadings were completed.

Writ Petition No.243 of 2024
(Vineet Shrivastava vs. IBBI and another):

10. The petitioner filed this petition originally before the High

5/96
WP703_23 & ors.doc

Court of Madhya Pradesh at Indore claiming to be a 67-year old
person, having no other source of income, except interest on deposits
with banks. By the aforesaid order passed by the Supreme Court, the
said petition stood transferred before this Court.

11. The grievance of the petitioner appears to be that introduction
of regulatory fee, as per Regulation 31A in the IBBI Regulations,
effectively negates the object with which the IBC was enacted. It is
claimed that the said regulatory fee would adversely affect the
financial health of banks, in turn affecting the security of deposits
kept by the petitioner in banks, thereby giving him the cause of
action to challenge the said Regulation as being arbitrary. The
petitioner claims that the said Regulation deserves to be struck down
as violating Articles 14, 19 and 21 of the Constitution of India.

Writ Petition No.244 of 2024
(Yadubir Singh Sajwan vs. IBBI and another):

12. The petitioner had originally filed this petition before the Delhi
High Court and by the aforesaid order of the Supreme Court, the
petition stood transferred to this Court. The petitioner is one of the
buyers/allottees of a unit from the corporate debtor Som Resorts
Private Limited. The CIRP pertaining to the said corporate debtor
commenced as per order dated 02.08.2022 passed by the NCLT, New
Delhi on an application filed under Section 7 of the IBC by the
petitioner and other buyers. In the said case, the CoC approved the
resolution plan submitted by the association of such home buyers i.e.
Casa Italia Social Welfare Association in a meeting held on
08.04.2023. The said resolution plan was approved by majority.

13. The resolution professional submitted the said resolution plan
before the NCLT for approval. At this point in time, the said

6/96
WP703_23 & ors.doc

notification dated 20.09.2022 was published by the Board,
introducing regulatory fee as per Regulation 31A in the IBBI
Regulations with effect from 01.10.2022. The petitioner is aggrieved
by introduction of the regulatory fee, claiming the same to be
arbitrary and illegal. The petitioner has also raised grounds
pertaining to the said amendment in the IBBI Regulations, as being
beyond the powers and functions of the Board under Section 196 of
the IBC. It is alleged that such regulatory fee is ultra vires the IBC.

Writ Petition No.1560 of 2025
(Suraksha Realty Limited and another vs. IBBI and another):

14. The petitioners in this petition are the successful resolution
applicants in the context of CIRP concerning a corporate debtor
called Jaypee Infratech Limited. The CIRP was triggered in respect of
the corporate debtor due to an application filed by the IDBI Bank
Limited under Section 7 of the IBC before the NCLT, Allahabad
Bench. On 09.08.2017, the NCLT, Allahabad Bench passed an order,
admitting the said application filed by the IDBI Bank, thereby
commencing the CIRP. Initially, the CIRP culminated in approval of
resolution plan submitted by NBCC (India) Limited and the same
was approved by the NCLT, Allahabad Bench on 03.03.2020.

15. However, on certain appeals filed against the said order,
reaching the Supreme Court, the aforesaid order of the NCLT was set
aside and the matter was remanded by the Supreme Court back to
the CoC for reconsideration. Eventually, on 10.06.2021, the CoC
approved the resolution plan of the petitioner by 98.66% voting
share. The resolution professional of the corporate debtor filed an
application before the NCLT, Allahabad Bench, for granting sanction
to the said resolution plan of the petitioner as approved by the CoC.

7/96
WP703_23 & ors.doc

16. During the pendency of the said proceeding before the NCLT,
Allahabad Bench, by the aforesaid notification dated 20.09.2022,
Regulation 31A was introduced in the IBBI Regulations pertaining to
regulatory fee. On 07.03.2023, the NCLT, Allahabad Bench granted
sanction to the resolution plan of the petitioner. Thereafter, by email
dated 20.05.2024, the resolution professional informed the petitioner
about the liability to pay further amounts towards CIRP costs, in the
light of the aforesaid regulatory fee introduced in pursuance of
Regulation 31A of the IBBI Regulations. Aggrieved by the said
demand, the petitioner filed this writ petition, raising various
grounds to challenge Regulation 31A of the IBBI Regulations.

SUBMISSIONS

17. Mr. Nankani, learned senior counsel appearing for the
petitioners in Writ Petition No.703 of 2023, made the following
submissions:

(a) The impugned Regulation 31A of the IBBI Regulations,
introducing regulatory fee, is beyond the regulation making
power of the Board under Section 196 of the IBC. As per Section
196(1)(c) of the IBC, the Board can levy fee or other charges,
essentially in the context of service providers. Introduction of
certain words pertaining to the purposes of the IBC by way of
amendment with effect from 06.06.2018, does not change the
basic nature of power under the aforesaid provision. Since the
Board provides service to and regulates only the insolvency
professionals, insolvency professional agencies and information
utilities, the Board could exercise power to levy regulatory fee
only on the aforesaid entities. The petitioners, as successful
resolution applicants, cannot be levied fee by recourse to the
said power under Section 196(1)(c) of the IBC. During the

8/96
WP703_23 & ors.doc

course of CIRP, the Board does not regulate the petitioners as
the successful resolution applicants, or for that matter, even the
CoC, and it also does not provide any service to them, thereby
demonstrating that Regulation 31A of the IBBI Regulations,
deserves to be struck down.

(b) In this context, it is necessary to peruse the definition of
Insolvency Resolution Process Costs under Section 5(13) of the
IBC. This is because, by the very same notification dated
20.09.2022, clause (ba) was also illegally introduced in
Regulation 31, thereby including regulatory fee under
Regulation 31A of the IBBI Regulations into the insolvency
resolution process costs. It was submitted that the such
introduction of regulatory fee on successful resolution
applicants like the petitioners herein, is rendered wholly
arbitrary and illegal, apart from being beyond the authority of
the Board under Section 196(1)(c) of the IBC.

(c) The impugned Regulation 31A of the IBBI Regulations is
actually in the nature of a tax, although it is stated to be a fee. It
was submitted that since the Board plays absolutely no role for
the purposes of the IBC and since the process of inviting
proposals, evaluation thereof and approval of the resolution
plan is done by the resolution professional and the CoC, there is
no corresponding service or even a general service provided by
the Board in the CIRP to indicate quid pro quo in any form.
Thus, the regulatory fee amounts to a tax masquerading as a
fee. In this context, reliance was placed on judgment of the
Supreme Court in the case of Commissioner, Hindu Religious
Endowments, Madras vs. Sri Lakshmindra Thirtha Swamiar of
Sri Shirur Mutt, (1954) 1 SCC 412.

9/96
WP703_23 & ors.doc

(d) On the true meaning of the expression ‘Regulation’, reliance was
placed on judgment of nine-Judge Constitution Bench of the
Supreme Court in the case of Mineral Area Development
Authority & Anr. vs. Steel Authority of India & Anr., (2024) 10
SCC 1. It was submitted that the Board does not perform any of
the exercises or functions noted in the said judgment, which
would justify the impugned levy as a regulation fee. It was
further submitted that although the strict principle of quid pro
quo has been diluted in various judgments of the Supreme
Court over a period of time, nonetheless the distinguishing
feature between a fee and a tax is that fee involves an element
of service, which in the present case is completely missing on
the part of the Board.

(e) It was further submitted that the regulatory fee under the
impugned Regulation is a measure or a percentage of the
resolution plan approved by the CoC, but the same has no
relation whatsoever with the object and purpose of the
regulatory fee. On this basis, it was submitted that the
impugned levy is rendered unconstitutional. In support of the
said proposition, reliance was placed on the judgment of the
Supreme Court in the case of State of Rajasthan & Anr. vs.
Rajasthan Chemists Association, (2006) 6 SCC 773.

(f) It was emphasized that the Board does not, in any manner,
regulate the proposed resolution applicants and the successful
resolution applicants, during the process of CIRP. The
acceptance of the proposal of the successful resolution applicant
is dependent entirely on the negotiations between the CoC and
the resolution applicant. Ultimately, it is the commercial wisdom
of the CoC that prevails and even the adjudicatory body in the

10/96
WP703_23 & ors.doc

form of NCLT has a marginal role to play in the matter. On this
basis, it was submitted that the regulatory fee introduced by the
impugned Regulation 31A of the IBBI Regulations, is wholly
unsustainable. In support of the said proposition, reliance was
placed on the judgments of the Supreme Court in the case of
Swiss Ribbons Private Limited & Anr. vs. Union of India & Ors.,
(2019) 4 SCC 17 and Ebix Singapore Private Limited vs.
Committee of Creditors of Educomp Solutions Limited & Anr.,
(2022) 2 SCC 401.

(g) It was submitted that the argument regarding financial self-
sufficiency made on behalf of the Board to justify the impugned
regulatory fee is wholly unsustainable. Since the Board does not
provide any service to the successful resolution applicants like
the petitioners or for that matter, even to the CoC, there is no
question of extracting the aforesaid amount as a percentage of
realisable value to the creditors under the resolution plan. The
material placed on record on behalf of the Board does not
justify extraction of such amount from a party to whom no
service is provided by the Board. It was also submitted that the
Board did not come clean with its actual annual expenses and
projected expenses to justify the regulatory fee.

(h) The proviso to Regulation 31A of the IBBI Regulations, which
specifies that regulatory fee is applicable where resolution plan
is approved on or after 01.10.2022, retrospectively applies the
aforesaid regulatory fee. In the present case, the CoC had
approved the resolution plan proposed by the petitioners on
17.03.2022 and the application dated 24.03.2022 filed by the
respondent-resolution professional under Section 31 of the IBC
was pending before the adjudicatory authority i.e. NCLT. As per

11/96
WP703_23 & ors.doc

settled law, neither the petitioners as resolution applicants nor
the CoC could have made any change in the resolution plan
already approved by the CoC by overwhelming majority. In such
a situation, merely because the application filed by the
resolution professional for sanction from the NCLT to the said
resolution plan approved by the CoC, was pending, it could not
lead to a situation where the regulatory fee could be imposed as
part of the insolvency resolution process costs. This had the
effect of retrospectively applying Regulation 31A of the IBBI
Regulations. It was submitted that as per the scheme of the IBC,
the NCLT has to merely verify whether the approved resolution
plan is in terms of the requirements and it can either reject the
plan leading to liquidation process being initiated or the same
has to be sanctioned. This clearly demonstrates the arbitrariness
and unsustainable nature of the regulatory fee being made
applicable with effect from 01.10.2022.

(i) The impugned regulatory fee, as per Regulation 31A of the IBBI
Regulations, is wholly arbitrary for the reason stated above, as it
is detrimental to all the stakeholders, particularly the successful
resolution applicants like the petitioners. The amendment
disturbs the sensitive financial equilibrium involved in a
resolution plan, since the corporate debtor is to be revived as a
going concern, in terms of the object of enactment of the IBC.
Thus, the regulatory fee militates against the very object of the
IBC. Hence, the writ petition deserves to be allowed and the
impugned Regulation 31A of the IBBI Regulations deserves to be
struck down as ultra vires the parent statue i.e. the IBC, apart
from being unconstitutional and invalid, being in violation of
Article 14 of the Constitution of India.

12/96
WP703_23 & ors.doc

18. Mr. Kadam, learned Senior Counsel appearing for the
petitioners in Writ Petition No. 1560 of 2025 made the following
submissions :

(a) It was submitted that the impugned Regulation 31A introduced
in the IBBI Regulations militates against the very object of the
IBC. By placing reliance on the judgments of the Supreme Court
in the case of Chitra Sharma and others vs. Union of India and
others, (2018) 18 SCC 575 and Swiss Ribbons Private Limited
and another vs. Union of India and others (supra), it was
submitted that under the IBC, primacy is given to the process of
commercial decision and the whole process of CIRP is market
driven. The object of the IBC is to maximize the value of asset of
the corporate debtor, so that it is efficiently run as a going
concern, which in turn promotes entrepreneurship. The primary
focus of the IBC is to ensure revival and continuation of the
corporate debtor and to protect it from debt by liquidation. It is
submitted that if these objectives of the IBC are kept in focus,
introduction of regulatory fee by way of the impugned
Regulation 31A of the IBBI Regulations, can be demonstrated to
be a regressive step aimed at extracting amounts from the
successful resolution applicants, with no corresponding service
being provided by the Board.

(b) The impugned regulatory fee is ultra vires the provisions of the
parent statute i.e. the IBC. A proper reading of Sections 5(13),
30(2)(a), 31(1) and 53(1)(a) of the IBC, shows the intent of the
IBC to prioritize costs and expenses incurred by the resolution
professional during the CIRP. By inviting attention of this Court
to clauses (a) to (d) of Section 5(13) of the IBC and then
reading clause (e) thereof, it was emphasized that the concept
of ejusdem generis applies and the Board cannot impose an

13/96
WP703_23 & ors.doc

arbitrary levy by resorting to clause (e) of Section 5(13) of the
IBC. It was submitted that the levies under clauses (a) to (d) of
Section 5(13) of the IBC represent a genus or class of which
clause (e) must also become a part. In this context, reliance was
placed on the judgment of the Supreme Court in the case of
Nirma Industries Limited & Anr. vs. Securities and Exchange
Board of India, (2013) 8 SCC 20.

(c) It was submitted that the introduction of Regulation 31A in the
IBBI Regulations, specifying regulatory fee, amounts to
colourable exercise of power as it results in a windfall for the
Board, in priority to all other debts as the said fee is covered
under CIRP costs, despite the fact that the Board plays
absolutely no role in CIRP. In that sense, regulatory fee is
rendered an artificial charge or fee payable to the Board, when
it has nothing to do with CIRP.

(d) On this basis, it was submitted that the impugned regulatory fee
is rendered unconstitutional, as it amounts to imposition of tax
without authority of law. In support of the said proposition, the
learned Senior Counsel placed reliance on judgments of the
Supreme Court in the cases of Hingir-Rampur Coal Co. Ltd. &
Ors. vs. State of Orissa & Ors., (1961) 2 SCR 537, Raja
Jagannath Baksh Singh vs. State of Uttar Pradesh & Anr., (1963)
1 SCR 220, Saurashtra Cement & Chemical Industries Ltd. &
Anr. vs. Union of India & Ors., (2001) 1 SCC 91 and Indsil
Hydro Power and Manganese Limited vs. State of Kerala & Ors.,
(2021) 10 SCC 165.

(e) It was submitted that since the Board had failed to demonstrate
as to what service it was providing during the CIRP and as to in
what manner it was either supervising or assisting the

14/96
WP703_23 & ors.doc

resolution applicants and the CoC, not even a broad quid pro
quo was made out in the present case, leading to the only
conclusion that the impugned levy amounts to a tax and not fee.
It was submitted that the Board cannot claim that it is providing
an ‘ecosystem’ for the CIRP, without specifying as to what
service is even broadly provided during the CIRP, to justify the
impugned regulatory fee. It was submitted that the Board
supervises and assists only the three entities i.e. resolution
professional, insolvency professional agencies and information
utilities, for which it is already charging fee. Therefore, the
introduction of impugned Regulation 31A of the IBBI
Regulations for charging regulatory fee payable to the Board is
wholly arbitrary, unconstitutional and hence, unsustainable.

(f) The impugned fee amounting to a tax is grossly
disproportionate and this is evident from the facts and figures
placed on record by the Board itself. By referring to the
expenses incurred by the Board and the amounts extracted by
way of regulatory fee, it was highlighted on behalf of the
petitioners that the amount collected was wholly
disproportionate to the expenses incurred by the Board. It was
emphasized that since regulatory fee is made part of the CIRP
costs, it has to be based on actual costs incurred during the
CIRP and not under an imaginary blown up figure as sought to
be done under the impugned Regulation 31A of the IBBI
Regulations. By placing reliance on the admitted facts and
figures, it was submitted that levy of the regulatory fee
amounted to extraction of huge amounts by the Board without
any justification at all. It was submitted that on this ground also
the impugned Regulation 31A of the IBBI Regulations deserves
to be struck down.

15/96
WP703_23 & ors.doc

(g) In this context, the learned Senior Counsel for the petitioners
placed reliance on the judgment of the Supreme Court in the
case of P. M. Ashwathanarayana Setty & Ors. vs. State of
Karnataka & Ors., 1989 Supp (1) SCC 696, wherein it was laid
down that a fee would be justified, if there is a broad and
general correlation between the amount realised by way of such
fee and the expenses involved in providing services. It was held
that a broad and general correlation would be sufficient, but the
fee would lose its character, if it enriches the general revenues
of the State to be applied to the general purposes of the
Government.

(h) Reliance was also placed on the judgments of the Supreme
Court in the cases of State of U.P. & Ors. vs. VAM Organic
Chemicals Ltd. & Ors., (2004) 1 SCC 225, State of H.P. & Ors.
vs. Shivalik Agro Poly Products & Ors., (2004) 8 SCC 556, Delhi
Race Club Limited vs. Union of India & Ors., (2012) 8 SCC 680
and the judgment of this Court in case of Vidarbha Chamber of
Commerce and Industries, Akola vs. Commissioner, Municipal
Corporate of Akola City & Anr., 2007 (5) Mh.L.J. 82, to contend
that a levy would be rendered unsustainable, if there is
substantial discrepancy between the total amount of fee realised
by the department and the total amount of expenditure incurred
by the Government in maintaining and functioning of the
department. There has to be at least a broad corelation between
the two.

(i) The learned Senior Counsel for the petitioners further submitted
that proviso to Regulation 31A of the IBBI Regulations renders
imposition of regulatory fee retrospective in nature and on this
ground, the said Regulation 31A of the IBBI Regulations or at

16/96
WP703_23 & ors.doc

least proviso thereto, deserves to be struck down. Much
emphasis was placed on judgment of the Supreme Court in the
case of Ebix Singapore Private Limited vs. Committee of
Creditors of Educomp Solutions Limited and another (supra). It
was submitted that as per the law laid down in the said
judgment, the resolution applicants cannot withdraw the
resolution plan once the CoC approves the same on the basis of
its commercial wisdom. It was submitted that once the CoC
approves the resolution plan submitted by the resolution
applicants, it is ‘cast in stone’ and there cannot be any
modification at all. It was submitted that the role of the NCLT
under Section 31 of the IBC is very limited and there is a real
threat of the resolution application itself being rejected due to
failure to incorporate regulatory fee as part of the resolution
plan, paving the way for the drastic consequence of liquidation
of the corporate debtor. This militates against the object of the
IBC.

(j) On this basis, it was submitted that since neither the petitioners
as the resolution applicants nor the CoC could have
contemplated the requirement of regulatory fee, as introduced
only on 20.09.2022, w.e.f. 01.10.2022, there was no question of
having incorporated the same in the proposed resolution plan.
Hence, there was serious disservice being done to the resolution
applicants like the petitioners as well as the CoC, as
introduction of regulatory fee as part of costs of CIRP would
force them to take a hit in their resolution plan that stood
already approved and placed before the NCLT for sanction. In
this regard, reliance was also placed on the judgment of the
Supreme Court in the case of Deccan Value Investors L.P. & Anr.
vs. Dinkar Venkatasubramanian & Anr. , 2024 SCC OnLine SC

17/96
WP703_23 & ors.doc

804.

(k) Much emphasis was placed on the judgment of the Supreme
Court in the case of Union of India & Ors. vs. G. S. Chatha Rice
Mills & Anr., (2021) 2 SCC 209, to contend that since the
impugned levy was clearly retrospective and the IBC did not
empower the Board expressly or by way of necessary
implication to make regulations with retrospective effect, the
said impugned Regulation is rendered unconstitutional. It was
again emphasized that the NCLT as the adjudicatory authority
does not exercise power as a superior authority over and above
the commercial wisdom of the CoC and that the resolution plan
cannot go back and forth, during CIRP. In this regard, reliance
was placed on the judgments of the Supreme Court in the cases
of RPS Infrastructure Limited vs. Mukul Kumar & Anr., (2023)
10 SC 718 and Piramal Capital and Housing Finance Limited vs.
63 Moons Technologies Limited & Ors., 2025 SC OnLine SC
690. On this basis, it was submitted that the impugned
regulation deserves to be set aside.

(l) The learned Senior Counsel appearing for the petitioners sought
to distinguish the judgment of the Supreme Court in the case of
B.S.E. Brokers’ Forum, Bombay & Ors. vs. Securities and
Exchange Board of India & Ors., (2001) 3 SCC 482 upon which
reliance was placed on behalf of the Board. It was submitted
that in the said case, the imposition of the fee was considered in
the context of service provided by the SEBI directly to the
entities it regulated i.e. stockbrokers and sub-brokers. In the
present case, as emphasized hereinabove, it was submitted that
the Board does not provide any service to the successful
resolution applicants like the petitioners or even the CoC,

18/96
WP703_23 & ors.doc

during the CIRP. In this context, reliance was placed on the
judgment of the Supreme Court in the case of Calcutta
Municipal Corporation & Ors. vs. Shrey Mercantile (P) Ltd. &
Ors., (2005) 4 SCC 245. On this basis, it was submitted that the
writ petition ought to be allowed and the impugned Regulation
deserves to be struck down.

19. Ms. Khushboo D. Rohra, learned counsel appeared for the
petitioner in Writ Petition No. 243 of 2024 and Ms. Meghna Talwar,
learned counsel appeared for the petitioner in Writ Petition No. 244
of 2024. They supported and adopted the contentions raised by the
learned Senior Counsel for the petitioners in Writ Petition No. 703 of
2023 and Writ Petition No. 1560 of 2025. On that basis, it was
submitted that the said writ petitions also deserved to be allowed
and the impugned Regulation deserved to be struck down.

20. On the other hand, Mr. Khambata, learned senior counsel
appearing for the respondent Board in all the petitions submitted as
follows:-

(a) The contentions raised on behalf of the petitioners are based on
an erroneous understanding of the role of the Board under the
scheme of the IBC. It was submitted that the petitioners were
deliberately portraying the role of the Board as being limited to
supervising and / or facilitating the activities of only three
entities in the CIRP i.e. insolvency resolution professionals,
insolvency professional agencies and information utilities. It was
submitted that a proper appreciation of the provisions of the
IBC, particularly the provisions pertaining to the powers and
functions of the Board and the extent of power of the Board in
making regulations shows that the role of supervising and / or
assisting the aforesaid three entities, is only part of the functions

19/96
WP703_23 & ors.doc

of the Board. It was asserted that the Board is an integral part
and it performs diverse functions in CIRP and helps to create an
ecosystem that furthers the object of enactment of the IBC.

(b) In support of the said contention, the learned senior counsel for
the respondent Board relied upon the Report of Bankruptcy Law
Reforms Committee (BLRC). The said report referred to the
crucial role performed by the Board in CIRP, the main object of
which was to ensure that the corporate debtor is revived as a
going concern while the dues of the creditors are appropriately
satisfied.

(c) The learned senior counsel for the respondent Board referred to
the specific provisions of the IBC to emphasize that the Board
performs executive functions, quasi-legislative functions and
quasi-judicial functions. In this context, reliance was placed on
Sections 188, 196 and 240 of the IBC, apart from other
provisions. Much emphasis was placed on the role of the Board
in making available accurate information regarding the process
of CIRP in a timely manner to ensure transparency, monitoring
of insolvency professionals and information utilities,
streamlining of the CIRP to avoid undue delays and ensuring
that all the stakeholders were engaged in the process of framing
insolvency policies. Reliance was placed on judgement of Delhi
High Court in the case of Kunwar Sachdev Vs. IDBI Bank passed
in Writ Petition No.10599 of 2021, wherein reference was made
to the guidelines for CoC published by the Board. Reliance was
also placed on judgement of the Supreme Court in the case of
State Bank of India and others Vs. Consortium of Murari Lal
Jalan and Florian Fritsch and another , (2025) 4 SCC 354,
wherein the said guidelines for CoCs were approved.

20/96
WP703_23 & ors.doc

(d) By placing reliance on judgement of the Supreme Court in the
case of Ebix Singapore Private Limited vs. Committee of
Creditors of Educomp Solutions Limited and another (supra), it
was submitted that the Board is required to formulate
regulations dynamically. Reliance was also placed on
judgements of Delhi and Madras High Courts in the cases of
Insolvency and Bankruptcy Board of India Vs. State Bank of
India, 2022 SCC OnLine Del. 4200 and CA Venkata Siva Kumar
Vs. Insolvency and Bankruptcy Board of India , 2020 SCC
OnLine Mad. 22581, on the significant role performed by the
Board and its responsibilities for carrying out the functions of
various entities and stakeholders under the IBC, particularly
during CIRP. On this basis, it was submitted that the attempt on
the part of the petitioners to limit the role of the Board only qua
the aforesaid three entities, was fallacious and the same ought
ought not to be accepted.

(e) A strong objection was raised on behalf of the respondent Board
on the claim of the petitioners that the regulatory fee under the
impugned Regulation 31A of the IBBI Regulations was levied
without authority of law. It was submitted that a bare perusal of
Section 196(1)(c) of the IBC shows that the Board is
empowered to levy fee or other charges for carrying out the
purposes of the IBC. Much emphasis was placed on the fact that
the aforesaid words were added to Section 196(1)(c) of the IBC
by amendment in 2018. It was submitted that the latest
amendment further clarified that the Board was entitled to levy
fee in relation to the processes under the IBC. On this basis, it
was submitted that the aforesaid contention raised on behalf of
the petitioners that the Board had limited power to levy fee or
other charges only in respect of insolvency professionals,

21/96
WP703_23 & ors.doc

insolvency professional agencies and information utilities is not
borne out by the provision itself. In support of the said
contention, reliance was placed on judgements of the Supreme
Court in the cases of Umed Vs. Raj Singh, (1975) 1 SCC 76 and
V. Jagannadha Rao Vs. State of AP, (2001) 10 SCC 401.

(f) The learned senior counsel for the respondent Board invited
attention of this Court to Sections 5, 13, 196(1)(c) and 240(2)
(d) of the IBC, while defending the impugned Regulation 31-A
of the IBBI Regulations introduced with effect from 01.10.2022.
Reference was also made to Regulation 31(ba) and (e) of the
IBBI Regulations while making submissions to answer the
assertions made on behalf of the petitioners. On the argument
of the petitioners that clause (e) of Section 5(13) must be read
ejusdem generis with clauses (a) to (d) thereof, it was
submitted that the same was erroneous as it was based on the
assumption that clauses (a) to (d) formed a particular class. By
referring to each of the clauses, it was submitted that they do
not form a single class or genus, and therefore, clause (e)
cannot be read ejusdem generis with clauses (a) to (d) of
Section 5(13) of the IBC. In support of the said contention,
reliance was placed on the judgement of the Supreme Court in
the case of Pioneer Urban Land and Infrastructure Limited Vs.
Union of India and others, (2019) 8 SCC 416, wherein it was
held that the principle of ejusdem generis does not apply to
residuary clauses and in the present case, clause (e) to Section
5(13) of the IBC is clearly a residuary clause. In this regard,
reliance was also placed on judgements of the Supreme Court in
the cases of Grasim Industries Limited Vs. Collector of Customs ,
(2002) 4 SCC 297 and Rajasthan State Electricity Board Vs.
Mohan Lal, 1967 SCC OnLine SC 18.

22/96
WP703_23 & ors.doc

(g) It was further emphasized that even if it was assumed for the
sake of argument that the principle of ejusdem generis applied,
following the dictum laid down by the Supreme Court in the
case of Grasim Industries Limited vs. Collector of Stamps
(supra) when specific subjects of enumeration belong both to a
broad-based genus and a narrower genus, there is no principle
that the general words should be confined to the narrower
genus. In this regard, reference was also made to Section 222
pertaining to the Board’s Funds, particularly clauses (b) and (c)
of Section 222(2) of the IBC, specifying expenses concerning
objects and purposes authorized by the IBC.

(h) In answer to the contention raised on behalf of the petitioners
that imposition of regulatory fee under the impugned
Regulation 31A of the IBBI Regulations was a colourable
exercise of power, reliance was placed on judgements of the
Supreme Court in the cases of Raja Jagannath Baksh Singh Vs.
State of Uttar Pradesh and another (supra) and Saurashtra
Cement & Chemical Industries Limited Vs. Union of India
(supra). Reliance was also placed on judgements of the
Supreme Court in the cases of K. C. Gajapati Narayan Deo Vs.
State of Orissa, (1953) 2 SCC 178 and Nine-Judge Constitution
Bench judgement in the case of Mineral Area Development
Authority and another vs. Steel Authority of India and another
(supra). It was emphasized that the said doctrine of colourable
exercise of power applies only if the Legislature lacks
competence to enact a particular law. The same does not involve
any question of bona fide or mala fide on the part of the
Legislature as no motive can be imputed to the Legislature and
it is required to be demonstrated that the subject levy is unjust,
exorbitant or improper. In this context, it was submitted that the

23/96
WP703_23 & ors.doc

petitioners have not challenged the relevant provisions of IBC in
this context.

(i) On the allegation that the impugned regulatory fee is actually a
‘tax’ and not a ‘fee’, it was submitted on behalf of the
respondent Board that with passage of time and the evolution of
law in a number of judgements of the Supreme Court, the
distinction between ‘tax’ and ‘fee’ had been substantially diluted
and it was now recognized as a very fine distinction. It was
submitted that with position of law that has emerged over a
period of time, the fee charged and the service rendered for
such fee are not required to be directly proportional. The
correlation is of general character and not of mathematical
exactitude. It was submitted that availability of even indirect
benefit and a general nexus between the persons bearing the
burden of such fee and the services rendered from collection of
the fee, is enough to uphold the validity of imposition of such
fee. Reliance was placed on judgements of the Supreme Court in
this regard in the cases of Sreenivasa General Traders Vs. State
of AP, (1983) 4 SCC 353; State of West Bengal Vs. Kesoram
Industries Limited, (2004) 10 SCC 201; BSE Broker’s Forum Vs.
SEBI, (2001) 3 SCC 482; Delhi Race Club Limited Vs. Union of
India, (2012) 8 SCC 680; Jalkal Vibhag Nagar Nigam and others
Vs. Pradeshiya Industrial and Investment Corporation and
another, (2021) 20 SCC 657; and Small Scale Entrepreneurs
Association and others Vs. State of Maharashtra and others ,
2026 SC OnLine SC 972.

(j) The learned senior counsel for the respondent Board made
specific submissions with regard to the meaning and
interpretation of the word ‘regulate’ as the impugned Regulation

24/96
WP703_23 & ors.doc

imposes a regulatory fee, which is treated as part of the CIRP
cost. It was submitted that in terms of the settled position of
law, when the subject fee is regulatory in nature, the element of
quid pro quo is not strictly necessary and when the fee is
charged for regulation, specific service being rendered need not
be demonstrated. In this regard reliance was placed on the
judgement of the Constitution Bench of the Supreme Court in
the cases of Corporation of Calcutta Vs. Liberty Cinema , AIR
1965 SC 1107 and the aforesaid judgement in the case of
Mineral Area Development Authority and another vs. Steel
Authority of India and another (supra). Much emphasis was
placed on the judgement of the Supreme Court in the case of
BSE Broker’s Forum vs. SEBI (supra), wherein it was held that
where the fee is regulatory in nature then the requirement of
quid pro quo recedes in the background and quid pro quo is not
a condition precedent for levying a regulatory fee. Reliance was
also placed on the judgement of this Court in the case of Yog
Advertising & Marketing Services and another Vs. Municipal
Corporation of Greater Mumbai, 2016 SCC OnLine Bom. 62.

(k) The learned senior counsel appearing for the Board further
submitted that considering the nature of activities performed by
the Board under the provisions of the IBC and the Regulations
framed thereunder, it was of utmost necessity that the Board
achieves financial self-sufficiency. In this regard, reliance was
placed on the report of the BLRC, wherein it was recorded that
as a matter of good practice, the Board ought to fund itself from
the fees collected and that government involvement in the
financial matters of the Board should be minimal. Reference
was made to report of the BLRC of November 2015, wherein it
was emphasized that a regulatory body like the respondent

25/96
WP703_23 & ors.doc

Board herein must have the capacity and resources to keep pace
with the development in its sector. Reliance was also placed on
report of the National Council of Applied Economic Research
(NCAER), which evaluated the performance of the respondent
Board. It was recorded by the NCAER that regulators like the
respondent Board may fail to deliver if their activities are
unduly influenced by the government, politicians or outside
interest groups. Thus, financial self-sufficiency and
independence is of utmost importance for the respondent
Board.

(l) Reliance was also placed on judgement of the Supreme Court
in the case of IFB Agro Industries Limited Vs. SICGIL India
Limited and others, (2023) 4 SCC 209, to contend that
independent regulatory bodies like the respondent Board herein
are much more effective, transparent and accountable with
regard to the concerned sector, when they are financially
independent. On this basis, it was submitted that the impugned
Regulation 31A of the IBBI Regulations introduced with effect
from 01.10.2022, was a step in the direction of ensuring
financial self-sufficiency and independence of the respondent
Board. As regards the audited accounts of the respondent Board
showing its expenditure and income, it was submitted that the
said documents were being deliberately misread by the
petitioners to show as if the respondent Board had achieved a
financial windfall by imposition of the regulatory fee. It was
emphasized that the said data on record shows how the
respondent Board was substantially dependent upon the
government for its finances and the manner in which it is on its
way to achieve financial self-sufficiency in the light of the
amounts generated by levy of the regulatory fee.

26/96
WP703_23 & ors.doc

(m) As regards the attack launched on behalf of the petitioners on
the proviso to impugned Regulation 31A of the IBBI
Regulations, it was submitted that the petitioners were wrongly
reading the proviso to claim that it amounted to retrospective
applicability of the regulatory fee. It was submitted that a
proper reading of the proviso would show that it is clearly
prospective, with effect from 01.10.2022. In this context, it was
submitted that the petitioners were wrongly reading the
provisions of the IBC, particularly Section 31 thereof. If the
contentions raised on behalf of the petitioners with regard to
the role of the NCLT as an adjudicatory authority under Section
31 of the IBC are to be accepted, it would reduce the NCLT to
being a body merely performing ministerial acts. The whole
authority of the NCLT as an adjudicatory authority would stand
jeopardized. It was submitted that the judgement of the
Supreme Court in the case of Ebix Singapore Private Limited vs.
Committee of Creditors of Educomp Solutions Limited and
another (supra) was deliberately being misread and the
observations of the Supreme Court in the case of Essar Steel
India Limited Committee of Creditors Vs. Satish Kumar Gupta ,
(2020) 8 SCC 531 were deliberately being ignored. In the said
judgement, the Supreme Court categorically held that in a given
case, the NCLT, as the adjudicatory authority, could send a
resolution plan back to the CoC for re-submission, although the
commercial wisdom of the CoC was recognized. It was
submitted that the contention that the resolution plan is ‘cast in
stone’ the moment it is approved by the CoC, and that it cannot
be touched in any manner even by the NCLT as the adjudicatory
authority, is fallacious and it is in the teeth of the provisions of
the IBC. Thus, it was submitted that there is no question of

27/96
WP703_23 & ors.doc

retrospective operation of the impugned regulatory fee.

(n) By referring to the resolution plans of the petitioners in Writ
Petition No.703 of 2023 (Hazel Mercantile Limited and others)
and Writ Petition No.1560 of 2025 (Suraksha Realty Limited
and another), it was submitted that the said petitioners
themselves had agreed that they would bear CIRP Costs, on the
basis of the provisions of the IBC, as amended from time to
time. In this backdrop, it was submitted that the petitioners
cannot be permitted to turn around and challenge the
regulatory fee, which forms part of CIRP Costs. It was submitted
that the petitioners themselves offered to bear this cost, while
under the scheme of the IBC, it would be the financial creditors,
who would share such costs. The financial creditors or members
of the CoC in these cases have not raised any objection and
therefore, the petitioners as the successful resolution applicants,
who took it upon themselves to bear the CIRP Costs, cannot be
permitted to challenge the regulatory fee.

(o) It was submitted that the petitioners cannot claim that the
impugned regulatory fee is discriminatory or arbitrary in any
manner. There is no basis to raise such a challenge as it applies
with effect from 01.10.2022 to all resolution plans to be
approved by the adjudicatory authority.

(p) The learned senior counsel for the respondent Board placed
much emphasis on the object of enactment of IBC, the role of
the respondent Board at every stage of the CIRP and the manner
in which the adjudicatory authority also heavily relied upon the
respondent Board for a smooth, transparent and accelerated
conduct of CIRP. It was submitted that the petitioner (Hazel
Mercantile Limited) surprisingly claimed that it had nothing to

28/96
WP703_23 & ors.doc

do with the CIRP and that the respondent Board did not provide
any service to it. The said claim is obviously based on a
complete misreading and misunderstanding of the entire
scheme of the IBC.

(q) The learned senior counsel for the respondent Board proceeded
to deal with and distinguish various judgements relied upon by
the learned senior counsel appearing for the petitioners. He
submitted that the position of law, if properly understood,
inures to the benefit of the respondent Board and that therefore,
all the petitions deserve to be dismissed.

CONSIDERATION & ANALYSIS

21. Having considered the rival submissions and in the light of the
material brought to the notice of this Court, including a number of
judgements, the findings thereon are being rendered under various
headings, so that the contentions put forth by the parties are
effectively dealt with under each heading.

Role of Insolvency and Bankruptcy Board:

22. The Insolvency and Bankruptcy Board, being referred to in this
judgement as the Board, is the regulatory authority established under
the provisions of the IBC. Part IV of the IBC concerns regulation of
various entities and Chapter I refers to establishment and
incorporation of the Board. Before referring to the relevant
provisions concerning the Board, it would be appropriate to first take
into consideration the observations made by the Bankruptcy Law
Reforms Committee report of November, 2015 (hereinafter referred
to as the BLRC report), which was a precursor to enactment of IBC. A
perusal of the report shows that it referred to various aspects of law

29/96
WP703_23 & ors.doc

sought to be introduced concerning insolvency and bankruptcy in
India. Apart from referring to the adjudicatory authority and its role,
the BLRC report also specifically concerned itself with the role
expected of a regulator. In the report, the BLRC indicated that the
regulator would ensure malleability and efficiency in working out the
bankruptcy process and in that context, the role of the Board as the
regulator would be crucial.

23. The BLRC report visualized that the Board would not only
regulate the insolvency professionals, insolvency professional
agencies and information utilities, but it would also specifically
concern itself with regulation-making in specific areas about
procedural detail in the insolvency and bankruptcy process, apart
from performing the function of data collection, research and
performance evaluation. Having perused the contents of the said
report, which was a precursor to enactment of the IBC, this Court
finds that the Board was projected to perform the role of a regulator,
so as to achieve the object with which IBC was enacted. We find
considerable force in the contention raised on behalf of the
respondent – Board that the regulatory functions of the Board ought
not to be construed as restricted to regulating the aforesaid three
entities i.e. insolvency professionals, insolvency professional agencies
and information utilities. The provisions of the IBC, particularly after
the amendments that have been introduced from time to time,
indicate that the legislature itself has indicated that the role of the
Board, as a regulator, is broad-based, far-reaching and has a crucial
bearing on achieving the object of enactment of IBC.

24. In this backdrop, when the relevant provisions of the IBC are
perused, it becomes evident that reading the role of the Board as a
regulator only for the aforementioned three entities, would not be in

30/96
WP703_23 & ors.doc

consonance with the scheme of the IBC. Section 188 of the IBC
provides for establishment and incorporation of the Board, while
Sections 189 to 195 thereof, provide the details of constitution of the
Board, powers of the Chairperson of the Board and other such
aspects. Section 196 of the IBC provides for the powers and functions
of the Board. Amongst other functions, the Board crucially performs
quasi-legislative functions and these have to be appreciated along
with the clauses of Section 240 of the IBC. But before referring to the
aforementioned provisions, it would be appropriate to also consider
as to the executive functions performed by the Board under the IBC.
The Board, under Section 196(1)(a) maintains a register of service
providers and it has the power to renew, withdraw, suspend or cancel
such registrations. The Board also performs quasi-judicial functions
in the form of regulating the functioning of insolvency professionals,
insolvency professional agencies and information utilities. It has the
power to appoint a disciplinary committee, which is empowered to
impose penalties, etc.

25. Since the Board does perform such executive and quasi-judicial
functions in the context of the aforesaid three entities, the petitioners
have forcefully argued that the Board can essentially be said to be a
regulator, only with respect to the said three entities and that its role
cannot be construed as broad-based, as the respondent No.1 would
like this Court to believe. But, this Court is of the opinion that since
the aforesaid three entities i.e. insolvency professionals, insolvency
professional agencies and information utilities, indeed perform a
pivotal role in CIRP, even the aforesaid role of regulating the said
three entities by the Board, indicates an intrinsic role of the Board in
ensuring that CIRP is conducted and undertaken efficiently, so that
the object of the IBC is satisfied. Apart from the role that the Board
performs as a regulator in the context of the aforesaid three entities,

31/96
WP703_23 & ors.doc

a proper appreciation of Sections 196 and 240 of the IBC indicates
that at various stages of the CIRP concerning the roles of the CoC as
well as the resolution applicants, the Board exercises its executive,
quasi-judicial and quasi-legislative functions.

26. Sections 196 and 240 of the IBC indicate in great detail, the
quasi-legislative functions performed by the Board. Section 196(1)(c)
of the IBC provides that the Board has the power to levy fee or other
charge for carrying out the purposes of the IBC, including fee for
registration and renewal of service providers. The Explanation
appended to the said provision inserted by a recent amendment
dated 06.04.2026, further clarifies the manner in which the Board
can impose the levy or other charge in relation to the process under
the IBC. Since various clauses of Section 196 of the IBC as also
Section 240 thereof, refer to the power of the Board as a regulator, to
perform its role throughout the process of CIRP, it would be
appropriate to quote the relevant portions of the aforesaid two
provisions. The same read as follows:
“196. Powers and functions of Board.—
(1) The Board shall, subject to the general direction of
the Central Government, perform all or any of the
following functions namely:—

(a) register insolvency professional agencies, insolvency
professionals and information utilities and renew,
withdraw, suspend or cancel such registrations;
(aa) promote the development of, and regulate, the
working and practices of, insolvency
professionals, insolvency professional agencies
and information utilities and other institutions,
in furtherance of the purposes of this Code;

(b) specify the minimum eligibility requirements for
registration of insolvency professional agencies,
insolvency professionals and information utilities;

32/96
WP703_23 & ors.doc

of this Code, including fee for registration and
renewal] of insolvency professional agencies,
insolvency professionals and information utilities;

(d) specify by regulations standards for the functioning of
insolvency professional agencies, insolvency
professionals and information utilities;

(e) lay down by regulations the minimum curriculum for
the examination of the insolvency professionals for
their enrolment as members of the insolvency
professional agencies;

(f) carry out inspections and investigations on insolvency
professional agencies, insolvency professionals and
information utilities and pass such orders as may be
required for compliance of the provisions of this Code
and the regulations issued hereunder;

(g) monitor the performance of insolvency professional
agencies, insolvency professionals and information
utilities and pass any directions as may be required for
compliance of the provisions of this Code and the
regulations issued hereunder;

(h) call for any information and records from the
insolvency professional agencies, insolvency
professionals and information utilities;

(i) publish such information, data, research studies and
other information as may be specified by regulations;

(j) specify by regulations the manner of collecting and
storing data by the information utilities and for
providing access to such data;

(k) collect and maintain records relating to insolvency
and bankruptcy cases and disseminate information
relating to such cases;

(l) constitute such committees as may be required
including in particular the committees laid down in
section 197;

(m) promote transparency and best practices in its
governance;

(n) maintain websites and such other universally
accessible repositories of electronic information as
may be necessary;

33/96
WP703_23 & ors.doc

(o) enter into memorandum of understanding with any
other statutory authorities;

(p) issue necessary guidelines to the insolvency
professional agencies, insolvency professionals and
information utilities;

(q) specify mechanism for redressal of grievances against
insolvency professionals, insolvency professional
agencies and information utilities and pass orders
relating to complaints filed against the aforesaid for
compliance of the provisions of this Code and the
regulations issued hereunder;

(r) conduct periodic study, research and audit the
functioning and performance of to the insolvency
professional agencies, insolvency professionals and
information utilities at such intervals as may be
specified by the Board;

(s) specify mechanisms for issuing regulations, including
the conduct of public consultation processes before
notification of any regulations;

(t) make regulations and guidelines on matters relating
to insolvency and bankruptcy as may be required
under this Code, including mechanism for time bound
disposal of the assets of the corporate debtor or
debtor; and

(u) perform such other functions as may be prescribed.

(2) The Board may make model bye-laws to be to adopted
by insolvency professional agencies which may
provide for—

(a) the minimum standards of professional competence of
the members of insolvency professional agencies;

(b) the standards for professional and ethical conduct of
the members of insolvency professional agencies;

(c) requirements for enrolment of persons as members of
insolvency professional agencies which shall be non-
discriminatory;
Explanation.—For the purposes of this clause, the
term “non-discriminatory” means lack of
discrimination on the grounds of religion, caste,

34/96
WP703_23 & ors.doc

gender or place of birth and such other grounds as
may be specified;

(d) the manner of granting membership;

(e) setting up of a governing board for internal
governance and management of insolvency
professional agency in accordance with the
regulations specified by the Board;

(f) the information required to be submitted by members
including the form and the time for submitting such
information;

(g) the specific classes of persons to whom services shall
be provided at concessional rates or for no
remuneration by members;

(h) the grounds on which penalties may be levied upon
the members of insolvency professional agencies and
the manner thereof;

(i) a fair and transparent mechanism for redressal of
grievances against the members of insolvency
professional agencies;

(j) the grounds under which the insolvency professionals
may be expelled from the membership of insolvency
professional agencies;

(k) the quantum of fee and the manner of collecting fee
for inducting persons as its members;

(l) the procedure for enrolment of persons as members of
insolvency professional agency;

(m) the manner of conducting examination for enrolment
of insolvency professionals;

(n) the manner of monitoring and reviewing the working
of insolvency professional who are members;

(o) the duties and other activities to be performed by
members;

(p) the manner of conducting disciplinary proceedings
against its members and imposing penalties;

(q) the manner of utilising the amount received as penalty
imposed against any insolvency professional.

35/96
WP703_23 & ors.doc

(3) xxx xxx xxx

240. Power to make regulations.—

(1) The Board may, by notification, make regulations
consistent with this Code and the rules made
thereunder, to carry out the provisions of this Code.

(2) In particular, and without prejudice to the generality
of the foregoing power, such regulations may provide
for all or any of the following matters, namely:—

xxx xxx xxx

(d) the other costs under clause (e) of sub-section (13) of
section 5;

xxx xxx xxx

(nc) the manner of voting and determining the voting
share in respect of financial debts under sub-section
(7) of section 21;

xxx xxx xxx

(o) the persons who shall comprise the committee of
creditors, the functions to be exercised such
committee and the manner in which functions shall be
exercised under the proviso to sub-section (8) of
section 21;

(oa) any other class or classes of creditors who may attend
the meetings of committee of creditors under the
proviso to sub-section (11) of section 21;

(p) the other electronic means by which the members of
the committee of creditors may meet under sub-
section (1) of section 24;

(q) the manner of assigning voting share to each creditor
under sub-section (7) of section 24;

(r) the manner of conducting the meetings of the
committee of creditors under sub-section (8) of
section 24;

(s) the manner of appointing accountants, lawyers and
other advisors under clause (d) of sub-section (2) of
section 25;

36/96
WP703_23 & ors.doc

xxx xxx xxx

(u) the form and the manner in which an information
memorandum shall be prepared by the resolution
professional sub-section (1) of section 29;

(v) the other matter pertaining to the corporate debtor
under the Explanation to sub-section (2) of section
29;

(w) the manner of making payment of insolvency
resolution process costs under clause (a), the manner
of payment of debts of operational creditors under
clause (b), the manner of payment of debts of
financial creditors who do not vote in favour of the
resolution plan under clause (ba), the conditions and
manner for constitution of a committee under clause
(d) and the other requirements to which a resolution
plan shall conform to under clause (f) of sub-section
(2) of section 30;

(wa) other requirements under sub-section (4) of section
30;

(wb) the form, manner and the conditions under the second
proviso to sub-section (1) of section 31;

(wc) the manner and conditions for making an application
by the committee of creditors for restoring the
corporate insolvency resolution process and manner
and conditions for completing the restored corporate
insolvency resolution process under sub-section (1A)
of section 33;

(wd) the conditions under the proviso to sub-section (2) of
section 33;

xxx xxx xxx

(zt) the appointment of other officers and employees
under sub-section (2), and the salaries and allowances
payable to, and other terms and conditions of service
of, such officers and employees of the Board under
sub-section (3), of section 194;

(zu) the other information under clause (i) of sub-section
(1) of section 196;

xxx xxx xxx

37/96
WP703_23 & ors.doc

(zw) the place and the time for discovery and production of
books of account and other documents under clause
(i) of sub-section (3) of section 196;

(zx) the other committees to be constituted by the Board
and the other members of such committees under
section 197;

xxx xxx xxx ”

27. Only the relevant clauses of Section 240 have been quoted
hereinabove, as they specifically pertain to the CIRP, while others
pertain to the liquidation process. In the present case, since the
attack on the role of the Board as a regulator on behalf of the
petitioners, is based on an allegation that the Board does not perform
any worthwhile function during CIRP, the clauses pertaining to
liquidation have not been quoted.

28. This Court is of the opinion that the above-quoted clauses of
Sections 196 and 240 of the IBC, elaborately demonstrate the role of
the Board as a regulator throughout the entire CIRP. It would be
inappropriate to hold that the Board performs the role as a regulator
only in respect of the aforesaid three entities and that otherwise, it
has nothing to do with CIRP. The manner in which CoC, for instance,
undertakes the action of voting, the details of the manner in which
the resolution applicants submit their applications and other such
aspects, are also regulated by the Board. As per the aforementioned
two provisions, it has powers to regulate such actions, which are
integral part of CIRP by framing regulations under the regulation-
making power specifically granted to the Board under the IBC. Thus,
the contention raised on behalf of the petitioners that the Board does
not regulate the CIRP and that therefore, the impugned Regulation
31A of the IBBI Regulations ought to be struck down, deserves to be
rejected.

38/96
WP703_23 & ors.doc

29. As a matter of fact, the aforesaid contention of the petitioners
goes against the observations made by the Courts in various cases
with regard to the importance attached to the role of the Board, as a
regulator, particularly during CIRP.

30. The Delhi High Court, in the case of Kunwar Sachdev vs. IDBI
Bank (supra), had an occasion to consider the role of the Board in
the context of CIRP. After referring to the relevant provisions of the
IBC, the Delhi High Court observed in the said judgement that the
Board could frame and finalize the code of conduct/guidelines for
effective functioning of the CoC. In the said judgement, the Delhi
High Court took into consideration Section 196 of the IBC and
reached a conclusion that although the sanctity of commercial
wisdom of the CoC was indeed protected under the IBC, but for an
effective working of the CoC and for satisfying the objectives of the
IBC, a proper set of guidelines and code of conduct was necessary. In
the light of the pivotal role of the Board as a regulator under the IBC,
the Delhi High Court thought it fit to issue directions to the Board to
frame and finalize such a code of conduct/guidelines. The aforesaid
judgement of the Delhi High Court clearly indicates the importance
of the role of the Board, in the light of the scheme of the IBC.

31. The Supreme Court, in the case of State Bank of India and
others vs. Consortium of Murari Lal Jalan and Florian Fritsch and
another (supra) also noticed the important role of the Board as a
regulator, under the provisions of the IBC. A specific reference was
made to the guidelines issued by the Board for the CoC on
06.08.2024. It was found that the Board issued the self-regulating
guidelines for effective and time-bound decision-making by the
members of the CoC. The entire set of guidelines was quoted with
approval by the Supreme Court and it was held that the members of

39/96
WP703_23 & ors.doc

the CoC ought to follow the aforesaid guidelines and a suggestion
was further given that the Central Government or the Board itself
must explore the possibility of better enforcement of the standards
and practices enumerated in the guidelines through an independent
mechanism under the auspices of an oversite committee, instead of
treating the said guidelines merely as self-regulatory.

32. The aforesaid observation of the Supreme Court, in the case of
State Bank of India and others vs. Consortium of Murari Lal Jalan
and Florian Fritsch and another (supra) further indicates judicial
notice taken by Courts, with regard to the crucial role performed by
the Board as a regulator under the IBC.

33. The petitioners relied upon the judgement of the Supreme
Court in the case of Ebix Singapore Private Limited vs. Committee of
Creditors of Educomp Solutions Limited and another (supra). We
find that even in the said judgement, the Supreme Court took notice
of the role performed by the Board as a regulator. The Supreme
Court referred to the BLRC report, which had recommended
formation of the Board for functioning as a regulator and in that
context, it was observed that the Board was expected to formulate
regulations that would dynamically detail the procedural norms of
working of the IBC with necessary immediacy. The said observations
made by the Supreme Court are crucial, as they indicate a pivotal
and dynamic role ascribed to the Board as a regulator under the
scheme of the IBC.

34. The Madras High Court, in the case of CA Venkata Siva Kumar
vs. Insolvency and Bankruptcy Board of India (supra), also referred
to the provisions of the IBC, as also the BLRC report and having
taken note of the relevant provisions of the IBC, observed as follows:
“13. In this case, it is evident that Parliament enacted the

40/96
WP703_23 & ors.doc

IBC by drawing on the BLRC Report and the bill
prepared by the BLRC. In both the FSLRC and BLRC
Reports, it was recommended that the regulator
should be self- sufficient at least with regard to
operational expenses by collecting fees to finance its
activities. When viewed in this context, it is clear that
sections 196(1)(c) and 207 of the IBC and the IP
Regulations are intended to fulfil the object and
purpose of the IBC as regards the functioning of the
IBBI. On examining the IBC, it is also clear that the
IBBI plays a significant role as the principal regulator
as regards insolvency and liquidation. Even with
specific reference to IPs, as pointed out by the learned
ASGI, under section 16(3) and (4) of the IBC, the IBBI
is entrusted with the responsibility of recommending a
RP if the operational creditor concerned fails to do so.
In addition, by way of illustration, under section 22(4)
and (5) and section 27(4) and (5), respectively, the
IBBI is required to confirm the proposal of the
committee of creditors (the CoC) with regard to the
appointment of the RP or the replacement RP,
respectively. Under section 25(2)(d), (h) and (k), the
RP is required, in the discharge of duties, to act in the
manner specified by the IBBI. Under section 28(4) and
(5), if the RP acts without seeking the approval of the
CoC, the CoC is entitled to report the matter to the
IBBI for taking necessary action against the RP. Even
with regard to proposing the name of an IP as a
liquidator, the IBBI plays a role under section 34.
Furthermore, we find that the IBBI has been tasked
with several responsibilities under the IBC as is
evident from the fact that the IBC is replete with
references to the IBBI. Thus, we conclude that the
IBBI does provide significant services, including in
relation to IPs and that there is broad correlation
between fees and services. Given the fact that direct
or arithmetical correlation as between the fee received
and service rendered is not necessary especially in the
context of regulatory fees, we are of the view that
regulation 7(2)(ca) of the IP Regulations does not
suffer from any constitutional infirmity on account of
the absence of quid pro quo.”

35. The Delhi High Court, in the case of Insolvency and
Bankruptcy Board of India Vs. State Bank of India (supra) also

41/96
WP703_23 & ors.doc

referred to the provisions of the IBC and concluded that the Board, in
effect, is an authority carrying out a number of functions relating to
implementation of the IBC. The role of the Board, as a regulator, was
specifically noted by the Delhi High Court, while making the said
observations.

36. In this backdrop, we find that various Courts and particularly,
the Supreme Court, in the aforementioned judgements, have taken
judicial notice of the plethora of functions performed by the Board
and powers exercised by it, including the power to make regulations
concerning various stages of CIRP, with the aim and object to ensure
that CIRP is conducted from start to finish in an efficient manner.

37. The petitioners have sought to limit the role of the Board as a
regulator only with respect to the insolvency professionals,
insolvency professional agencies and information utilities. We are of
the opinion that the said attempt on the part of the petitioners to
limit the role of the Board, is not borne out by the legislative scheme
of the IBC in the light of the above-quoted provisions, as also the
findings and observations given by various Courts, while dealing with
the regulatory role performed by the Board under the provisions of
the IBC.

38. This Court is of the opinion that the Board indeed performs
executive, quasi-judicial and quasi-legislative functions under the
provisions of the IBC and its role is highlighted in various provisions,
including those which mandate the adjudicatory authority at various
stages to seek the opinion of the Board as a regulator. We are of the
opinion that the broad regulatory role of the Board under the
provisions of the IBC, needs to be taken into consideration, while
dealing with other aspects of the matter that arise for consideration

42/96
WP703_23 & ors.doc

in these petitions.

Whether the regulatory fee is with authority of law?

39. The petitioners, particularly Hazel Mercantile Limited, has
contended before this Court that the impugned Regulation 31A
introduced by way of amendment with effect from 01.10.2022 in the
IBBI Regulations, is without authority of law, as it is beyond the
powers and functions of the Board under Section 196 of the IBC. In
order to consider the said contention, it would be necessary to refer
to Sections 196(1)(c) and 240 of the IBC. Section 196(1)(c) provides
for a power with the Board to levy fee or other charges for carrying
out the purposes of the IBC, including fee for registration and
renewal of the said service providers. The attempt of the petitioner –
Hazel Mercantile Limited is to restrict the levy of fee or other charges
only to the aforementioned three service providers i.e. insolvency
professionals, insolvency professional agencies and information
utilities. We find that the said contention of the petitioner – Hazel
Mercantile Limited is devoid of any substance, simply for the reason
that limiting the power of the Board to levy fee or other charges only
to the aforementioned three service providers, would render specific
words used in Section 196(1)(c) as otiose and meaningless. In this
context, the respondent Board is justified in relying upon judgements
of the Supreme Court in Umed Vs. Raj Singh (supra) and V.
Jagannadha Rao Vs. State of A.P. (supra) wherein it is laid down that
interpretation of a provision that renders some of its words
superfluous, redundant or meaningless, must be avoided.

40. It is crucial to note that the words that would be rendered
meaningless by such an interpretation, were substituted by a specific
amendment in the IBC, that was brought into effect from

43/96
WP703_23 & ors.doc

06.06.2018. The words added by the said amendment i.e. “for
carrying out the purposes of this code, including” are crucial and go
to the very heart of the matter. Addition of the said words by way of
amendment shows that the legislature consciously provided for a
power in the Board, as a regulator under the IBC, to levy fee or other
charges for carrying out the purposes of the IBC, thereby indicating
that the Board does have the power to levy such a fee beyond
collecting fee for registration and renewal of the aforesaid three
service providers. Therefore, we are unable to agree with the
contention raised on behalf of the petitioner – Hazel Mercantile
Limited that under Section 196(1)(c) of the IBC, the Board, as a
regulator, does not have the power to levy fee, as contemplated
under Regulation 31A of the IBBI Regulations introduced by the said
amendment with effect from 01.10.2022.

41. In this context, Section 240 of the IBC also assumes
significance, when it is read with Regulation 31 of the IBBI
Regulations. It is significant to note that by the very amendment
which introduced Regulation 31A of the IBBI Regulations, clause
(ba) was also introduced in Regulation 31, which pertains to
insolvency resolution process costs. This, in turn, has to be read with
Section 5(13), which defines insolvency resolution process costs,
wherein clause (e) states that such costs would mean any other costs
that may be specified by the Board. A conjoint reading of Sections
5(13)(e), 196(1)(c) and 240(2)(d) of the IBC and Regulation 31 of
the IBBI Regulations, clearly shows that the Board, as a regulator,
had the power under the legislative scheme of the IBC to impose
regulatory fee by way of Regulation 31A introduced in the IBBI
Regulations by the aforesaid amendment. Therefore, the petitioners
cannot contend that introduction of regulatory fee by way of
amending the IBBI Regulations and inserting Regulation 31A therein,

44/96
WP703_23 & ors.doc

was without the authority of law. We find that the introduction of
Regulation 31A in the IBBI Regulations was well within the quasi-
legislative powers conferred on the Board under the aforesaid
provisions of the IBC.

Is Regulation 31A ultra vires the provisions of the IBC?

42. The petitioners have vehemently argued that the impugned
regulatory fee in Regulation 31A of the IBBI Regulations, is ultra
vires the provisions of the IBC and that it is in the teeth of the
scheme of IBC. In that context, reference is made to various
provisions of the IBC, particularly Section 5(13) thereof. It is
contended that the aforesaid clause (e) thereof has to be read
ejusdem generis with clauses (a) to (d). It is contended that the
general words used in clause (e) necessarily take their colour from
the restrictive words used in clauses (a) to (d) of Section 5(13) of
the IBC. In this context, the petitioners specifically relied upon the
contents of clauses (a) to (d) of Section 5(13) of the IBC, to claim
that they formed a single or uniform class and therefore, the general
words used in clause (e) must necessarily be read in the narrow
context of clauses (a) to (d).

43. Much emphasis was placed on the judgement of the Supreme
Court in the case of Nirma Industries Limited and another vs.
Securities and Exchange Board of India (supra), in support of the
said contention. On the other hand, the respondent – Board relied
upon judgements of the Supreme Court in the cases of Grasim
Industries Limited vs. Collector of Stamps (supra), Rajasthan State
Electricity Board, Jaipur vs. Mohan Lal and others (supra) and
Pioneer Urban Land and Infrastructure Limited vs. Union of India
and others (supra), to demonstrate that the principle of ejusdem
generis could certainly not be invoked in the context of Section 5(13)

45/96
WP703_23 & ors.doc

(e) of the IBC.

44. Before the rival contentions in this context are analyzed, it
would be appropriate to refer to Section 5(13) as also other
provisions of the IBC and the IBBI Regulations that concern the
concept of CIRP costs. Section 5(13) of the IBC reads as follows:
“5. Definitions.—

In this Part, unless the context otherwise requires,—

xxx xxx xxx

(13) “insolvency resolution process costs” means—

(a) the amount of any interim finance and the costs
incurred in raising such finance;

(b) the fees payable to any person acting as a resolution
professional;

(c) any costs incurred by the resolution professional in
running the business of the corporate debtor as a
going concern;

(d) any costs incurred at the expense of the Government
to facilitate the insolvency resolution process; and

(e) any other costs as may be specified by the Board;”

45. Regulation 31 and 31A of the IBBI Regulations read as follows:

“31. Insolvency resolution process costs.

“Insolvency resolution process costs” under Section
5(13)(e) shall mean-

(a) amounts due to suppliers of essential goods and
services under Regulation 32;

(aa) fee payable to authorised representative under sub-
regulation (8) of regulation 16A;

(ab) out of pocket expenses of authorised representative
for discharge of his functions under section 25A;

(ac) fee payable to facilitator under clause (c) of sub-
regulation (1) of regulation 16C.

46/96
WP703_23 & ors.doc

(b) amounts due to a person whose rights are
prejudicially affected on account of the moratorium
imposed under section 14(1)(d);

(ba) fee payable to the Board under regulation 31A;

(d) expenses incurred on or by the resolution professional
fixed under Regulation 34; and

(e) other costs directly relating to the corporate
insolvency resolution process and approved by the
committee.

31A. Regulatory Fee

(1) A regulatory fee calculated at the rate of 0.25 per cent
of the realisable value to creditors under the
resolution plan approved under section 31, shall be
payable to the Board, where such realisable value is
more than the liquidation value:

Provided that this sub-regulation shall be applicable
where resolution plan is approved under section 31,
on or after 1st October 2022.

Explanation: For removal of doubts, it is hereby
clarified that the regulatory fee under this sub-
regulation, shall not be payable in cases where the
approved resolution plan in respect of insolvency
resolution of a real estate project is from an
association or group of allottees in such real estate
project.

(2) A regulatory fee calculated at the rate of one per cent
of the cost being booked in insolvency resolution
process costs in respect of hiring any professional or
other services by the interim resolution professional or
resolution professional, as the case may be, for
assistance in a corporate insolvency resolution
process, shall be payable to the Board, in the manner
as specified in clause (cb) of sub-regulation (2) of
regulation (7) of Insolvency and Bankruptcy Board of
India (Insolvency Professionals) Regulations, 2016.”

47/96
WP703_23 & ors.doc

46. Section 240(2)(d) is also relevant in this context and it has
been already quoted hereinabove.

47. The above-quoted Section 5(13) of the IBC concerns
insolvency resolution process costs and clause (e) thereof states that
such costs would include any other costs as may be specified by the
Board. Section 240(2)(d) gives power to the Board to frame
regulations in respect of other costs, as specified in Section 5(13)(e)
of the IBC and as noted hereinabove, Section 196(1)(c) thereof gives
power to the Board to levy fee or other charges for carrying out the
purposes of IBC.

48. By way of amendment, clause (ba) was added to Regulation 31
of the IBBI Regulations, which concerns insolvency resolution process
costs, specifically under Section 5(13)(e) of the IBC and by the very
same amendment, the impugned Regulation 31A was also introduced
in the IBBI Regulations. All the aforesaid provisions read together
bring out the meaning and definition of the expression ‘insolvency
resolution process costs’. As per the said provisions, this definition
includes the impugned regulatory fee introduced by Regulation 31A
in the IBBI Regulations by way of amendment with effect from
01.10.2022. In this backdrop, the assertion of the petitioners, while
invoking the principle of ejusdem generis in the context of clause (e)
to Section 5(13) of the IBC, has to be considered.

49. The law relating to the concept of ejusdem generis is by now
well-settled and it has been referred to and relied upon by the Courts
as an interpretative tool on many occasions. In the case of Rajasthan
State Electricity Board, Jaipur vs. Mohan Lal and others (supra) and
Pioneer Urban Land and Infrastructure Limited vs. Union of India
and others (supra), the Supreme Court had an occasion to deal with

48/96
WP703_23 & ors.doc

the said concept. The Constitution Bench of the Supreme Court, in
the case of Rajasthan State Electricity Board, Jaipur vs. Mohan Lal
and others (supra), observed as follows:
“4. In our opinion, the High Courts fell into an error in
applying the principle of ejusdem generis when
interpreting the expression ‘other authorities’ in
Article 12 of the Constitution, as they overlooked the
basic principle of interpretation that, to invoke the
application of ejusdem generis rule, there must be a
distinct genus or category running through the bodies
already named. Craies on Statute Law summarises the
principle as follows:

‘The ejusdem generis rule is one to be applied with
caution and not pushed too far…. To invoke the
application of the ejusdem generis rule there must be
a distinct genus or category. The specific words must
apply not to different objects of a widely differing
character but to something which can be called a class
or kind of objects. Where this is lacking, the rule
cannot apply, but the mention of a single species does
not constitute a genus [Craies on Statute Law, 6th Edn,
p 181].’

Maxwell in his book on ‘Interpretation of Statutes’
explained the principle by saying: ‘But the general
word which follows particular and specific words of
the same nature as itself takes its meaning from them,
and is presumed to be restricted to the same genus as
those words …. Unless there is a genus or category,
there is no room for the application of the ejusdem
generis doctrine [Maawell on Interpretation of
Statutes, 11th Edn pp 326, 327]’. In United Towns
Electric Co., Ltd. v. Attorney-General for
Newfoundland [(1939) I AER 423], the Privy Council
held that, in their opinion, there is no room for the
application of the principle of ejusdem generis in the
absence of any mention of a genus, since the mention
of a single species — for example, water rates — does
not constitute a genus. In Article 12 of the
Constitution, the bodies specifically named are the
Executive Governments of the Union and the States,
the Legislatures of the Union and the States, and local
authorities. We are unable to find any common genus
running through these named bodies, nor can these
bodies be placed in one single category on any

49/96
WP703_23 & ors.doc

rational basis. The doctrine of ejusdem generis could
not, therefore, be, applied to the interpretation of the
expression “other authorities” in this article.”

50. This principle was followed in a number of judgements,
including the judgement of the Supreme Court, in the case of Grasim
Industries Limited vs. Collector of Stamps (supra). In the said case,
while discussing the principle of ejusdem generis, the Supreme Court
observed as follows:
“12. In the background of what has been urged by the
assessee it has to be further seen whether the
principles of ejusdem generis have application. The
rule is applicable when particular words pertaining to
a class, category or genus are followed by general
words. In such a case the general words are construed
as limited to things of the same kind as those
specified. The rule reflects an attempt to reconcile
incompatibility between the specific and general
words in view of the other rules of interpretation that
all words in a statute are given effect if possible, that a
statute is to be construed as a whole and that no
words in a statute are presumed to be superfluous.
The rule applies only when (1) the statute enumerates
the specific words, (2) the subjects of enumeration
constitute a class or category, (3) that class or
category is not exhausted by the enumeration, (4) the
general terms follow the enumeration, and (5) there is
no indication of a different legislative intent. If the
subjects of enumeration belong to a broad-based
genus, as also to a narrower genus there is no
principle that the general words should be confined to
the narrower genus. In interpreting Section 30 of the
United Towns Electrical Company Act, 1902 which
reads ‘the company shall be liable for water rates on
all lands and buildings owned by it in the aforesaid
towns, but otherwise the company shall be exempt
from taxation’, the Privy Council rejected the
contention that the word ‘taxation’ should be
considered ejusdem generis with ‘water rate’. It was
held that there is no room for application of the
principle in the absence of any mention of a genus,
since the mention of a single species, for example of
water rates, does not constitute a genus. (See: United
Towns Electric Co. Ltd. v. Attorney-General for

50/96
WP703_23 & ors.doc

Newfoundland [(1939) 1 All ER 423 (PC)] .) The rule
cannot be applied unless there is genus constituted or
a category disclosed. If the preceding words do not
constitute mere specifications of a genus but
constitute description of a complete genus, the rule
has no application. The rule has to be applied with
care and caution. This is not an inviolable rule of law,
but it is only permissible inference, in the absence of
any indication to the contrary. Where the context and
the object and mischief of the enactment do not
require restricted meaning to be attached to words of
general import it becomes the duty of the courts to
give those words their plain and ordinary meaning.
The following enunciation in Craies on Statute Law
(7th Edn.), at pp. 181-82 succinctly states the
principle:
‘The modern tendency of the law, it was said,
(by Asquith, J. in Allen v. Emmerson [1944 KB
362 : (1944) 1 All ER 344 (KBD)] ) is ‘to
attenuate the application of the rule of ejusdem
generis’. To invoke the application of the
ejusdem generis rule there must be a distinct
genus or category. The specific words must
apply not to different objects of a widely
differing character but to something which can
be called a class or kind of objects. Where this
is lacking, the rule cannot apply, (Hood-Barrs v.
IRC [(1946) 2 All ER 768 : 176 LT 283 (CA)] )
but the mention of a single species does not
constitute a genus. (Per Lord Thankerton in
United Towns Electric Co. Ltd. v. Attorney-
General for Newfoundland [(1939) 1 All ER
423 (PC)] .) ‘Unless you can find a category,’
said Farwell, L.J., (in Tillmanns and Co. v. S.S.
Knutsford [(1908) 2 KB 385 : 77 LJ KB 778 : 99
LT 399 (CA)] ‘there is no room for the
application of the ejusdem generis doctrine,’
and where the words are clearly wide in their
meaning they ought not to be qualified on the
ground of their association with other words.
For instance, where a local Act required that
‘theatres and other places of public
entertainment’ should be licensed, the question
arose whether a ‘funfair’ for which no fee was
charged for admission was within the Act. It
was held to be so, and that the ejusdem generis
rule did not apply to confine the words ‘other

51/96
WP703_23 & ors.doc

places’ to places of the same kind as theatres.
So the insertion of such words as ‘or things of
whatever description’ would exclude the rule.
(Attorney-General v. Leicester Corpn. [(1910) 2
Ch 359 : (1908-10) All ER Rep Ext 1002 : 103
LT 14] ) In N.A.L.G.O. v. Bolton Corpn. [1943
AC 166 : (1942) 2 All ER 425 (HL)] Lord
Simon, L.C. referred to a definition of
‘workman’ as any person who has entered into
a works under a contract with an employer
whether the contract be by way of manual
labour, clerical work ‘or otherwise’ and
said:‘The use of the words “or otherwise” does
not bring into play the ejusdem generis
principle : for “manual labour” and “clerical
work” do not belong to a single limited genus’
and Lord Wright in the same case said:‘The
ejusdem generis rule is often useful or
convenient, but it is merely a rule of
construction, not a rule of law. In the present
case it is entirely inapt. It presupposes a
“genus” but here the only “genus” is “a contract
with an employer”.’ ”

51. In a relatively recent judgement in the case of Pioneer Urban
Land and Infrastructure Limited vs. Union of India and others
(supra), the Supreme Court considered the said principle of ejusdem
generis along with the principle of noscitor a sociis in the context of
the provisions of the IBC. The relevant portion of the said judgement
reads as follows:
“84. It was then argued, relying on a large number of
judgments that Section 5(8)(f) must be construed noscitur a
sociis with clauses (a) to (e) and (g) to (i), and so
construed would only refer to loans or other financial
transactions which would involve money at both ends. This,
again, is not correct in view of the fact that Section 5(8)(f)
is clearly a residuary ‘catch all’ provision, taking within it
matters which are not subsumed within the other sub-
clauses. Even otherwise, in CED v. Kantilal Trikamlal [CED
v. Kantilal Trikamlal, (1976) 4 SCC 643 : 1977 SCC (Tax)
90], this Court has held that when an expression is a
residuary one, ejusdem generis will not apply. It was thus
held : (SCC p. 655, para 21)

52/96
WP703_23 & ors.doc

“21. … We have also to stress the expression
“other right” in the explanation which is of the
widest import and cannot be constricted by
reading it ejusdem generis with “debt”. “Other
right”, in the context, is expressly meant
considerably to widen the concept and therefore
suggests a somewhat contrary intention to the
application of the ejusdem generis rule. We may
derive instruction from Green's construction of
the identical expression in the English Act.
[Section 45(2)]. The learned author writes:
‘A disclaimer is an extinguishment of a
right for this purpose. Although in the
event the person disclaiming never has
any right in the property, he has the right
to obtain it, this inchoate right is a “right”
for the purposes of Section 45(2). The
ejusdem generis rule does not apply to the
words “a debt or other right” and the
word “right” is a word of the widest
import. Moreover, the expression “at the
expense of the deceased” is used in an
ordinary and natural manner; and is apt
to cover not only cases where the
extinguishment involves a loss to the
deceased of a benefit he already enjoyed,
but also those where it prevents him from
acquiring the benefit.’

85. Also, in Subramanian Swamy v. Union of India
(2016) 7 SCC 221, this Court held : (SCC pp. 291-93, paras
70-74)
‘’70. The other aspect that is being highlighted in
the context of Article 19(2) is that defamation even
if conceived of to include a criminal offence, it
must have the potentiality to “incite to cause an
offence”. To elaborate, the submission is the words
“incite to cause an offence” should be read to give
attributes and characteristics of criminality to the
word “defamation”. It must have the potentiality to
lead to breach of peace and public order. It has
been urged that the intention of clause (2) of
Article 19 is to include a public law remedy in
respect of a grievance that has a collective impact
but not as an actionable claim under the common
law by an individual and, therefore, the word
“defamation” has to be understood in that context,

53/96
WP703_23 & ors.doc

as the associate words are “incitement to an
offence” would so warrant. Mr Rao, learned Senior
Counsel, astutely canvassed that unless the word
“defamation” is understood in this manner
applying the principle of noscitur a sociis, the
cherished and natural right of freedom of speech
and expression which has been recognised under
Article 19(1)(a) would be absolutely at peril. Mr
Narasimha, learned ASG would contend that the
said rule of construction would not be applicable to
understand the meaning of the term “defamation”.
Be it noted, while construing the provision of
Article 19(2), it is the duty of the Court to keep in
view the exalted spirit, essential aspects, the value
and philosophy of the Constitution. There is no
doubt that the principle of noscitur a sociis can be
taken recourse to in order to understand and
interpret the Constitution but while applying the
principle, one has to keep in mind the contours and
scope of applicability of the said principle.

71. In State of Bombay v. Hospital Mazdoor
Sabha, AIR 1960 SC 610, it has been held that it
must be borne in mind that noscitur a sociis is
merely a rule of construction and it cannot prevail
in cases where it is clear that wider words have
been deliberately used in order to make the scope
of the defined word correspondingly wider. It is
only where the intention of the legislature in
associating wider words with words of narrower
significance is doubtful, or otherwise not clear that
the said rule of construction can be usefully
applied. It can also be applied where the meaning
of the words of wider import is doubtful; but,
where the object of the legislature in using wider
words is clear and free of ambiguity, the rule of
construction in question cannot be pressed into
service.

72. In Bank of India v. Vijay Transport, 1988
Supp SCC 47, the Court was dealing with the
contention that a literal interpretation is not
always the only interpretation of a provision in a
statute and the court has to look at the setting in
which the words are used and the circumstances in
which the law came to be passed to decide whether
there is something implicit behind the words
actually used which would control the literal

54/96
WP703_23 & ors.doc

meaning of the words used. For the said purpose,
reliance was placed on R.L. Arora v. State of U.P.,
(1964) 6 SCR 784. Dealing with the said aspect,
the Court has observed thus : Bank of India v. Vijay
Transport, 1988 Supp SCC 47], SCC p. 51, para
11)
‘11. … It may be that in interpreting the
words of the provision of a statute, the
setting in which such words are placed may
be taken into consideration, but that does
not mean that even though the words which
are to be interpreted convey a clear
meaning, still a different interpretation or
meaning should be given to them because of
the setting. In other words, while the setting
of the words may sometimes be necessary
for the interpretation of the words of the
statute, but that has not been ruled by this
Court to be the only and the surest method
of interpretation.’

73. The Constitution Bench, in Godfrey Phillips
(India) Ltd. v. State of U.P. (2005) 2 SCC 515, while
expressing its opinion on the aforesaid rule of
construction, opined : (SCC pp. 550 & 551, paras
81 & 83)
‘81. We are aware that the maxim of noscitur
a sociis may be a treacherous one unless the
“societas” to which the “socii” belong, are
known. The risk may be present when there
is no other factor except contiguity to
suggest the “societas”. But where there is, as
here, a term of wide denotation which is not
free from ambiguity, the addition of the
words such as “including” is sufficiently
indicative of the societas. As we have said,
the word “includes” in the present context
indicates a commonality or shared features
or attributes of the including word with the
included.
***
83. Hence on an application of general
principles of interpretation, we would hold
that the word “luxuries” in Entry 62 of List II
means the activity of enjoyment of or
indulgence in that which is costly or which is

55/96
WP703_23 & ors.doc

generally recognised as being beyond the
necessary requirements of an average
member of society and not articles of luxury.’

74. At this juncture, we may note that in
Ahmedabad Private Primary Teachers' Assn. v.
Administrative Officer (2004) 1 SCC 755, it has
been stated that noscitur a sociis is a legitimate rule
of construction to construe the words in an Act of
Parliament with reference to the words found in
immediate connection with them. In this regard, we
may refer to a passage from Justice G.P. Singh,
Principles of Statutory Interpretation [(13th Edn.,
2012) 509] where the learned author has referred
to the lucid explanation given by Gajendragadkar, J.
We think it appropriate to reproduce the passage:
‘It is a rule wider than the rule of ejusdem
generis; rather the latter rule is only an
application of the former. The rule has been
lucidly explained by Gajendragadkar, J. in the
following words:
“This rule, according to Maxwell
[Maxwell, Interpretation of Statutes (11th
Edn., 1962) 321], means that when two
or more words which are susceptible of
analogous meaning are coupled together,
they are understood to be used in their
cognate sense. They take as it were their
colour from each other, that is, the more
general is restricted to a sense analogous
to a less general.”’
The learned author on further discussion has
expressed the view that meaning of a word is to be
judged from the company it keeps i.e. reference to
words found in immediate connection with them. It
applies when two or more words are susceptible of
analogous meanings are coupled together, to be
read and understood in their cognate sense. [ G.P.
Singh, Principles of Statutory Interpretation (8th
Edn.) 379.] Noscitur a sociis is merely a rule of
construction and cannot prevail where it is clear
that wider and diverse etymology is intentionally
and deliberately used in the provision. It is only
when and where the intention of the legislature in
associating wider words with words of narrowest
significance is doubtful or otherwise not clear, that

56/96
WP703_23 & ors.doc

the rule of noscitur a sociis is useful.

86. It is clear from a reading of these judgments that
noscitur a sociis being a mere rule of construction cannot be
applied in the present case as it is clear that wider words
have been deliberately used in a residuary provision, to
make the scope of the definition of “financial debt” subsume
matters which are not found in the other sub-clauses of
Section 5(8). This contention must also, therefore, be
rejected.”

52. The exposition of the principles of ejusdem generis and
noscitor a sociis by the Supreme Court in the aforementioned
judgements and followed thereafter in various other judgements,
makes it sufficiently clear that for invoking the said principles, the
general words used in a provision of law have to be preceded by
words that form an identifiable class or genus. It is also laid down
that if the preceding words do not form such a class or genus, the
general words used in the later portion of the provision cannot be
limited to the preceding words, apart from holding that the principle
of ejusdem generis does not apply to a residuary clause. The position
of law as enumerated in the said judgements also clarifies that if the
subjects specified in the preceding words belong to a broad-based
genus as well as a narrow genus, the general words should not be
confined to the narrower genus. This is most crucial for the argument
of principle of ejusdem generis raised on behalf of the petitioners.

53. In this backdrop, when we peruse clauses (a) to (d) of Section
5(13) of the IBC, pertaining to insolvency resolution process costs, it
is found that each clause pertains to a different class or genus of
expenses or costs under the IBC. Clause (a) pertains to interim
finance and the costs incurred in raising such finance. Clause (b)
refers to fees payable to any person acting as a resolution
professional. Clause (c) refers to costs incurred by the resolution

57/96
WP703_23 & ors.doc

professional in running the business of the corporate debtor as a
going concern and clause (d) refers to costs incurred at the expense
of the Government to facilitate the insolvency resolution process.

54. We are of the opinion that each of the clauses from (a) to (d)
of Section 5(13) of the IBC refer to distinct costs and they cannot be
classified as belonging to a particular class or genus. Clause (e),
which comes at the end of clauses (a) to (d) of Section 5(13) of the
IBC, uses the words ‘any other costs as may be specified by the
Board’. The said words used in clause (e) cannot be said to be
general words, following the specific words used in the preceding
clauses, that form a single class or genus of words.

55. We find that clause (e) as a residuary clause, cannot be read in
a narrow fashion by invoking the principle of ejusdem generis in
context of clauses (a) to (d), which precede it. It is also relevant to
note that clause (e) refers to costs that may be specified by the
Board, while costs referred to in clauses (a) to (d) in the said
provision, are costs that are distinctly enumerated, which have
nothing to do with each other in terms of their nature and the stages
at which such costs are incurred. Consequently, the principle of
noscitor a sociis can also not be invoked because the words in clause
(e) of Section 5(13) of the IBC have nothing in common with the
words used in clauses (a) to (d) of the said provision.

56. In any case, Section 5(13) has to be read with Section 196(1)
(c) and 240(2)(d) of the IBC. As noted hereinabove, Regulation 31
of the IBBI Regulations specifically pertains to the power of the
Board to include certain levies as part of the insolvency resolution
process costs. In this context, clause (e) of Regulation 31 of the IBBI
Regulations is also significant, as it pertains to other costs directly

58/96
WP703_23 & ors.doc

relating to corporate insolvency, CIRP and approved by the
Committee. Thus, it cannot be said that the Board could not impose
the impugned regulatory fee as part of the insolvency resolution
process costs, on the ground that the Board can levy a fee or charge
only in the nature of fee identified in clauses (a) to (d) of Section
5(13) of the IBC.

57. We also find that the petitioners cannot rely upon the
judgement of the Supreme Court in the case of Nirma Industries
Limited & Anr. vs. Securities and Exchange Board of India (supra). A
perusal of the said judgement shows that the Supreme Court was
considering such a purported residuary clause in a Regulation, which
was itself couched in negative terms. It was found that the concerned
Regulation itself indicated a class of circumstances, wherein a public
offer once made in the context of Regulations framed by the
Securities and Exchange Board of India, could not be withdrawn. On
facts, it was found that the clauses preceding the said general clause
indicated the circumstances, wherein such a public offer could not be
withdrawn and that such circumstances indeed formed a specific
class or genus. In such facts, the Supreme Court held that the
concerned clause of the Regulation would have to be read along with
the words used in the preceding clauses and in that context, the
principle of ejusdem generis was applied.

58. We are of the opinion that the case of Nirma Industries Limited
and another vs. Securities and Exchange Board of India (supra)
being distinguishable on facts, cannot be relied upon by the
petitioners, in support of their contention that in the present case,
the Board could not have invoked its regulation-making power to
include the impugned regulatory fee, as part of the insolvency
resolution process costs, under Section 5(13)(e) of the IBC. Once

59/96
WP703_23 & ors.doc

such a conclusion is reached, it becomes evident that the petitioners
cannot successfully claim that the impugned Regulation 31A can be
said to be ultra vires the provisions of the IBC.

59. As noted hereinabove, a proper and conjoint reading of
Sections 5(13)(e), 196(1)(c) and 240(2)(d) of the IBC with
Regulations 31 and 31A of the IBBI Regulations, clearly demonstrates
that the Board was well within its powers to frame the impugned
Regulation 31A of the IBBI Regulations with effect from 01.10.2022,
in order to levy the regulatory fee as part of the insolvency resolution
process costs, so defined under the provisions of the IBC.

Whether regulatory fee is a tax or fee?

60. The petitioners have made a frontal attack on the impugned
regulatory fee introduced by way of amendment, as per Regulation
31A of the IBBI Regulations with effect from 01.10.2022, contending
that in real terms, it is a tax and not a fee. The petitioners allege that
regulatory fee is a compulsory exaction from entities like the
petitioners, who are successful resolution applicants, although the
Board which is entitled to recover such regulatory fee provides no
service at all to the CIRP, much less to the successful resolution
applicants like the petitioners. This contention is stoutly refuted on
behalf of the respondent No.1 – Board and in that context, the rival
parties have relied upon a series of judgments. A reference to the
said judgments would indicate the manner in which the law relating
to a levy being treated as a tax or fee, has developed over a period of
time and thereupon, the position of law, as it stands today, can be
applied to the facts of the present case.

61. The petitioners placed reliance on judgment of the
Constitution Bench of the Supreme Court (seven Hon’ble Judges), in

60/96
WP703_23 & ors.doc

the case of Commissioner, Hindu Religious Endowments, Madras vs.
Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (supra),
wherein the distinction between tax and fee was deliberated upon.
The Supreme Court in the said judgment held that the distinction
between a tax and a fee primarily lies in the fact that tax is levied as
part of the common burden, while a fee is a payment for special
benefit or privilege. The relevant portion of the said judgment, upon
which the petitioners heavily relied, reads as follows :
“46. As regards the distinction between a tax and a fee, it is
argued in the first place on behalf of the respondent that a
fee is something voluntary which a person has got to pay if
he wants certain services from the Government; but there is
no obligation on his part to seek such services and if he does
not want the services, he can avoid the obligation. The
example given is of a licence fee. If a man wants a licence
that is entirely his own choice and then only he has to pay
the fees, but not otherwise. We think that a careful
examination will reveal that the element of compulsion or
coerciveness is present in all kinds of imposition, though in
different degrees and that it is not totally absent in fees.
This, therefore, cannot be made the sole or even a material
criterion for distinguishing a tax from fees. It is difficult, we
think, to conceive of a tax except, it be something like a poll
tax, the incidence of which falls on all persons within a
State. The house tax has to be paid only by those who own
houses, the land tax by those who possess lands, municipal
taxes or rates will fall on those who have properties within a
municipality. Persons, who do not have houses, lands or
properties within municipalities, would not have to pay
these taxes, but nevertheless these impositions come within
the category of taxes and nobody can say that it is a choice
of these people to own lands or houses or specified kinds of
properties so that there is no compulsion on them to pay
taxes at all. Compulsion lies in the fact that payment is
enforceable by law against a man in spite of his
unwillingness or want of consent; and this element is
present in taxes as well as in fees. Of course, in some cases
whether a man would come within the category of a service
receiver may be a matter of his choice, but that by itself
would not constitute a major test which can be taken as the
criterion of this species of imposition. The distinction
between a tax and a fee lies primarily in the fact that a tax is

61/96
WP703_23 & ors.doc

levied as a part of a common burden, while a fee is a
payment for a special benefit or privilege. Fees confer a
special capacity, although the special advantage, as for
example in the case of registration fees for documents or
marriage licences, is secondary to the primary motive of
regulation in the public interest [ Findlay Shirras, Science of
Public Finance, Vol. I, 202] . Public interest seems to be at
the basis of all impositions, but in a fee it is some special
benefit which the individual receives. As Seligman says, it is
the special benefit accruing to the individual which is the
reason for payment in the case of fees; in the case of a tax,
the particular advantage if it exists at all is an incidental
result of State action [Seligman's Essays on Taxation, 409].”

62. In the case of Hingir-Rampur Coal Co. Ltd. and others vs. State
of Orissa and others (supra), the Supreme Court in a Constitution
Bench of five Hon’ble Judges held that in regard to a fee as opposed
to a tax, there must always be correlation between the fee collected
and the service intended to be rendered. It was held that where the
legislature attempted to impose a tax under the guise of levying a
fee, it could be colourable exercise of power and that the Courts
would be well within their rights to scrutinize the scheme of the levy
very carefully, to examine whether there was a correlation between
the service and the levy.

63. In the case of Sreenivasa General Traders vs. State of AP
(supra), a two Judge Bench of the Supreme Court considered the
development of law as regards the distinction between tax and fee. It
was found that the traditional view, that there must be actual quid
pro quo for a fee, had undergone a sea change in subsequent
decisions. In that context, the Supreme Court in the said judgment
made the following observations :
“31. The traditional view that there must be actual quid
pro quo for a fee has undergone a sea change in the
subsequent decisions. The distinction between a tax and a
fee lies primarily in the fact that a tax is levied as part of a
common burden, while a fee is for payment of a specific

62/96
WP703_23 & ors.doc

benefit or privilege although the special advantage is
secondary to the primary motive of regulation in public
interest if the element of revenue for general purpose of the
State predominates, the levy becomes a tax. In regard to
fees there is, and must always be, correlation between the
fee collected and the service intended to be rendered. In
determining whether a levy is a fee, the true test must be
whether its primary and essential purpose is to render
specific services to a specified area or class; it may be of no
consequence that the State may ultimately and indirectly be
benefited by it. The power of any legislature to levy a fee is
conditioned by the fact that it must be “by and large” a quid
pro quo for the services rendered. However, correlationship
between the levy and the services rendered ( sic or) expected
is one of general character and not of mathematical
exactitude. All that is necessary is that there should be a
“reasonable relationship” between the levy of the fee and
the services rendered. If authority is needed for this
proposition, it is to be found in the several decisions of this
Court drawing a distinction between a ‘tax’ and a ‘fee’. (See:
The Commissioner, Hindu Religious Endowments, Madras v.
Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt [AIR
1954 SC 282 : 1954 SCR 1005 : 1954 SCJ 335] ; H.H.
Sudhundra Thirtha Swamiar v. Commissioner for Hindu
Religious and Charitable Endowments, Mysore [1963 Supp
2 SCR 302 : AIR 1963 SC 966] ; The Hingir-Rampur Coal
Co. Ltd. v. State of Orissa [AIR 1961 SC 459 : (1961) 2 SCR
537] ; H.H. Shri Swamiji of Shri Admar Mutt v.
Commissioner. Hindu Religious and Charitable Endowments
Department [(1979) 4 SCC 642 : 1980 SCC (Tax) 16 :
(1980) 1 SCR 368] ; Southern Pharmaceuticals and
Chemicals, Trichur v. State of Kerala [(1981) 4 SCC 391 :
1981 SCC (Tax) 320 : (1982) 1 SCR 519] and Municipal
Corporation of Delhi v. Mohd. Yasin [(1983) 3 SCC 229 :
1983 SCC (Tax) 154 : AIR 1983 SC 617].)

32. There is no generic difference between a tax and a
fee. Both are compulsory exactions of money by public
authorities. Compulsion lies in the fact that payment is
enforceable by law against a person in spite of his
unwillingness or want of consent. A levy in the nature of a
fee does not cease to be of that character merely because
there is an element of compulsion or coerciveness present in
it, nor is it a postulate of a fee that it must have direct
relation to the actual service rendered by the authority to
each individual who obtains the benefit of the service. It is
now increasingly realised that merely because the

63/96
WP703_23 & ors.doc

collections for the services rendered or grant of a privilege
or licence are taken to the consolidated fund of the State
and not separately appropriated towards the expenditure for
rendering the service is not by itself decisive. Presumably,
the attention of the Court in the Shirur Mutt case [(1980) 1
SCC 416 : AIR 1980 SC 1008 : (1979) 3 SCR 1217] was not
drawn to Article 266 of the Constitution. The Constitution
nowhere contemplates it to be an essential element of fee
that it should be credited to a separate fund and not to the
consolidated fund. It is also increasingly realised that the
element of quid pro quo in the strict sense is not always a
sine qua non for a fee. It is needless to stress that the
element of quid pro quo is not necessarily absent in every
tax: Constitutional Law of India by H.M. Seervai, Vol. 2, 2nd
Edn., p. 1252, paras 22, 39.”

64. In the case of B.S.E. Brokers’ Forum, Bombay and others vs.
Securities and Exchange Board of India and others (supra), upon
which even the petitioners placed reliance, a three Judge Bench of
the Supreme Court had an occasion to consider a fee, found to be
regulatory in nature, imposed upon Stock Brokers and others. In the
said judgment, the Supreme Court referred to earlier precedents and
observed as follows :
“31. In the case of City Corpn. of Calicut v. Thachambalath
Sadasivan [(1985) 2 SCC 112 : 1985 SCC (Tax) 211] this
Court reflected the change that is taking place in the judicial
thinking as to the difference between a tax and a fee. It held
that the traditional concept of quid pro quo in a fee is
undergoing transformation, though the fee must have
relation to the services rendered, or the advantages
conferred, it is not necessary to establish that those who pay
the fee must receive direct or special benefit or advantage of
the services rendered for which the fee is being paid. It held
that if one who is liable to pay receives general benefit from
the authority levying the fee the element of service required
for collecting fee is satisfied.

32. In the case of Sirsilk Ltd. v. Textiles Committee [1989
Supp (1) SCC 168 : 1989 SCC (Tax) 219 : AIR 1989 SC 317]
this Court held that when the entire proceeds of the fee are
utilised in financing the various projects undertaken by the
Textiles Committee, it cannot be said that there is no
reasonable and sufficient correlation between the levy of fee

64/96
WP703_23 & ors.doc

and the services rendered by the Textiles Committee. It
further held that when the levy of the fee is for the benefit of
the entire textile industry, there is sufficient quid pro quo
between the levy recovered and the services rendered to the
industry as a whole.

33. In a more recent case of Commr. & Secy. to Govt.,
Commercial Taxes & Religious Endowments Deptt. v. Sree
Murugan Financing Corpn. [(1992) 3 SCC 488] this Court,
after taking into consideration the financial involvement of
general public in the chit funds, observed that the object of
the Act obviously was to protect the interest of the
subscribers and more the number of subscribers meant more
the burden on the authorities under the Act and as a
consequence, more fee is required to meet the expenditure.
Taking note of the human expectation of winning in a draw
or a bid at the auction and becoming rich overnight mostly
by the lower-middle class and the poor who invest their
hard-earned money in such chit funds, this Court held that a
situation like that makes the levy a regulatory measure since
the collection of such funds from such category of people
will have to be monitored strictly, and it also held that the
Act and the Rules which operate with such objectives, if
charge enhanced fee, such enhancement is justified in law as
amounting to sufficient quid pro quo.

34. In Krishi Upaj Mandi Samiti v. Orient Paper &
Industries Ltd. [(1995) 1 SCC 655] rejecting the contention
of the respondent therein, this Court held that the
machinery created under the said Act is meant to facilitate
and benefit all the buyers and sellers of all the agricultural
produce within the market area and it cannot be said that
the respondent Mills are neither directly nor indirectly a
beneficiary of the said machinery.

35. In the case of Secy. to Govt. of Madras v. P.R.
Sriramulu [(1996) 1 SCC 345] testing the validity of the
Court Fee Act involved therein, this Court negatived the
contention that the expenses incurred by the administration
of justice in criminal courts should not be treated as
sufficient quid pro quo for the levy of court fee in civil cases.
It held that such levy should not be examined so minutely or
be weighed in golden scales to discern any difference
between the two. It also held that there could not be any
scientific method by which levy of fee may be made exactly
corresponding to the expenditure in a particular year
relating to the administration of civil justice. It held that it is
not the requirement of law that the collection raised by the

65/96
WP703_23 & ors.doc

levy should exactly tally or correspond to the expenditure in
the administration of civil justice. It further held that the test
of corelation of the collection with the services rendered is
to be reckoned at the aggregate level and not at the
individual level.

36. In Vam Organic Chemicals Ltd. v. State of U.P. [(1997)
2 SCC 715] this Court held that there is a distinction
between a fee charged for licence, that is regulatory fees
and fees for services rendered as compensatory fees. In the
case of regulatory fees, the Court held that like the licence
fees, existence of quid pro quo is not necessary although the
fee imposed must not, in the circumstances of the case, be
excessive, keeping in view the quantum and nature of the
work involved in the required supervision.

37. In Secunderabad Hyderabad Hotel Owners' Assn. v.
Hyderabad Municipal Corpn. [(1999) 2 SCC 274] this
Court after considering the earlier judgments, to some of
which we have already made reference, held that a licence
fee may be either regulatory or compensatory. When a fee
is charged for rendering specific services, a certain element
of quid pro quo must be there between the service rendered
and the fee charged so that the licence fee is commensurate
with the cost of rendering the service although the exact
arithmetical equivalence is not expected. It held, however,
that it is not the only kind of fee which can be charged.
Licence fees can also be regulatory when the activities for
which a licence is given require to be regulated or
controlled. The fee which is charged for regulation of such
activity would be validly classifiable as a fee and not a tax
although no service is rendered. An element of quid pro
quo for levy of such fee is not required although such fees
cannot be excessive.

38. As noticed in the City Corpn. of Calicut [(1985) 2
SCC 112 : 1985 SCC (Tax) 211] the traditional concept of
quid pro quo in a fee has undergone considerable
transformation. From a conspectus of the ratio of the above
judgments, we find that so far as the regulatory fee is
concerned, the service to be rendered is not a condition
precedent and the same does not lose the character of a fee
provided the fee so charged is not excessive. It is also not
necessary that the services to be rendered by the collecting
authority should be confined to the contributories alone. As
held in Sirsilk Ltd. [1989 Supp (1) SCC 168 : 1989 SCC
(Tax) 219 : AIR 1989 SC 317] if the levy is for the benefit
of the entire industry, there is sufficient quid pro quo

66/96
WP703_23 & ors.doc

between the levy recovered and services rendered to the
industry as a whole. If we apply the test as laid down by
this Court in the abovesaid judgments to the facts of the
case in hand, it can be seen that the statute under Section
11 of the Act requires the Board to undertake various
activities to regulate the business of the securities market
which requires constant and continuing supervision
including investigation and instituting legal proceedings
against the offending traders, wherever necessary. Such
activities are clearly regulatory activities and the Board is
empowered under Section 11(2)(k) to charge the required
fee for the said purpose, and once it is held that the fee
levied is also regulatory in nature then the requirement of
quid pro quo recedes to the background and the same need
not be confined to the contributories alone.”

65. The Supreme Court in the said judgment went on to examine
the data relating to the expenditure incurred by SEBI and held that
the Court could examine reasonableness of a levy in the case of a
regulatory fee to find out whether there was a correlatable quid pro
quo, but quid pro quo was not a condition precedent for levy of a
regulatory fee. The only limited examination that could be
undertaken was, as to whether the levy was excessive and
unreasonable.

66. The above quoted observations made by the Supreme Court in
the said case of B.S.E. Brokers’ Forum, Bombay and others vs.
Securities and Exchange Board of India and others (supra) are
important because they also refer to earlier judgments of the
Supreme Court in various cases, including VAM Organic Chemicals
Ltd. and another vs. State of U.P. and others, (1997) 2 SCC 715, upon
which the petitioners have placed much reliance.

67. Thereafter, in the case of State of West Bengal vs. Kesoram
Industries Limited (supra), another Constitution Bench of the
Supreme Court (five Hon’ble Judges) considered the position of law
in respect of levy of fee, when a challenge was raised thereto on the

67/96
WP703_23 & ors.doc

ground that in real terms it amounted to imposition of tax. In the
context of the evolution of law and the manner in which the position
of law had changed over a period of time with regard to distinction
between tax on the one hand and fee on the other, the Supreme
Court in the said judgment observed as follows :
“146. As stated earlier also, the impugned cess can be
justified as fee as well. The term cess is commonly employed
to connote a tax with a purpose or a tax allocated to a
particular thing. However, it also means an assessment or
levy. Depending on the context and purpose of levy, cess
may not be a tax; it may be a fee or fee as well. It is not
necessary that the services rendered from out of the fee
collected should be directly in proportion with the amount
of fee collected. It is equally not necessary that the services
rendered by the fee collected should remain confined to the
persons from whom the fee has been collected. Availability
of indirect benefit and a general nexus between the persons
bearing the burden of levy of fee and the services rendered
out of the fee collected is enough to uphold the validity of
the fee charged. The levy of the impugned cess can equally
be upheld by reference to Entry 66 read with Entry 5 of List
II.”

68. Thus, it becomes evident that with passage of time, in the
context of levy of a fee, even availability of indirect benefit and a
general nexus between the persons bearing the burden of levy of fee
and the services rendered out of such fee, was found to be enough to
uphold the validity of such a fee. This is crucial in the present case,
for the reason that the petitioners on the one hand claim that the
respondent Board provides no service at all to them, as they are
successful resolution applicants and they are not regulated by the
Board, while on the other hand, the respondent Board claims that it
provides wide ranging services throughout CIRP to all the
stakeholders, including the petitioners, who are successful resolution
applicants. In this context, the rival parties relied upon the provisions
of the IBC and the Regulations framed thereunder. An analysis of the

68/96
WP703_23 & ors.doc

same would be necessary to reach a conclusion in the matter.

69. But, before undertaking the aforesaid exercise, it would be
appropriate to further consider a few judgments, upon which the
rival parties have placed reliance, indicating the manner in which the
law regarding distinction between tax and fee has evolved as also the
position with regard to regulatory fee imposed by an Authority.

70. In the case of Calcutta Municipal Corporation and others vs.
Shrey Mercantile (P) Ltd. and others (supra), upon which the
petitioners placed reliance, the Court struck down a fee on the
ground that there was no element of any service rendered in the facts
of the said case. In the said judgment, the Supreme Court reiterated
the distinction between tax and fee. Reference was also made to
imposition of fee, primarily for the purpose of regulation and control,
which could be classified as an exercise of ‘police power’. It was held
that if the primary purpose of the levy is generating revenue and
regulation is merely incidental, then the imposition is clearly a tax.
We are of the opinion that although the petitioners heavily relied
upon the said judgment, the settled position of law with regard to
distinction between tax and fee was reiterated and in the facts and
circumstances of the said case, the levy was found to be a tax
masquerading as a fee.

71. The petitioners have also relied on judgment of the Supreme
Court in the case of Delhi Race Club Limited vs. Union of India and
others (supra). In the said case also, after taking note of the series of
judgments on the aforesaid distinction between tax and fee, the
Supreme Court held as follows :
“42. Thus, it is clear that a licence fee imposed for
regulatory purposes is not conditioned by the fact that there
must be a quid pro quo for the services rendered, but that,

69/96
WP703_23 & ors.doc

such licence fee must be reasonable and not excessive. It
would again not be possible to work out with arithmetical
equivalence the amount of fee which could be said to be
reasonable or otherwise. If there is a broad correlation
between the expenditure which the State incurs and the fees
charged, the fees could be sustained as reasonable.”

72. We are of the opinion that even though the petitioners have
relied upon the said judgment, the observations made therein, take
forward the evolution of law in the context of the distinction
between a fee and tax to the point that general correlation between
the levy imposed and the service rendered without mathematical
equivalence would be enough to sustain the levy as a fee and not
classify it as tax.

73. In the case of Jalkal Vibhag Nagar Nigam and others vs.
Pradeshiya Industrial and Investment Corporation and another
(supra), a three Judge Bench of the Supreme Court, while
considering a levy imposed by a municipal body while deliberating
upon the nature of the levy, observed as follows :
“61. The distinction between a tax and fee has substantially
been effaced in the development of our constitutional
jurisprudence. At one time, it was possible for courts to
assume that there is a distinction between a tax and a fee : a
tax being in the nature of a compulsory exaction while a fee
is for a service rendered. This differentiation, based on the
element of a quid pro quo in the case of a fee and its absence
in the case of a tax, has gradually, yet steadily, been
obliterated to the point where it lacks any practical or
constitutional significance. For one thing, the payment of a
charge or a fee may not be truly voluntary and the charge
may be imposed simply on a class to whom the service is
made available. For another, the service may not be provided
directly to a person as distinguished from a general service
which is provided to the members of a group or class of
which that person is a part. Moreover, as the law has
progressed, it has come to be recognised that there need not
be any exact correlation between the expenditure which is
incurred in providing a service and the amount which is
realised by the State. The distinction that while a tax is a

70/96
WP703_23 & ors.doc

compulsory exaction, a fee constitutes a voluntary payment
for services rendered does not hold good. As in the case of a
tax, so also in the case of a fee, the exaction may not be truly
of a voluntary nature. Similarly, the element of a service may
not be totally absent in a given case in the context of a
provision which imposes a tax.

62. The gradual obliteration of the distinction between a
tax and a fee on a conceptual level has been the subject-
matter of several decisions of this Court.

63. In Southern Pharmaceuticals & Chemicals v. State of
Kerala [Southern Pharmaceuticals & Chemicals v. State of
Kerala, (1981) 4 SCC 391 : 1981 SCC (Tax) 320] A.P. Sen, J.
speaking for the Court held : (SCC pp. 408-10, paras 24-25)

‘24. The distinction between a “tax” and a “fee” is
well-settled. The question came up for
consideration for the first time in this Court in
Commr., Hindu Religious Endowments v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt
[Commr., Hindu Religious Endowments v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt ,
(1954) 1 SCC 412 : 1954 SCR 1005 : AIR 1954 SC
282] . …

* * *

25. “Fees” are the amounts paid for a privilege,
and are not an obligation, but the payment is
voluntary. Fees are distinguished from taxes in that
the chief purpose of a tax is to raise funds for the
support of the Government or for a public purpose,
while a fee may be charged for the privilege or
benefit conferred, or service rendered or to meet
the expenses connected therewith. Thus, fees are
nothing but payment for some special privilege
granted on service rendered. Taxes and taxation
are, therefore, distinguishable from various other
contributions, charges, or burdens paid or imposed
for particular purposes and under particular
powers or functions of the Government. It is now
increasingly realised that merely because the
collections for the services rendered or grant of a
privilege or licence, are taken to the consolidated
fund of the State and are not separately
appropriated towards the expenditure for
rendering the service is not by itself decisive. That

71/96
WP703_23 & ors.doc

is because the Constitution did not contemplate it
to be an essential element of a fee that it should be
credited to a separate fund and not to the
consolidated fund. It is also increasingly realised
that the element of quid pro quo stricto senso is
not always a sine qua non of a fee. It is needless to
stress that the element of quid pro quo is not
necessarily absent in every tax. We may, in this
connection, refer with profit to the observations of
Seervai in his Constitutional Law, to the effect :
[ H.M. Seervai, Constitutional Law of India, 2nd
Edn., Vol. 2, p. 1252, paras 22 & 39.]
‘It is submitted that as recognised by
Mukherjea, J. himself, the fact that the
collections are not merged in the consolidated
fund, is not conclusive, though that fact may
enable a court to say that very important
feature of a fee was present. But the attention
of the Supreme Court does not appear to have
been called to Article 266 which requires that
all revenues of the Union of India and the
States must go into their respective
consolidated funds and all other public moneys
must go into the respective public accounts of
the Union and the States. It is submitted that if
the services rendered are not by a separate
body like the Charity Commissioner, but by a
government department, the character of the
imposition would not change because under
Article 266 the moneys collected for the
services must be credited to the consolidated
fund. It may be mentioned that the element of
quid pro quo is not necessarily absent in every
tax.’

Our attention has been drawn to the observations in
Kewal Krishan Puri v. State of Punjab [Kewal Krishan Puri v.
State of Punjab, (1980) 1 SCC 416, 425 : (1979) 3 SCR
1217, 1230] : (SCC p. 425, para 8)
‘8. … The element of quid pro quo must be
established between the payer of the fee and the
authority charging it. It may not be the exact
equivalent of the fee by a mathematical precision,
yet, by and large, or predominantly, the authority
collecting the fee must show that the service which
they are rendering in lieu of fee is for some special
benefit of the payer of the fee.’

72/96
WP703_23 & ors.doc

To our mind, these observations are not intended and
meant as laying down a rule of universal application. The
Court was considering the rate of a market fee, and the
question was whether there was any justification for the
increase in rate from Rs 2 per every hundred rupees to Rs 3.
There was no material placed to justify the increase in rate
of the fee and, therefore, it partook the nature of a tax. It
seems that the Court proceeded on the assumption that the
element of quid pro quo must always be present in a fee.
The traditional concept of quid pro quo is undergoing a
transformation.”

74. The petitioners have also relied upon judgment of the
Constitution Bench of the Supreme Court (9 Hon’ble Judges) in the
case of Mineral Area Development Authority and another vs. Steel
Authority of India and another (supra). In the said judgment also,
which really concerned the levy of a tax, it was observed that in the
context of a regulatory fee, there has to be some relationship
between the levy and the services provided. If such relationship was
demonstrated, the fee could be said to be reasonable and valid.

75. In a recent judgment rendered by a two Judge Bench of the
Supreme Court in the case of Small Scale Entrepreneurs Association
and others vs. State of Maharashtra and others (supra), the Supreme
Court again referred to a series of its judgments, including
judgements rendered by Constitution Benches, on the aspect of
distinction between tax and fee. Thereupon, in the aforesaid
judgment, the following observations were made :
“83. In three Judges Bench decision in the case of
Sreenivasa General Traders v. State of Andhra Pradesh14 it
was held that there is no generic difference between tax and
a fee as the traditional law distinguishing tax from fee has
undergone a sea change. The distinction between a fee and
tax lies primarily between the fact that tax is a part of
common burden while a fee is for payment of a specific
benefit or privilege. In regard to the fee, there is, and must
always be, direct relation between fee collected and the
services intended to be rendered. In determining whether a

73/96
WP703_23 & ors.doc

levy is a fee, the true test must be whether its primary and
essential purpose is to render specific services. The benefit, if
any, derived by the State out of such fee collected is of no
consequences. The power of any legislature to levy a fee is
conditioned by the fact that it must “by and large” be a quid
pro quo for the services rendered and that there should be a
“reasonable relationship” between the levy of the fee and the
services rendered.

84. In short, despite the distinction between “tax” and
“fee” having been blurred to some extent but still it has not
been completely done away with and the distinction, though
very fine, continues to remain. The tax is a compulsory
extraction for the collection of revenue whereas fee is in the
nature of a charge for the services rendered. The element of
quid pro quo is an essential characteristic of a fee or a
charge. Therefore, so long as the said element ex facie exists,
the levy of fee or charges cannot be equated with tax.

85. The appellants have cited a large number of decisions
including that of the Constitution Benches of this Court as
large as of nine Judges to bring home the point that
distinction between tax and fee has more or less vanished
and that the levy of fee/charges partakes taxation. However,
despite blurring of the traditional distinction between a fee
and taxation, one thing is very much clear that where there
is explicit reasonable relationship between levy of
fee/service charges and the services rendered, the distinction
would continue to stand and the fee/charges would not be
treated as part of tax.”

76. Having referred to the judgments relied upon by the rival
parties, starting with the judgment of the Supreme Court in the case
of Commissioner, Hindu Religious Endowments, Madras vs. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (supra) rendered in
the year 1954 till the aforesaid recent judgment rendered in the year
2026 by the Supreme Court in the case of Small Scale Entrepreneurs
Association and others vs. State of Maharashtra and others (supra),
the evolution of the law with regard to determining whether a levy is
a fee or a tax, is clearly noticeable. It is evident that although the
distinction has blurred, but nonetheless, a fine distinction still exists.

74/96
WP703_23 & ors.doc

An element of quid pro quo is still an essential characteristic of a fee
and it is this aspect that distinguishes it from a tax. But, the nature of
quid pro quo and the service rendered for the levy charged as a fee
has become broad based and general, over a period of time in terms
of the law laid down by the Supreme Court in the aforesaid
judgments. It is no longer necessary for the authority imposing a fee,
particularly a regulatory fee, to strictly demonstrate the exact service
rendered as quid pro quo for the fee charged from certain entities.

77. Applying the said position of law to the present case, it would
be enough for the respondent Board to show generalized and broad-
based quid pro quo services provided to the stakeholders in the
process of the CIRP under the IBC. It is relevant to note that the
stakeholders in CIRP include the members of CoC as well as
resolution applicants like the petitioners. In fact, this Court finds the
contention raised on behalf of the petitioner-Hazel Mercantile
Limited to the effect that it had nothing to do with CIRP, as a
completely untenable submission, worthy of being rejected outright.
We fail to understand how the petitioner-Hazel Mercantile Limited
can claim that it has nothing to do with CIRP when the whole
process of CIRP is tuned and dynamically operates with the active
participation of all stakeholders, particularly the CoC and the
resolution applicants.

78. The emphasis on the part of the petitioners, as noted in the
earlier part of this judgment, was on the manner in which the
respondent Board regulates the three service providers i.e. insolvency
professionals, insolvency professional agencies and service utility.
The petitioners claimed that, if at all, the respondent Board was
regulating any aspect of CIRP, it was only the said three service
providers. Although the said contention has been dealt with in the

75/96
WP703_23 & ors.doc

earlier part of this judgment, further discussion on the same is
warranted in the context of the aforesaid contention raised on behalf
of the petitioners that the impugned regulatory fee is actually a tax
masquerading as fee and that therefore, on this ground alone, the
impugned Regulation 31A of the IBBI Regulations imposing such
regulatory fee, deserves to be struck down.

79. This Court is of the opinion that the respondent Board by
regulating the aforesaid three service providers, on that score itself,
regulates CIRP for the reason that the three service providers play an
active role during the process of CIRP. The respondent Board is
fastened with the responsibility of ensuring that the aforesaid three
service providers maintain the integrity of CIRP and that they ensure
that the process is undertaken with maximum efficiency and
immediacy. Apart from this, a reference to the relevant provisions of
the IBC quoted hereinabove, demonstrates that the role of the
respondent Board is not restricted to regulating only the aforesaid
three service providers.

80. As per Section 196(1)(c) of the IBC, the respondent Board has
power to levy fee or other charges for carrying out the purposes of
the IBC. It also has the power under Section 196(1)(t) to make
regulations and guidelines on matters relating to insolvency and
bankruptcy, as may be required for the purposes of the IBC, including
the mechanism for time bound disposal of the assets of the corporate
debtor or debtor. Although, the words ‘for the purposes of this Code’
have been added by recent amendment dated 06.04.2026, they can
be treated as a useful aid for the purpose of understanding the role
of the respondent Board throughout the process of CIRP and the
object of the IBC for reviving the corporate debtor, as a going
concern.

76/96
WP703_23 & ors.doc

81. At this stage, reference to various clauses of Section 240(2) of
the IBC merits consideration. Under the said provision, the
respondent Board is empowered to make regulations to provide for
various matters concerning CIRP. These are found in the numerous
clauses in the said provision and they indicate as to the manner in
which the process of CIRP and all the stakeholders therein are indeed
regulated by the respondent Board and that it therefore provides
service to the process of CIRP in that context.

82. Clause (nc) of Section 240(2) of the IBC provides for the
manner of voting and determining the vote share in respect of
financial debts under Section 21(7) of the IBC. Section 21(7) of the
IBC specifically empowers the respondent Board to specify as to the
manner in which the voting and determining the voting share of the
CoC is to be undertaken. The aforesaid action of the CoC is at the
very heart of the process of CIRP, therefore, indicating the role of the
respondent Board in that context. Clause (o) of Section 240(2) of the
IBC gives power to the Board to frame regulations with regard to the
persons who shall comprise the CoC, the functions to be exercised by
the CoC and the manner in which functions shall be exercised under
priviso to Section 21(8) of the IBC. The said proviso pertains to a
situation where a corporate debtor does not have any financial
creditors and when the CoC has to be constituted and comprise of
such persons, as may be specified by the Board. This is another
crucial function performed by the respondent Board during CIRP.

83. Clause (oa) of Section 240(2) of the IBC, although introduced
recently by amendment dated 06.04.2026, in Section 240(2) of the
IBC, for the purposes of interpretation can also be perused. It
empowers the Board to make regulations for specifying any other
class or classes of creditors who may attend the meeting of CoC

77/96
WP703_23 & ors.doc

under proviso to Section 21(11) of the IBC. Clause (p) thereof
pertains to other electronic means by which members of the CoC can
meet under Section 24(1) of the IBC, while clause (q) thereof
pertains to the manner of assigning voting share to each creditor
under Section 24(7) of the IBC. Clause (r) to Section 240(2) of the
IBC pertains to the manner of conducting meetings of the CoC under
Section 24(8) thereof.

84. Clauses (u) and (v) of Section 240(2) of the IBC pertain to the
power of the Board to make regulations in respect of various aspects
of preparation of information memorandum by the insolvency
professional under Section 29 of the IBC. Clause (w) provides for the
manner in which the Board can make regulations for making
payment of insolvency resolution process costs and other details
thereof. Clauses (wa), (wb), (wc) and (wd) of Section 240(2) of the
IBC, concern various aspects of submission of the resolution plan,
such as the manner in which the CoC members approve the
resolution plan by a vote of not less than 66% of voting share, the
manner in which the second proviso to Section 31 of the IBC
pertaining to approval of resolution plan would be finalized, its form,
manner and conditions and eventually, if the matter goes to
liquidation, the condition under proviso to Section 33(2) of the IBC.

85. Clauses (zt), (zu), (zw) and (zx) of Section 240 (2) of the IBC
provide for various aspects of the CIRP, including constitution of the
committees by the Board etc. The aforementioned relevant clauses of
Section 240(2) of the IBC have been quoted in the earlier part of this
judgment and a perusal thereof indeed shows that the role of the
Board in providing its various services during the CIRP is not a
constricted or a narrow one, as canvassed on behalf of the
petitioners. On the other hand, it is indeed a widely prevalent role

78/96
WP703_23 & ors.doc

performed by the respondent Board throughout the process of the
CIRP, right from the moment it is initiated till the resolution plan is
either approved by the adjudicatory authority i.e. the NCLT or
rejected, which then leads to the process of liquidation. The role of
the respondent Board is further widened by the introduction of the
concept of cross-border insolvency under Section 240C of the IBC.
This includes the process for recognition of proceedings, judicial co-
operation, assistance and co-ordination in such cases of cross-border
insolvency for classes of debtors or corporate debtors, involving
various countries and territories outside India. A perusal of the IBBI
Regulations indeed shows that Board has framed Regulations for
crucial stages of CIRP, which include Chapter V for CoC, Chapter VI
for meetings of the Committee, Chapter VII for voting by the
Committee, Chapter VIII for conduct of CIRP, Chapter IX for
insolvency resolution process costs and Chapter X for resolution plan.

86. Hence, the role of the respondent Board sought to be read in a
narrow and constricted manner by the petitioners in order to claim
that there is absolutely no quid pro quo insofar as they are
concerned, is found to be unsustainable. The whole process of
preparation of the resolution plan and submission of the same before
the CoC, approval thereof by requisite majority of the members of
the CoC and then the finalized plan being placed before the
adjudicatory authority i.e. NCLT, is a process in respect of which the
respondent Board performs a wide ranging an integral role, thereby
indicating that there is indeed substance in the contention raised on
behalf of the respondent Board that it is responsible for ensuring that
the CIRP is undertaken with expediency and immediacy to revive the
corporate debtor as a going concern to meet the ultimate object and
purpose for which the IBC has been enacted.

79/96
WP703_23 & ors.doc

87. We are of the opinion that the role of the respondent Board as
noticed in the earlier part of this judgment, starting from the manner
in which the report of the BLRC of November 2015 ascribed
responsibilities to the proposed Board under the IBC, which was
contemplated as a statute at that point in time, indicates the crucial
regulatory role performed by the respondent Board, for the purposes
of the IBC. The Courts have been relying on the respondent Board as
a statutory regulator for various aspects of CIRP, including for laying
down guidelines for the manner in which members of the CoC shall
conduct their affairs, in order to ensure that the process of CIRP is
expeditiously taken to its logical end. In that sense, the respondent
Board is justified in claiming that it provides a conducive ‘eco-system’
for efficient completion of CIRP, in order to meet the goals for which
the IBC has been enacted. Hence, the petitioners are not justified in
relying on judgement of the Supreme Court in the case of State of
Rajasthan & Anr. vs. Rajasthan Chemists Association (supra) to claim
that there is no causal nexus between the measure of the levy and
the levy itself.

88. Once the aforesaid conclusions are reached, it becomes clear
that the impugned levy i.e. the regulatory fee passes the test of law,
as it has evolved with regard to the necessary ingredients and
constituents of a fee, as opposed to a tax. Since, specific service and
quid pro quo is not required to be demonstrated by the respondent
Board, in order to justify imposition of the impugned levy, the
statutory scheme of the IBC and the regulations framed thereunder,
clearly demonstrate that the Board indeed provides wide-ranging
general service and quid pro quo in the process of CIRP to all the
stakeholders, including the petitioners and therefore, the impugned
levy cannot be treated as a tax. The contention of the petitioners that
it is in reality a tax masquerading as a fee, deserves to be rejected.

80/96
WP703_23 & ors.doc

Accordingly, it is rejected.

Is the impugned regulatory fee bad, as it is excessive in nature?

89. The petitioners have also challenged the impugned regulatory
fee on the ground that it is excessive and expropriatory in nature, as
a consequence of which in reality it has become a compulsory
imposition in the form of a tax. In this context, the petitioners have
relied upon some judgments and reference is also made to the
audited statement of account of the respondent Board.

90. The petitioners have relied upon the judgments of the
Supreme Court in the cases of P. M. Ashwathanarayana Setty and
others vs. State of Karnataka and others (supra); A. P. Paper Mills
Ltd. vs. Govt. of A.P. and another, (2020) 8 SCC 167; State of U.P. and
others vs. VAM Organic Chemicals Ltd. and others (supra); State of
H.P and others vs. Shivalik Agro Poly Products and others (supra)
and the judgment of this Court in case of Vidarbha Chamber of
Commerce and Industries, Akola vs. Commissioner, Municipal
Corporate of Akola City and another (supra). The thrust of the
contention raised on behalf of the petitioners by relying upon the
said judgments is that the levy of the impugned regulatory fee in the
form of 0.25% of the realisable value to creditors under the
resolution plan, is disproportionate and excessive, as it is not justified
in any manner when appreciated in the context of the expenditure
incurred by the Board in performing its functions. The petitioners
claim that there has to be some correlation between the totality of
the receipts and the value of the totality of services provided by the
respondent Board. It is contended that the moment this balance is
disturbed, the levy is rendered arbitrary, unreasonable,
disproportionate and therefore, it offends Article 14 of the

81/96
WP703_23 & ors.doc

Constitution of India.

91. We have carefully considered the aforesaid judgments of the
Supreme Court and this Court. We find that in the case of P. M.
Ashwathanarayana Setty and others vs. State of Karnataka and
others (supra), the levy in question was not a regulatory fee. It was
held that the fee would lose its character and become tax, if it
enriches the general revenue of the State to be applied for general
purposes. We find that in the present case, the levy of the regulatory
fee is by the respondent Board and the amount collected remains
with the Board to meet its expenses for the services that it renders.
The amount collected through the impugned regulatory fee under
the Regulation 31A of the IBBI Regulations w.e.f. 01.10.2022, does
not go into the general revenue of the State and on this ground itself,
the said judgment is inapplicable to the facts of the present case.

92. In the case of State of U.P. and others vs. VAM Organic
Chemicals Ltd. and others (supra), the Supreme Court found that the
enhancement in the levy of the licence fee could not be justified on
the basis of the material on record, as the State had failed to produce
material about incurring of additional costs etc. In the case of State
of H.P. and others vs. Shivalik Agro Poly Products and others (supra),
the Supreme Court, as a matter of fact, found in favour of the State
as regards the levy of registration fee. In the case of A. P. Paper Mills
Ltd. vs. Govt. of A.P. and another (supra) on the basis of failure of the
State to justify enhancement of fee, the Court rendered adverse
findings.

93. In this context, we have heard rival submissions of the parties
on the facts and figures that came to the fore in the light of the
audited annual accounts of the respondent Board for the financial

82/96
WP703_23 & ors.doc

year ending 2024-25. Although, these facts and figures were
produced by way of a compilation on behalf of the petitioners, at the
time of hearing, the respondent Board did not deny the contents
thereof. This Court perused the same with the assistance of the
learned counsel representing the rival parties. Having perused the
said figures, we do not find any reason to hold that excessive
amounts have been collected by the Board by levying the impugned
regulatory fee, to the extent that it can be concluded to be excessive
and disproportionate. All that the said figures indicate is that while
prior to the impugned regulatory fee being brought into effect from
01.10.2022, the respondent Board was suffering a deficit, which had
to be made good by contributions from the Government, after the
impugned regulatory fee has been levied, the respondent Board is
able to meet its expenditure and it is also left with surplus. Merely
because the respondent Board has ended up having surplus in its
collection, cannot ipso facto lead to the conclusion that the
impugned regulatory fee is excessive and disproportionate, to be held
in reality as a tax imposed without authority of law. We are unable to
agree with the petitioners on the said ground of challenge.

94. We find substance in the contention raised on behalf of the
respondent Board that as a regulatory body, in order to maintain its
integrity as a regulator to provide best services, so that the process of
CIRP is completed efficiently, to meet the very object of the IBC,
financial independence of the Board is a sine qua non.

95. The report of the National Council of Applied Economic
Research (NCAER) of December 2021 with regard to evaluation of
the regulatory performance of the respondent Board, records that a
regulator like the respondent Board must have financial
independence. Although, in the initial years, such a regulator may

83/96
WP703_23 & ors.doc

obtain loans from the Government, independent funding of the
respondent Board as a regulator has the benefit of operational
efficiency, freedom from the Government on pay and budgeting and
it avoids conflict of interest arising from the political economy. These
are crucial aspects flagged by the NCAER, which is one of India’s
oldest and largest independent economic think tank set up in the
year 1956 to inform policy choices for both Government and
Industry.

96. There is merit in the contention raised on behalf of the
respondent Board that introduction of the regulatory fee by way of
Regulation 31A of the IBBI Regulations is a step in the direction for
ensuring financial independence of the Board as a regulatory
authority and watchdog in the overall scheme of the IBC, with
specific focus on CIRP, for revival of the corporate debtor, as a going
concern. This, in turn, is at the very heart of the IBC and the process
of CIRP. Therefore, the petitioners are not justified in contending that
even if a broad and general quid pro quo or service is rendered by
the respondent Board, the impugned regulatory fee being excessive
and disproportionate renders it as a tax in real terms. There is no
material to reach the said conclusion and it cannot be said that the
imposition of regulatory fee and the manner in which it is recovered,
renders it a tax. The said contention raised on behalf of the
petitioners to challenge the validity of the impugned Regulation as
ultra vires the constitution under Article 14 of the Constitution of
India, is also rejected.

Is the impugned regulatory fee retrospective in operation?

97. The petitioners have contended that the proviso to impugned
Regulation 31A of the IBBI Regulations renders it retrospective in

84/96
WP703_23 & ors.doc

operation, and therefore, the impugned Regulation deserves to be
struck down. Alternatively, it is contended that the proviso to clause
(1) of impugned Regulation 31A needs to be struck down, even if the
Regulation is to be sustained.

98. The thrust of the submissions of the petitioners, is on the
assertion that once the resolution plan is approved by the CoC, under
the scheme of the IBC, it is ‘cast in stone’. The petitioners rely upon
the provisions of the IBC, particularly Sections 30 and 31 thereof,
read with judgements of the Supreme Court, to contend that once
the resolution plan is approved by the CoC, it is binding on the
resolution applicant as well as the CoC and since there cannot be any
modification thereof, the proviso to impugned Regulation 31A of the
IBBI Regulations, is rendered unsustainable as being retrospective in
operation, for it would amount to allowing the resolution plan,
approved by the CoC, being tinkered with.

99. By placing reliance on judgement of the Supreme Court in the
case of Ebix Singapore Private Limited vs. Committee of Creditors of
Educomp Solutions Limited and another (supra), it is emphasized
that the adjudicatory authority i.e. the NCLT only looks at the
resolution plan approved by the CoC for examining whether it is
compliant with Section 30(2) of the IBC and that the NCLT can
either approve the same or reject it. Rejection of the resolution plan
has the drastic consequence of taking the corporate debtor to the
process of liquidation. Introduction of the impugned regulatory fee,
in the context of the petitioners, at the stage when their resolution
plans were pending before the NCLT, created a situation where the
NCLT had no option but to reject the resolution plan, which was
admittedly otherwise compliant with all the requirements of Section
30(2) of the IBC. At the heart of this contention is the claim of the

85/96
WP703_23 & ors.doc

petitioners that the NCLT as the adjudicatory authority under Section
31 of the IBC merely performs a ministerial act, verifying a checklist
of the requirements of Section 30(2) of the IBC and that, the NCLT
does not perform any further role in the matter.

100. On the other hand, the respondent Board asserts that if the
contentions raised on behalf of the petitioners are accepted, it would
reduce the NCLT i.e. the adjudicatory body, to performing the role of
merely ticking boxes regarding the requirements specified in Section
30(2) of the IBC. This goes against the scheme of the IBC where the
NCLT, as the adjudicatory authority, indeed has a pivotal role to play.
In this context, the respondent Board relies upon judgement of the
Supreme Court in the case of Essar Steel India Limited Committee of
Creditors vs. Satish Kumar Gupta (supra). The rival submissions in
this context will have to be analyzed on the basis of the provisions of
the IBC.

101. It would also be helpful to refer to the report of the BLRC of
November, 2015, which was a precursor to the enactment of the IBC.
The said report indicated that the adjudicatory authority would be
akin to a bankruptcy judge whose main objective would be to ensure
that the insolvency or bankruptcy resolution is being performed
within the framework laid down by law. Section 31 of the IBC gives
details of the role of the adjudicatory authority i.e. the NCLT in the
context of approving or sanctioning the resolution plan approved by
the CoC. While doing so, the adjudicatory authority has to make sure
that the requirements of Section 30(2) of the IBC have been satisfied
in the resolution plan. The aforesaid provision requires the
examination of the resolution plan received from the resolution
applicant and verifying whether it satisfies the requirements
enumerated therein. There is an elaborate set of requirements but

86/96
WP703_23 & ors.doc

the crucial aspect of the matter is that under Section 30(2)(a) of the
IBC, it is to be ensured that the resolution plan provides for payment
of insolvency resolution process costs in a manner specified by the
Board, in priority to the payment of other debts of the corporate
debtor. Section 53 of the IBC, which specifies the waterfall
mechanism for distribution of assets under clause (a) to sub-section
(1) thereof, also places at the top the payment in full of the
insolvency resolution process costs. Thus, when the adjudicatory
authority considers the resolution plan approved by the CoC under
Section 31 of the IBC, it has to ensure that the resolution plan
provides for payment of insolvency resolution process costs in
priority over other debts of the corporate debtor. The adjudicatory
authority is also required to ensure that the other requirements
specified in Section 30(2) of the IBC are satisfied.

102. In this backdrop, the observations made by the Supreme Court
in the case of Ebix Singapore Private Limited vs. Committee of
Creditors of Educomp Solutions Limited & another (supra) will have
to be appreciated. A perusal of the said judgement indeed shows that
the commercial wisdom of CoC, while approving the resolution plan
with requisite majority, has to be given primacy and the adjudicatory
authority cannot sit in appeal over the same. It is also emphasized in
the said judgement that the adjudicatory authority has to act in such
a manner that the objectives of the IBC for speedy, predictable and
timely resolution are duly satisfied. It is also observed therein that
the IBC envisages a certain level of finality before the resolution plan
is submitted to the adjudicatory authority and further that, once the
CoC approves the resolution plan and it is submitted to the
adjudicatory authority for approval, as between the CoC and the
resolution applicant, it is binding and no modifications can be made
therein.

87/96
WP703_23 & ors.doc

103. Even if the said position of law is to be taken into account, we
are unable to agree with the contention of the petitioners that the
consequence thereof is that under the IBC, the adjudicatory authority
i.e. the NCLT is reduced to merely performing a ministerial job. We
also disagree with the petitioners when they assert that the
adjudicatory authority merely performs the job of ticking boxes on a
checklist as regards requirements specified in Section 30(2) of the
IBC. The aforesaid interpretation of the petitioners is not borne out
from the provisions of the IBC, particularly Sections 30 and 31
thereof. The adjudicatory authority is certainly required to leave the
commercial wisdom of approval of the proposed resolution plan
upon the CoC, but it certainly cannot be reduced to being a body
performing a ministerial act, having no adjudicatory role. Therefore,
the aforesaid contention raised on behalf of the petitioners is
rejected.

104. A perusal of the judgement of the Supreme Court in the case of
Essar Steel India Limited Committee of Creditors Vs. Satish Kumar
Gupta (supra) shows that in a given case, the adjudicatory authority
can send the resolution plan back to the Committee of Creditors to
re-submit the same after satisfying the required parameters. The
introduction of proviso to sub-section (2) of Section 31 of the IBC
dated 06.04.2026 further throws light on the role of the adjudicatory
authority while considering the resolution plan submitted after
approval of the CoC. The said proviso specifies that the adjudicatory
authority may, before rejecting the resolution plan, give notice to the
CoC to rectify any defects in the resolution plan. Although the said
amendment has been brought about recently, it is a pointer towards
the manner in which role of the adjudicatory authority can be
construed under the scheme of the IBC. There can be no doubt that
when the adjudicatory authority exercises power under sub-section

88/96
WP703_23 & ors.doc

(2) of Section 31 of the IBC to reject a resolution plan, the
consequence is drastic in the form of the process of liquidation being
initiated under Section 33 thereof. The said consequence of
liquidation under the scheme of the IBC is the last resort, as the focus
is on reviving the corporate debtor as a going concern. It is perhaps
for this reason that the word ‘may’ is used in sub-section (2) of
Section 31 of the IBC, which states that when the adjudicatory
authority is satisfied that the resolution plan does not conform to the
requirements referred to in sub-section (1) of Section 31, it may by
an order reject the resolution plan. We are of the opinion that upon
reading the provisions of Sections 30 and 31 of the IBC in a conjoint
and reasonable manner, the role of the adjudicatory authority cannot
be reduced to that of performing only a ministerial function. The
adjudicatory authority, in a given case, can either send the resolution
plan back to the CoC for reconsideration in limited circumstances or
it can give notice to the CoC to rectify the defects, if any, in the
resolution plan. This flexibility has to be read into the said provisions
so that the objectives of the IBC are satisfied.

105. It cannot be said that merely because, in a narrow set of
circumstances, the adjudicatory authority could resort to the said
option, it would necessarily derail the CIRP. On the other hand, if
such play in the joints and flexibility is made available to the process
by interpreting the role of the adjudicatory authority in the aforesaid
manner, the objectives of the IBC of reviving the corporate debtor as
a going concern would be satisfied in a more comprehensive manner.
In this context, we find that reliance placed by the petitioners on
judgements of the Supreme Court in the cases of Chitra Sharma and
others vs. Union of India and others (supra) and Swiss Ribbons
Private Limited and another vs. Union of India and others (supra), is
misplaced. There can be no quarrel with the position recognised in

89/96
WP703_23 & ors.doc

the said judgements that CIRP is essentially market driven and the
focus is on revival of the corporate debtor as a going concern, but
that would not render the adjudicatory authority merely as a rubber
stamp. In fact, the adjudicatory authority, in a given case, can issue
directions to ensure that these very objectives of the IBC are fully
satisfied.

106. Although the resolution plan when approved by the CoC would
be ‘cast in stone’ as claimed by the petitioners, it would be so cast in
stone only insofar as the CoC and the resolution applicant are
concerned. The adjudicatory authority would not be bound by such a
resolution plan, as Section 31 of the IBC requires the adjudicatory
authority to satisfy itself on the question of the requirements of
Section 30(2) of the IBC being satisfied by the resolution plan. Thus,
we find that the very basis of the contentions raised on behalf of the
petitioners, while alleging that impugned Regulation 31A of the IBBI
Regulations is retrospective in nature, can be said to be fallacious.
The proviso to impugned Regulation 31A of the IBBI Regulations
specifies a particular date i.e. 01.10.2022 as the date from which it
comes into operation. A bare reading of the proviso to Regulation
31A of the IBBI Regulations shows that it is operative from
01.10.2022. On a plain reading, it cannot be said to be retrospective.
It is only because the petitioners are reading the role of the
adjudicatory authority under Section 31 of the IBC in the
aforementioned fallacious manner that they are claiming the effect of
the proviso to Regulation 31A of the IBBI Regulations as being
retrospective in nature.

107. Once the role of Adjudicatory Authority under the provisions
of the IBC is understood in the correct perspective, it becomes clear
that the argument regarding retrospective operation of the impugned

90/96
WP703_23 & ors.doc

regulation cannot be sustained. In this backdrop, it becomes clear
that reliance placed on behalf of the petitioners on the judgements of
the Supreme Court in the cases of Kalpraj Dharamshi and another vs.
Kotak Investment Advisors Limited and another , (2021) 10 SCC 401;
Jaypee Kensington Boulevard Apartments Welfare Association and
others vs. NBCC (India) Limited and others (supra); Piramal Capital
and Housing Finance Limited vs. 63 Moons Technologies Limited and
others (supra), is misplaced and hence, erroneous. The Supreme
Court in the case of RPS Infrastructure Limited vs. Mukul Kumar and
another, (2023) 10 SCC 718 did observe that the mere fact that the
adjudicatory authority was yet to approve the resolution plan did not
imply with the plan would go back and forth as it would render CIRP
an endless process, but the said observation was made in the context
of the finality of the resolution plan between the CoC and the
resolution applicant, once the CoC in its commercial wisdom
approves the plan. However, it cannot be interpreted to mean that
the adjudicatory authority would be powerless to take a call as to
whether, in a given case, the CoC could be asked to reconsider a
particular aspect of the plan and / or for removal of defects. Such
limited power in the adjudicatory authority has to be read in the
scheme of the IBC to ensure that the objective of reviving the
corporate debtor as a going concern is achieved.

108. We also find that reliance placed on behalf of the petitioners
on the judgements concerning the question of retrospectivity is also
misplaced. Since the impugned regulation comes into operation in all
cases, like the case of the petitioners, wherein the adjudicatory
authority is in the process of considering the resolution plan, there is
no question of any vested right under existing law being disturbed or
of a new obligation or liability being imposed. Therefore, reliance
placed on behalf of the petitioners is misplaced as regards

91/96
WP703_23 & ors.doc

judgements in the cases of SEBI vs. Rajkumar Nagpal, (2023) 8 SCC
274; Govind Das and others vs. Income Tax Officer and another ,
(1976) 1 SCC 906; Darshan Singh vs. Ram Pal Singh and another ,
1992 Supp (1) SCC 191; K. S. Paripoornan vs. State of Kerala and
others, (1994) 5 SCC 593; and Commissioner of Income Tax
(Central-I), New Delhi vs. Vatika Township Private Limited , (2015) 1
SCC 1.

109. It is to be noted that since the impugned regulation fee forms
part of the insolvency resolution process costs, which have to be
defrayed as top priority under Section 30(2)(a) read with Section
53(1)(a) of the IBC, by operation of the proviso to Regulation 31A of
the IBBI Regulations, the adjudicatory authority would clearly be
well within its powers to call for addition of the said regulatory fee in
the resolution plan towards cost of CIRP. In this context, the admitted
facts pertaining to the petitioners - Hazel Mercantile Limited and
Suraksha Realty Limited show that in both the cases, the resolution
plan was submitted before the adjudicatory authority for approval /
sanction when the impugned Regulation 31A came into operation
with effect from 01.10.2022. Therefore, it cannot be said that the
regulation fee was sought to be imposed retrospectively on the said
petitioners.

110. In the resolution plan proposed by Hazel Mercantile Limited, it
was recorded that the provisions of the IBC, Rules and Regulations
framed thereunder, as amended from time to time, would apply to
the said resolution plan. It was also specifically provided that the
CIRP costs would be paid upfront under the resolution plan and that
the escalation or increase of CIRP cost shall also be paid in full. The
resolution plan of Suraksha Realty Limited also contained such
clauses and additionally, it contained an undertaking that the said

92/96
WP703_23 & ors.doc

petitioner would pay the CIRP costs as per the IBC and the
Regulations framed thereunder. Thus, even as per the resolution
plans submitted by the petitioners as resolution applicants, the
obligation of payment of insolvency resolution process costs in terms
of the provisions of the IBC, as amended from time to time, was
acknowledged and undertakings were recorded to that effect. This is
another fact indicating that the petitioners cannot be permitted to
wriggle out of the said obligation by raising the argument of
retrospectivity. We also find substance in the contention raised on
behalf of the respondent Board that in a resolution plan, escalation
of the insolvency resolution process costs under the impugned
regulation fee may ultimately require the creditors to take a hit. But
none of the creditors are before this Court, challenging the impugned
regulation and it is only the petitioners i.e. the resolution applicants
are before this Court and that too in the face of acknowledgment of
liability in the resolution plan itself of bearing the insolvency
resolution process costs and escalation thereof under the provisions
of the IBC and the Regulations made thereunder, as amended from
time to time. We are of the opinion that in such circumstances, the
petitioners cannot pray for striking down of the impugned Regulation
31A or the proviso thereto of the IBBI Regulations on the ground of
retrospectivity.

Impugned Regulation 31A of the IBBI Regulations and alleged
colourable exercise of power:

111. The petitioners have also contended that including the
impugned regulatory fee in insolvency resolution process cost
amounts to a colourable exercise of power and it is an artificial levy,
which gives collection of such fee priority over other debts due of a
corporate debtor under the waterfall mechanism under Section 53 of

93/96
WP703_23 & ors.doc

the IBC. Reliance in this regard is placed on judgements of the
Supreme Court in the cases of Raja Jagannath Baksh Singh Vs. State
of Uttar Pradesh and another (supra) and Saurashtra Cement &
Chemical Industries Limited Vs. Union of India (supra). In the said
judgements, the question pertained to imposition of unreasonably
high burden of tax, rendering the levy itself a fraud, being
confiscatory in nature. In the present case, we have already
concluded hereinabove that the impugned regulatory fee, being only
0.25% of the realizable value to creditors under the resolution plan,
cannot be said to be excessive or disproportionate in nature. The
petitioners have failed to demonstrate that it could be said to be
confiscatory in nature.

112. The provisions of the IBC, particularly Sections 5(13)(e),
196(1)(c), 240(2)(d) read with Regulations 31 and 31A of the IBBI
Regulations, when appreciated in the correct perspective, clearly
demonstrate that the impugned regulatory fee is correctly placed
under the insolvency resolution process cost and the same not being
excessive or disproportionate in nature, cannot be said to be
amounting to colourable exercise of power. Apart from this, it is not
even the case of the petitioners that there is any lack of legislative
competence in respect of inclusion of regulatory fee in insolvency
resolution process cost and there is no question of any bona fide or
mala fide on the part of the Legislature to invoke the doctrine of
colourable exercise of power.

113. It is also relevant to note that the petitioners have not even
challenged the validity of Sections 5(13), 53, 196(1)(c) and 240(2)
(d) of the IBC. Even the validity of Regulation 31(ba) of the IBBI
Regulations has not been challenged. In the absence of any such
challenge to the said provisions, the petitioners cannot be heard on

94/96
WP703_23 & ors.doc

the allegation of colourable exercise of power in imposing the
impugned regulatory fee. An attempt was also made on behalf of the
petitioners to claim that framing of Regulation 31A of the IBBI
Regulations to impose regulatory fee amounted to excessive
delegation on the ground that uncontrolled power has been given to
the respondent Board while framing such Regulation. The impugned
Regulation, by way of amendment with effect from 01.10.2022, has
been framed under Section 196(1)(c) read with Section 240(2)(d) of
the IBC. These provisions are not challenged by the petitioners. The
delegation of power to the Board for framing such regulations is not
unbridled or unguided, simply for the reason that Section 196(1)(c)
empowers the Board to levy fee or charge 'for carrying out the
purposes of the Board'. The recovery fee is, therefore, included in
insolvency resolution process cost under Section 5(13)(e) of the IBC
read with Regulation 31(ba) of the IBBI Regulations, and since
insolvency resolution process is an integral part of the very purpose
of the enactment of the Code, the allegation regarding excessive
delegation is wholly misplaced. In any case, under Section 241 of the
IBC, every rule and regulation made under the same is to be laid
before each House of Parliament and therefore, the contention
regarding the impugned Regulation 31A of the IBBI Regulations
suffering from the vice of the excessive delegation, is wholly
unsustainable and accordingly it is rejected.

114. Although amongst the contentions raised on behalf of the
petitioner Suraksha Realty Limited, a reference was made to the
argument that Regulation 31A is violative of Article 14 of the
Constitution of India on the ground that it exempted real estate
allottees, during the course of arguments, the said contention was
not pressed before this Court.

95/96
WP703_23 & ors.doc

CONCLUSION

115. In the light of the discussion hereinabove, we find that the
petitioners have not been able to make good their contentions with
regard to the impugned Regulation 31A of the IBBI Regulations being
either ultra vires the parent Statute i.e. IBC or the Regulation being
arbitrary and hence violating Article 14 of the Constitution of India.
The grounds raised in support of the challenge to the impugned
Regulation have been considered in detail hereinabove. The
petitioners have not been able to make good the said grounds.
Consequently, the declaration sought by the petitioners for quashing
and striking down impugned Regulation 31A of the IBBI Regulations,
cannot be granted and the petitions deserve to be dismissed.

:: ORDER ::

116. Accordingly, all the four petitions are dismissed and the
challenge raised to the validity of impugned Regulation 31A of the
IBBI Regulations, pertaining to imposition of regulatory fee, is
rejected. All pending applications are also disposed of.

(SHREERAM V. SHIRSAT, J.) (MANISH PITALE, J.)

MINAL Digitally signed by
MINAL SANDIP
SANDIP PARAB
Date: 2026.08.19
PARAB 14:37:50 +0530

Priya / Bipin / Minal 96/96

Continue reading with your account

Checking your session…

Lawyer court records for this case

Associated through the court’s case reference.