High Court upholds the Constitutional Validity of Section 204 of IBC and Regulation 23A of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 | Section 204 of IBC is only an enabling provision | Both IBBI and IPAs can initiate parallel proceedings – CA V.Venkata Sivakumar Vs. Insolvency and Bankruptcy Board of India and Ors. – Madras High Court
Hon’ble High Court holds that:
(i) There is no discretion vested with the IPAs and the suspension is automatic, once the disciplinary proceedings are initiated. Therefore, it can neither be termed as manifestly arbitrary nor be challenged on the ground of any confirmation of unguided/unbridled power.
(ii) The requirement of issuance of show cause notice cannot be read into a provision of ad-interim suspension.
(iii) Only to avoid hardships, normally swift and prompt completion of the process of disciplinary proceedings is insisted upon. Therefore, the petitioner or any other aggrieved professional can only insist upon prompt completion of the proceedings and the hardship cannot be a ground for challenging the very regulation itself.
(iv) Accordingly, finding no infirmity, we uphold the constitutional validity of the Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of IPAs) Regulations, 2016.
(v) The very provision of the twin tire control will not give rise to illegality or the presumption of double jeopardy.
(vi) Further, in a given case, for the very same action, it may be possible that both IBBI and IPAs can initiate action. Even under Criminal Law, there can be prosecution and punishment by different agencies or more than one penal provision of law, if the gravamen of the charge differs. If only gravamen of the charge is self same, double jeopardy arises.
(vii) The Regulations and Bye-laws which are framed under Section 204 of the IBC clearly provide checks and balances. The procedure for taking disciplinary action and the appellate remedies are provided. Therefore, it cannot be said to be confirmation of excessive or unbridled power. Section 204 of IBC is only an enabling provision and therefore, we see no constitutional infirmity in any of the provisions under Section 204 (a) (b) (c) (d) and (e) of IBC.
