IBBI empowered to levy 0.25% regulatory fee on qualifying insolvency plans, Bombay High Court upholds Regulation 31A

The petitions challenged Regulation 31A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, introduced with effect from 1 October 2022.

The regulation imposed a regulatory fee of 0.25% of the realisable value to creditors under a resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), where that value exceeded the liquidation value; the fee was included within insolvency resolution process costs under Regulation 31(ba).

The petitioners in W.P. Nos. 703 of 2023 and 1560 of 2025 were successful resolution applicants whose resolution plans had been approved by the Committee of Creditors (“CoC”) before or during the pendency of approval proceedings before the National Company Law Tribunal (“NCLT”). They challenged subsequent demands for regulatory fee.

The Supreme Court transferred W.P. Nos. 243 and 244 of 2024 to the Bombay High Court for hearing with W.P. No. 703 of 2023.

Whether Regulation 31A was within the statutory and regulatory powers of the IBBI under Sections 196(1)(c), 240(2)(d) and 5(13)(e) of the IBC?

Whether the regulatory fee was in substance a tax rather than a fee because the IBBI did not provide a direct service or establish quid pro quo to successful resolution applicants?

Whether the regulatory fee was excessive, disproportionate, arbitrary or violative of Article 14 of the Constitution?

Whether the proviso to Regulation 31A operated retrospectively by applying to resolution plans approved by the CoC before 1 October 2022 but approved by the NCLT thereafter?

Whether inclusion of the regulatory fee within insolvency resolution process costs constituted a colourable exercise of power or excessive delegation?

Section 196(1)(c) of the IBC empowers the IBBI to levy fees or other charges “for carrying out the purposes of” the IBC, in addition to registration and renewal fees for insolvency service providers.

Section 240(1) and Section 240(2)(d) authorise the IBBI to make regulations consistent with the IBC, including regulations specifying “other costs” under Section 5(13)(e).

Section 5(13)(e), read with Regulations 31 and 31A, permits other costs specified by the Board to be treated as insolvency resolution process costs.

The Court held that ejusdem generis and noscitur a sociis could not restrict Section 5(13)(e), since clauses (a)–(d) describe distinct categories of costs and clause (e) is a residuary provision.

On fees, the Court applied the principle that strict or direct quid pro quo is unnecessary for a regulatory fee; a broad and general relationship between the levy and the regulatory services or benefits is sufficient, provided the levy is not excessive.

Under Sections 30(2)(a), 31 and 53(1)(a), insolvency resolution process costs are payable in priority, and the NCLT retains an adjudicatory role in ensuring that the resolution plan complies with the IBC.

The Court rejected the petitioners’ narrow construction of the IBBI’s role as being confined to insolvency professionals, insolvency professional agencies and information utilities.

Sections 196 and 240 demonstrate that the IBBI regulates several aspects of the CIRP, including CoC constitution and functioning, voting, information memoranda, resolution-process costs and resolution plans; this regulatory framework benefits the CIRP ecosystem and all stakeholders, including resolution applicants.

Consequently, Section 196(1)(c)’s broader words—fees or charges for carrying out the purposes of the IBC—authorised the levy, while Section 5(13)(e) and Section 240(2)(d) supported its inclusion in CIRP costs.

The levy was held to be a regulatory fee, not a tax.

Although the IBBI need not establish a service rendered individually to each successful resolution applicant, it demonstrated a broad regulatory nexus through its supervision and structuring of the CIRP.

The Court also found no sufficient material showing that the 0.25% levy was excessive or disproportionate; the fact that the IBBI generated a surplus after introduction of the fee did not by itself invalidate the levy, particularly since the funds were retained for the Board’s regulatory functions rather than credited to general State revenues.

The Court further held that Regulation 31A was prospective because it applied to resolution plans approved under Section 31 on or after 1 October 2022.

Approval by the CoC binds the CoC and resolution applicant as a matter of commercial finality, but the NCLT must still determine statutory compliance under Section 31, including provision for CIRP costs.

Therefore, applying Regulation 31A while the plan remained pending before the NCLT did not amount to retrospective operation or impairment of a vested right.

The petitioners’ own resolution plans also contemplated payment of CIRP costs and amendments to the IBC framework and regulations.

Finally, because the levy was authorised by the statutory scheme, was not shown to be confiscatory or excessive, and the enabling provisions themselves were not challenged, the allegations of colourable exercise of power and excessive delegation failed.

All four writ petitions were dismissed, the challenge to Regulation 31A was rejected, and all pending applications were disposed of.