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Bombay High Court Upholds IBBI Power to Levy 0.25 Percent Fee on Approved IBC Resolution Plans

  • Writer: Kaustav Chowdhury
    Kaustav Chowdhury
  • 20 minutes ago
  • 4 min read

The Bombay High Court, in a judgment delivered on August 20, 2026, has upheld the power of the Insolvency and Bankruptcy Board of India (IBBI) to levy a 0.25 percent regulatory fee on the realisable value of approved resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). A division bench of Justices Manish Pitale and Shreeram V. Shirsat dismissed a batch of writ petitions in Hazel Mercantile Limited and Others v. Insolvency and Bankruptcy Board of India and Others, holding that the fee imposed under Regulation 31A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, falls squarely within the Board's statutory mandate and does not constitute an unauthorised tax.


Background: Regulation 31A and the Challenge


Regulation 31A was inserted into the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, to require the payment of a regulatory fee calculated at 0.25 percent of the realisable value to creditors under a resolution plan approved under Section 31 of the IBC. The fee applies where the realisable value exceeds the liquidation value, and covers all resolution plans approved on or after October 1, 2022. It is payable by the resolution applicant as part of the insolvency resolution process costs.


Four connected writ petitions were filed before the Bombay High Court challenging the validity of this regulation. The petitioners, comprising successful resolution applicants and related stakeholders, raised several grounds. First, they argued that the IBBI provides no direct, identifiable service to resolution applicants, and the absence of a quid pro quo rendered the levy an illegal tax rather than a legitimate fee. Second, they contended that applying the fee to resolution plans that had already been approved by Committees of Creditors (CoCs) before the regulation was formally notified amounted to unconstitutional retrospective taxation. Third, challenges were mounted on grounds of proportionality and alleged violation of Article 14 of the Constitution, arguing the fee was arbitrary and discriminatory.


The Court's Reasoning and Findings


The Bombay High Court rejected each of the grounds raised by the petitioners. On the central question of whether the levy constitutes a fee or a tax, the bench drew upon established Supreme Court jurisprudence distinguishing between the two categories. The court observed that it is no longer necessary for an authority imposing a fee, particularly a regulatory fee, to demonstrate the exact service rendered as a strict, mathematical quid pro quo. Instead, it is sufficient for the Board to show generalised and broad based services provided to stakeholders in the Corporate Insolvency Resolution Process (CIRP) under the IBC.


The bench noted that the IBBI performs a wide range of regulatory functions that benefit all participants in the insolvency ecosystem. These include registration and regulation of insolvency professionals, oversight of insolvency professional agencies and entities, framing and enforcement of the procedural framework governing CIRP, monitoring of the resolution process, and maintenance of data and information utilities. The court held that these functions constitute a sufficient nexus between the fee collected and the services rendered to the regulated community as a whole, even if no specific service is rendered to a particular resolution applicant at the point of fee collection.


Analysis of the Retrospectivity and Constitutional Arguments


On the question of retrospective application, the court held that the fee is triggered at the point of approval of the resolution plan under Section 31, not at the stage of CoC voting or plan submission. Since the regulation applies to plans approved on or after October 1, 2022, and the regulation was duly notified and in force before the plans in question received NCLT approval, the court found no element of retrospective operation. The fee obligation crystallises at the time of judicial approval, not at any earlier stage in the CIRP timeline.


The bench also dismissed the Article 14 challenge, holding that the classification of resolution applicants whose plans are approved is a reasonable classification bearing a rational nexus to the object of the regulation, namely financing the regulatory infrastructure of the insolvency ecosystem. The 0.25 percent rate was found to be neither excessive nor disproportionate to the regulatory objective, particularly given the value of the resolution plans in question.


Implications for Resolution Applicants and the Insolvency Ecosystem


The ruling provides clarity for resolution applicants and lenders on a question that had created uncertainty in multiple ongoing CIRP proceedings. With the Bombay High Court upholding the fee, resolution applicants must factor this cost into their financial projections when submitting resolution plans. The 0.25 percent levy, while modest in percentage terms, can translate into significant sums for high value resolution plans, making it a material consideration in the commercial viability of bids. The judgment also strengthens the IBBI's financial autonomy as a regulator, ensuring a steady source of funding independent of government budgetary allocations.


For creditors and CoCs, the ruling affirms that the regulatory fee forms part of CIRP costs and is recoverable from the resolution plan proceeds, reinforcing the priority of regulatory compliance costs in the insolvency waterfall. For the broader insolvency ecosystem, the judgment settles a contested legal point and removes a potential ground for delaying plan implementation through satellite litigation.


Key Takeaways


  • The Bombay High Court has upheld Regulation 31A of the IBBI (CIRP) Regulations, confirming the Board's power to levy a 0.25 percent fee on approved resolution plans where the realisable value exceeds liquidation value.

  • A strict, mathematical quid pro quo between fee and service is not required for a regulatory fee. Broad based regulatory services to the insolvency ecosystem are sufficient justification.

  • The fee is not retrospective because it attaches at the point of plan approval under Section 31, not at any earlier stage in the CIRP process.

  • Resolution applicants must account for this regulatory cost when formulating their financial projections and bid calculations.

  • The judgment removes a significant source of litigation that had delayed plan implementation in multiple CIRP proceedings across the country.

  • The ruling strengthens the IBBI's financial independence and its capacity to fund regulatory infrastructure for India's insolvency framework.


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