Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India & Ors.

01 · Facts of the case and issues

The petitioner had practised as an advocate since 1995 and was registered as an insolvency professional on 27 July 2017. On 13 December 2018 the NCLT appointed him interim resolution professional for Ireo Fiveriver Pvt. Ltd. in CP(IB) 408/2018. After he raised professional-fee invoices dated 13 August and 31 October 2019, a dispute arose over unpaid fees and the successor resolution professional’s request for GST-compliant invoices. The petitioner maintained that his advocate status meant he did not need GST registration and that any GST was payable by the corporate debtor under reverse charge.

The NCLT’s order of 7 October 2020 directed payment of the balance professional fees of ₹49,04,988 and referred the GST question to IBBI. IBBI’s clarification of 9 March 2021 stated that insolvency and receivership services were outside reverse charge and required the petitioner to issue GST-compliant invoices for his IRP fees. The writ petition challenged that clarification and sought reverse-charge treatment for an advocate’s work under the IBC. The ₹49,04,988 figure is the historical balance-fee direction, not a GST demand quantified by this High Court judgment.

The High Court had stayed the clarification in September 2021 and continued interim protection during the petition. It obtained the Bar Council of India’s position, completed final hearing and reserved judgment on 9 July 2026. The final dispute was whether the relevant service was ordinary advocate legal work or the separately regulated service of an insolvency professional.

Source: Paragraphs 4–23, physical pp. 2–6; issue identified in paragraphs 31–32, p. 16.

02 · Discussion and reasoning of the Hon’ble Court

The petitioner argued that the definition of legal services was broad enough to include insolvency work, that the insolvency examination was substantially legal, that advocates should retain the reverse-charge treatment associated with their profession and that a different classification could endanger their Bar enrolment. A jurisdictional objection to IBBI was also raised. These were submissions, not findings adopted by the Court. The GST Department, IBBI, the successor resolution professional and BCI supported distinguishing the service supplied from the supplier’s underlying qualification.

The Court treated supplier liability under Section 9(1) as the default and recipient liability under Section 9(3) as applying to notified categories. It considered Notifications 12/2017 and 13/2017-Central Tax (Rate), the 25 September 2017 corrigendum and the J.K. Mittal litigation concerning advocate legal services. It then examined the IBC and IBBI regulatory framework: insolvency professionals have their own registration, eligibility, functions and duties, and entrants may come from several professional backgrounds. Insolvency services were not separately included in the reverse-charge categories considered by the Court, so the default mechanism applied.

Classification was central. The judgment distinguished legal services under group 99821 from the specific insolvency and receivership service code 998241. It treated the latter as its own category rather than the residual legal-services entry. The explanatory notes favour a specific description over a general one; the Court referred to Moorco (India) and A.R. Thermosets in applying that classification principle. The nature and capacity of the work performed, not merely the professional qualification held, therefore determined the treatment.

An advocate carrying out an insolvency appointment acts as an insolvency professional for that supply. The Court considered that professional class subject to the IBC/IBBI regime and rejected different GST treatment solely because some members are advocates. BCI’s affidavit supported the distinction from conventional legal practice. The Court also rejected the concern that this classification necessarily jeopardised advocate enrolment: the IBBI regulations expressly recognised advocates as eligible, and the statutes were to be read harmoniously. This is not a general permission for advocates to conduct any unrelated business, nor a universal ruling on IBBI’s competence over all tax disputes.

Source: Submissions: paragraphs 24–30, pp. 6–16. Charge mechanisms: paragraphs 34–65, pp. 17–27. Independent statutory class: paragraphs 68–87, pp. 28–34. Classification: paragraphs 88–96, pp. 34–42. BCI and harmonisation: paragraphs 97–110, pp. 42–46.

03 · Judicial decision and operative relief

The Court held that IBBI’s 9 March 2021 clarification reflected the correct position and that the challenge was untenable. Its operative directions were: advocates enrolled with the Bar Council who act as insolvency professionals under the IBC are governed by forward charge; they must obtain GST registration and comply with consequential requirements in the same manner as insolvency professionals as a class; the direction is confined to services rendered in the insolvency-professional capacity and does not alter the GST payment mechanism otherwise applicable to legal services supplied in the advocate capacity; and this petitioner must provide GST-compliant invoices for his IRP fees in CP(IB) 408/2018.

The petition and pending applications were disposed of on those terms. The operative order does not fix a GST rate, quantify a new tax demand, award a refund or impose an amount of interest or penalty. It does not decide how any recipient’s earlier reverse-charge payment should be adjusted. Its registration direction should be reported with its express same-class qualification, rather than expanded into a statement that all statutory thresholds or exemptions are removed.

Source: Paragraphs 111–114, physical pp. 46–48; directions in paragraph 113(i)–(iii), pp. 47–48.

04 · In favour of

Final substantive rejection of the challenge to IBBI’s clarification, with forward-charge and compliant-invoice directions. The earlier interim protection during the writ proceedings is not the final result. No remand or separate quantified monetary award.

Source: Paragraphs 18–19, p. 6, for interim history; paragraphs 112–114, pp. 47–48, for final result.