Kanwal Chaudhary Vs Insolvency And Bankruptcy Board of India & Ors. (Delhi High Court)
Summary: The Delhi High Court considered whether an Advocate acting as an Insolvency Professional is governed by the forward charge mechanism or the reverse charge mechanism for GST purposes. The petition was filed by Mr. Kanwal Chaudhary, an Advocate registered with the Bar Council of Delhi since 1995 and registered as an Insolvency Professional since 27th July, 2017. He had been appointed as Interim Resolution Professional for Ireo Fiveriver Pvt. Ltd. by the NCLT, Delhi Bench, on 13th December, 2018 in CP(IB) No. 408/2018. A dispute arose regarding GST-compliant invoices for his professional fees. The NCLT, by order dated 7th October, 2020, directed payment of the balance amount of Rs. 49,04,988/- and sought clarification regarding liability for GST. The IBBI thereafter, by order dated 9th March, 2021, held that “Insolvency and Receivership” services were not covered under the reverse charge mechanism and directed the Petitioner to submit GST-compliant invoices.
The Petitioner contended that, being an Advocate, he continued to be governed by the reverse charge mechanism applicable to legal services under Notification No. 12/2017 Central Tax (Rate) and Notification No. 13/2017-Central Tax (Rate). Reliance was also placed on orders dated 12th July, 2017 and 18th July, 2017 in J.K. Mittal & Company v. Union of India & Ors. The Respondents, including the GST Department, IBBI and Bar Council of India, contended that GST liability depends upon the nature of services rendered and not merely upon the professional qualification of the service provider. The BCI also stated that services performed by an Advocate as an Insolvency Professional are different from conventional legal services.
