SEBI not entitled to recover penalty from
Corporate Debtor During Moratorium
Anju Agarwal (RP
for Shree Bhawani Paper Mills Ltd.) vs. Bombay Stock Exchange & Ors
- The Resolution Professional (‘Appellant’) of Shree Bhawani Paper Mills Ltd. (‘Corporate Debtor’) challenged NCLT Allahabad order whereby it was held that Regulatory Authorities are not covered under moratorium as provided u/s 14 of the IBC. NCLT had held that BSE is not barred from compelling Corporate Debtor to comply with SEBI’s LODR Regulations.
- Rejecting BSE’s contention, NCLAT elucidated that as per Sec. 14 (1) (a) of IBC, the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority is prohibited. Hence, NCLAT stated that Sec. 28A of the SEBI Act contravened Sec. 14 of IBC.
- Further, on perusing Sec. 238 of IBC which is an overriding provision, NCLAT held that Sec. 28A of SEBI Act is inconsistent with Section 14 of the Code, and Sec. 14 will prevail. NCLAT thus held that SEBI couldn’t recover any amount including penalty from Corporate Debtor, and for the same reason, BSE could not take any coercive steps against Corporate Debtor nor can threaten suspension of trading of shares.
- References given -Maharashtra Seamless Ltd. vs. Shri Padmanabhan Venkatesh & Ors.─Company Appeal (AT) (Insolvency) No. 220 of 2019 .Innoventive Industries Limited vs. ICICI Bank and Another
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