Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases SEBI SEBI + AT SEBI - 2020 (10) TMI AT This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2020 (10) TMI 1332 - AT - SEBI


Issues Involved:
1. Legality and validity of the SEBI Adjudicating Officer's order imposing a penalty.
2. Applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) on SEBI proceedings.
3. Interpretation of the term "proceedings" under Section 14(1)(a) of the IBC.
4. Use of external aids in interpreting Section 14 of the IBC.

Detailed Analysis:

1. Legality and Validity of SEBI's Order:
The appeal questioned the legality and validity of the SEBI Adjudicating Officer's order dated 29th May 2020, which imposed a penalty of Rs. 20 lakhs on the appellant under Section 15A(b) and 15HB of the SEBI Act. The order directed the appellant to pay the amount within 45 days, failing which recovery proceedings would be initiated under Section 28A of the SEBI Act.

2. Applicability of Moratorium under Section 14 of the IBC:
The appellant, a housing finance company undergoing corporate insolvency resolution, argued that the moratorium under Section 14 of the IBC prohibited the initiation or continuation of proceedings against the corporate debtor. The appellant cited Supreme Court decisions to support the claim that no proceedings could be instituted or continued during the moratorium period.

3. Interpretation of "Proceedings" under Section 14(1)(a) of the IBC:
The adjudicating officer contended that the moratorium under Section 14 of the IBC did not prevent the determination of liability but only the enforcement/recovery of the determined liability. The officer relied on the Insolvency Law Committee's observations, which differentiated between assessing liability and recovering it. The officer concluded that the proceedings to determine liability for non-compliance with ILDS and LODR Regulations could continue despite the moratorium.

4. Use of External Aids in Interpreting Section 14 of the IBC:
The appellant argued that the adjudicating officer's reliance on the Insolvency Law Committee's report to interpret Section 14 of the IBC was erroneous and amounted to contempt of the Supreme Court's decisions. The appellant maintained that the provision was clear and explicit, requiring no external aid for interpretation.

Judgment Summary:

Applicability of Moratorium:
The Tribunal held that under Section 14 of the IBC, the institution or continuation of proceedings against the corporate debtor is prohibited once a moratorium is declared. This includes the execution of any judgment or order by any court, tribunal, arbitration panel, or authority. The provision is clear and explicit, prohibiting SEBI from initiating or continuing proceedings against the corporate debtor during the moratorium.

Supreme Court Precedents:
The Tribunal referenced Supreme Court cases, including Alchemist Asset Reconstruction Company Ltd. vs. Hotel Gaudavan Pvt. Ltd. & Ors. and Rajendra K. Bhuta vs. Maharashtra Housing and Area Development Authority, which affirmed that the moratorium under Section 14(1)(a) prohibits the institution or continuation of proceedings against the corporate debtor.

External Aid in Interpretation:
The Tribunal found that the adjudicating officer's reliance on the Insolvency Law Committee's report was inappropriate, as the provision of Section 14 is unambiguous and does not require external aid for interpretation. The Supreme Court's interpretation of Section 14 should have been followed.

Conclusion:
The Tribunal quashed the impugned order imposing the penalty and the subsequent recovery proceedings under Section 28A of the SEBI Act. It also quashed the show cause notice and the entire proceedings initiated by the adjudicating officer, concluding that no proceedings could be instituted once the moratorium under Section 14 of the IBC had come into effect.

The appeal was allowed, and the order was digitally signed due to the Covid-19 pandemic, directing all concerned parties to act on the digitally signed copy.

 

 

 

 

Quick Updates:Latest Updates