2019 (7) TMI 578 - AT - Insolvency and Bankruptcy

Admissibility of petition - Appellant submitted that Securities and Exchange Board of India having already taken action against the Corporate Debtor , the application under Section 7 was not maintainable - whether contesting Respondent is Financial Creditor or not - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The application under Section 7 is maintainable and till the period of Moratorium continues, the Securities and Exchange Board of India cannot recover any amount nor can sell the assets of the Corporate Debtor during the Moratorium period.

Summary

Issues:
1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Role of Securities and Exchange Board of India in the insolvency proceedings.
3. Conflict between provisions of the SEBI Act, 1992 and the Insolvency and Bankruptcy Code, 2016.

Issue 1: Maintainability of the application under Section 7:
The appeal was filed against the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellant argued that since the Securities and Exchange Board of India had already taken action against the Corporate Debtor, the application under Section 7 was not maintainable. The Respondents, including the group of investors, filed the insolvency petition due to frustration caused by delays in SEBI's actions against the Corporate Debtor.

Issue 2: Role of Securities and Exchange Board of India:
The Securities and Exchange Board of India had taken action against the Corporate Debtor for operating unauthorized Collective Investment Schemes, leading to a recovery certificate being issued against the Corporate Debtor. The SEBI's actions included attaching the Corporate Debtor's immovable properties. The SEBI's role was crucial in the insolvency proceedings, as it had a significant impact on the financial status of the Corporate Debtor.

Issue 3: Conflict between SEBI Act and I&B Code:
The judgment analyzed the conflict between Section 14 of the Insolvency and Bankruptcy Code, 2016, which imposes a moratorium on legal proceedings against the Corporate Debtor, and Section 28A of the SEBI Act, 1992, which allows for the recovery of amounts. The Tribunal held that the provisions of the I&B Code would prevail over the SEBI Act, stating that SEBI cannot recover any amount or take coercive actions against the Corporate Debtor during the moratorium period. The Resolution Professional was tasked with compliance with SEBI regulations, while SEBI retained the right to take action against individuals associated with the Corporate Debtor.

In conclusion, the Tribunal dismissed the appeal, holding that the application under Section 7 was maintainable. It clarified that SEBI could not recover amounts or sell assets of the Corporate Debtor during the moratorium period. The Resolution Professional had to comply with SEBI regulations, and SEBI could take action against individuals linked to the Corporate Debtor.