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TMI Blog2019 (3) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... lls within the ambit of “Regulatory Dues”. Therefore, as a sequel, need not be treated as an operational debt. It is also worth to add in this order that sub-section 3 of section 14 w.r.e.f 06.06.2018 prescribing that the transaction notified in consultation with ‘Financial Sector Regulator’ be not covered under ‘Moratorium’ clauses - keeping in mind the Legislative intent that while applying the “moratorium” as per the provisions of section 14 IBC, vide sub section (3), the provisions of moratorium U/s 14 IBC shall not apply on “Financial sector Regulator”. Had it been not so, the regulator shall be in a disadvantageous position in respect of regulatory dues being treated at par with “Operational Debt” as prescribed under IBC. This view shall put the Financial Sector Regulator at an advantageous pedestal so as to protect the interest of a regulator i.e. SEBI, as defined U/s 3(18) of IBC. As a consequence, the Debtor Company shall not get any shield or protection under the excuse of moratorium in respect of recovery of regulatory dues by the Financial Sector Regulator/SEBI. The right forum to initiate recovery proceedings for non-payment of Listing Fees is not NCLT. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an operational debt under IBC. ( B) Submissions by the Operational Creditor: 6. The Operational Creditor raised an invoice dated 01.04.2017 for an amount of ₹8,85,526/- for the Annual Listing Fees payable for the year 2017-18, and arrears for the Annual Listing Fees payable upto 2016-17, along with interest thereon. However, the Corporate Debtor failed to pay the same despite enjoying the service of continuous listing of its securities. 7. It is further contended that non-payment of Annual Listing Fees qualifies as a claim in favour of the Operational Creditor u/s 3(6) of the Code and consequently, as a Debt owed to the Operational creditor u/s 3(11) of the Code. Therefore, a Demand Notice dated 08.09.2017 as per Form 3 was issued to the Corporate Debtor but nothing fructified. 8. It is finally argued that since the Debtor is not making the payment and all the procedural formalities have been complied with, this Petition/Application may be Admitted for the initiation of the CIRP. ( C) Submissions by the Corporate Debtor: 9. The Corporate Debtor has filed Miscellaneous Application No. 216/2018 (MA 216) seeking dismissal of this petition at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of the Corporate Debtor were suspended, however, the securities continued to be listed with the Operational Creditor. Also, the suspension of Corporate Debtor s shares is inconsequential to the IBC proceedings. 13. It is submitted that the Operational Creditor is a non-governmental entity, a Limited Liability Company carrying out its business on a for profit basis. It is not a public sector undertaking or state owned entity, but in fact a publicly traded company/public limited company whose shares are listed on National Stock Exchange of India Limited. It is a professionally managed body, functioning under the overall direction of its Board of Directors. In any event, the Code does not create distinction amongst government and non-government entity as far as BEFORE THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH CP No. 1718/IBC/NCLT/MB/MAH/2017 the services rendered by any such entity and right accrued thereof on account of non-payment of operational debt. 14. Therefore, owing to the Listing Agreement entered into by the Operational Creditor and the Corporate Debtor, it is contended that the dues of non-payment of listing fees are contractual in nature and not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint (i) discussed above, the Committee noted that regulatory dues were intentionally not included in the definition of operational debt. It was discussed that if any claim or obligation arises pursuant to non-payment by a corporate debtor in lieu of any goods or services provided by a regulatory body, it may be interpreted as operational debt on a case to case basis. For example, the Committee noted that one of the leading stock exchanges had filed applications for initiation of CIRP against certain companies for non-payment of annual listing fees. The Committee also noted that, regulators generally have wide ranging powers to enforce their orders and recover dues. For example, section 24(2) of the SEBI Act, 1992 states as follows: If any person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both. 1.18 With respect to point (ii), the Committee noted that prior to the coming into force of the Code, preferential p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to recover the dues for/from the Stock Exchange (BSE). Relevant paragraph s are reproduced below: SEBI Circular No. CIR/CFD/CMD/12/2015 Dated 30.11.2015 Sub: Non-compliance with certain provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Standard Operating procedure for suspension and revocation of trading of specified securities 1 2. Sub regulations (1) and (2) of regulation 98 of Listing Regulations inter alia specify liability of a listed entity or any other person for contravention and actions which can be taken by the respective stock exchange and the revocation of such actions, in the manner specified by SEBI. 3 .. 4 .. 5 .. 6. Recognized stock exchanges may, having regard to the interests of investors and securities market, take appropriate action in line with the principles and procedures laid down in Annexure I and II and any deviation therefore should not dilute the spirit of the policy contained therein. Any deviation shall be on justifiable reasons to be recorded in writing. The above actions are without prejudice to power of SEBI to take action under securities laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded in the definition of Operational Debt. Because of this final observation as made in Para 1.20 of the Law Commission Report this Bench is of conscientious view that in spite of the fact that there was a listing agreement executed between BSE with the Corporate Debtor being issuing company, but totally governed and supervised by the regulations issued by SEBI dated 02.09.2015. As discussed supra , the regulatory authority i.e. SEBI is already empowered to execute not only its recovery mechanism, but also enshrined with power to punish the defaulter, hence, the insolvency proceedings shall not be gainful either to the Regulator or the Exchange . As a consequence, the debt in question can also be categorised under the head Regulatory Dues . The debt in question thus falls within the ambit of Regulatory Dues . Therefore, as a sequel, need not be treated as an operational debt. 19. Before we part with, it is also worth to add in this order that sub-section 3 of section 14 w.r.e.f 06.06.2018 prescribing that the transaction notified in consultation with Financial Sector Regulator be not covered under Moratorium clauses. By this substitution in Sec.14 IBC the intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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