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TMI Blog2020 (10) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... e the development to regulate the securities and for matters connected therewith - it is evident that IBC is clearly a time bound action with a wider remit, whereas SEBI was given a broad mandate to protect the interest of investors and the IBC which had brought into force after considering various acts prevailing at that point of time must have also been considered SEBI Act and its implication in the corporate debtor and its operations. Therefore Section 14(1) in IBC which came into force after the enactment of IBC 2016 has precedence over Section 28A of SEBI Act. It is pertinent to go through the judgment of the Hon'ble Supreme Court in Innoventive Industries. Vs. ICICI Bank and others [ 2017 (9) TMI 58 - SUPREME COURT ] where Hon'ble Supreme Court shows the primacy of IBC over other Acts. Thus, the issue framed in the instant application got an overwhelming affirmative answer that Sections 14 and 238 of IBC has an overriding impact on Section 28A of SEBI Act when an application is admitted under CIRP under Section 7, 9 or 10 of IBC - As both the Central Acts are having similar objectives, instead of clinging to over the supremacy of the Act the Recovery Officer appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.8.2017 where the SEBI found that the Corporate Debtor had not complied with the public issue norms ie., provisions of the Companies Act and SEBI regulations that govern the issue of securities to the public with respect to its issuances of equity shares, non-convertible debentures and preference shares. Hence by final order SEBI directed the CD and its directors jointly and severally to refund the monies collected from investors with interest at 15% per annum within six months making it clear that if they failed to comply with the direction of refund, SEBI shall initiate recovery proceedings in accordance with provisions of the SEBI Act. The CD filed an appeal before the Securities Appellate Tribunal (SAT) vide appeal No. 262/2017. Another Appeal No. 5/2018 has been preferred by the directors. Both appeals were dismissed by the SAT on 20.5.2019 for want of prosecution. In view of the non-compliance by the CD and its directors to refund the monies due to the investors, as directed vide SEBIs final order, SEBI initiated recovery proceedings under Section 28A of the SEBI Act, by drawing up a Recovery Certificate against the Corporate Debtor and its directors/promoters for an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be achieved by the Tribunals order. (c) The claims made by the operational creditors in the matter amount to few lakhs. However, the recovery proceedings by SEBI is for recovery of ₹ 261 crores for all investors who had subscribed to the securities illegally/irregularly issued by the CD. (d) The Tribunal has no jurisdiction to issue any order or direction in conflict to SEBI which is another statutory authority under an independent Central Legislation. The corporate insolvency resolution process would be inappropriate as it applies only in respect of a corporate debtor who has engaged only in lawful activity. (e) As the order of SEBI was upheld by the SAT, the investors who had subscribed to the securities issued by the CD were covered by such action and monies recovered thereon would have been distributed to them. (f) The Tribunal may not have jurisdiction as investors who subscribed to the securities issued by the CD cannot be termed as financial creditors or operational creditors . (g) The provisions of SEBI Act 1992 are not overridden by the provisions of the IBC by virtue of Section 238 of the IBC 2016 since SEBI Act deals with investor protection issues and not with c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relates to recovery of amounts; if a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any direction of the Board for refund of moneys or fails to comply with a direction for disgorgement order issued under Section 11B or fails to pay any fees due to the Board, the Recovery officer may draw up under his signature and statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes: (a) Attachment and sale of the persons moveable property (b) attachment of the persons bank accounts. (c) attachment and sales of the persons immoveable property (d) arrest of the person and his detention in prison 5. Appointing a receiver for the management of the persons' movable and immoveable properties, and for this purpose, the provisions of Sections 220 to 227, 228A, 229, 232, the second and third schedules to the Income Tax Act, 1961 and and the Income Tax (Certificate proceedings) Rules, 1962 as in force from time to time, in so far as may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Period. 8. The applicant in the IA filed a counter to the written statement of the RP reiterating most of his contentions in the IA. He has further stated that the applicants in the TIBA have suppressed material facts and without impleading SEBI obtained an order appointing the IRP in the above matter. 9. The financial creditors have filed a written argument stating that Parliament was very well aware about the SEBI Act at the time when IBC which is a complete code in itself was enacted. Section 238 of the IBC unequivocally provides that the provisions of the IBC shall have the effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Therefore, he opined that any provision under any other enactment including SEBI Act which contravenes or that portion which stands inconsistent with the provisions of the IBC will have any effect, if covered by the provisions of IBC 2016. Therefore, consequently any exercise of power under SEBI Act which stands inconsistent or which collides with the action initiated under IBC will not be operational. The proceedings initiated as per IBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes: (a)Attachment and sale of the persons moveable property (b) attachment of the persons bank accounts. (c) attachment and sales of the persons immoveable property (d) arrest of the person and his detention in prison 12. To determine whether Section 28A has a contravention with Section 14(1)(a) of the IBC, we have gone through Section 14(1)(a) which reads as under: 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. 13. IBC which is a complete code in itself was enacted in the year 2016 and the law makers after considering the various acts prevailing at that time have framed the IBC to have a faster resolution process at par with developed countries with the primary objective of maximisation of value of assets to all stake holders. The preamble of IBC clearly mentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Insolvency) No. 65 of 2018 dated 9th May, 2019 in which it was observed as under: 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. Though NCLAT have held that the application under Section 7 is maintainable while step has been taken by the 'Securities and Exchange Board of India' the 'Resolution Professional' is required to act in terms of Section 17(2) (e) of the 'I B Code' for complying with the requirements under the 'Securities and Exchange Board of India Act' and Regulations framed thereunder as well as the guidelines issued by the Regulatory Authority. It is also made clear that the 'Securities and Exchange Board of India' is however entitled to take action against individual including the former Directors and Shareholders of the 'Corporate Debtor'. 17. From the above decided case laws, the issue framed in the instant application got an overwhelming affirmative answer that Sections 14 and 238 of IBC has an overriding impact on Section 28A of SEBI Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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