Ruling that the National Company Law Tribunal (NCLT) is not the right forum to initiate recovery proceedings for non-payment of ‘annual listing fees,’ the tribunal’s Mumbai Bench has said that the listing agreements are subject to the control and supervision of the Securities and Exchange Board of India (SEBI).

The ruling came in a plea filed by the Bombay Stock Exchange (BSE) against Asahi Infrastructure & Projects.

The Bench of MK Shrawat, Member (Judicial), observed that the debt in question falls within the ambit of “regulatory dues”. Therefore, as a sequel, they need not be treated as operational debt.

While dismissing the petition filed by the BSE under Section 9 (application for initiation of corporate insolvency resolution process by operational creditor) of the Insolvency and Bankruptcy Code (IBC), the tribunal said the petitioner has the liberty to approach the appropriate forum and take legal steps for which it is entitled to.

BSE, in a statement in December 2017, said a few listed companies had failed to pay the listing fee for the last few years in spite of advance intimation, reminders and grant of sufficient time. Such companies — numbering about 130 — continue to be listed and traded on the BSE.

Proceedings have already been initiated against seven such defaulters before the NCLT, Mumbai, the exchange said.

Law panel’s observation

The tribunal referred to the Insolvency Law Committee’s March 2018 report wherein an observation is made that SEBI has wide ranging powers to enforce its orders and recover dues. Further, it mentioned that the Law Commission has given an example of Section 24 (2) of SEBI Act, 1992, that if any person fails to pay the penalty imposed or fails to comply with any of directions, he/she shall be punishable with imprisonment etc.

The ccommission, after due deliberation, unanimously agreed that regulatory dues need not be included 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 the BSE with the corporate debtor, it [the issue] is totally governed and supervised by the regulations issued by SEBI.

“As discussed supra (above), the regulatory authority (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 (front-line regulator),” said the Bench.

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