Tribunal: SEBI Regulations Inapplicable During Moratorium Period under I&B Code

The Tribunal ruled that Securities Exchange Board of India (SEBI) regulations do not apply during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016. It held that SEBI cannot recover amounts from the Corporate Debtor during the moratorium, emphasizing the priority of the I&B Code over other laws. The Tribunal also clarified that the Bombay Stock Exchange cannot take coercive actions, such as suspending trading shares, against the Corporate Debtor during the moratorium. The appeal was disposed of with directions favoring the Resolution Professional, without any cost orders.

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Issues:
1. Interpretation of Section 14 of the Insolvency and Bankruptcy Code, 2016 regarding the applicability of moratorium on Regulatory Authorities.
2. Applicability of Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the moratorium period.
3. Jurisdiction of the Bombay Stock Exchange to suspend trading shares of a Corporate Debtor during the moratorium.
4. Conflict between Section 14 of the I&B Code and Section 28A of the SEBI Act, 1992 regarding recovery of amounts from the Corporate Debtor.

Analysis:

1. The Appellant, a Resolution Professional, challenged an order stating that Regulatory Authorities are not covered under the moratorium as per Section 14 of the I&B Code. The Appellant argued that the Securities Exchange Board of India (SEBI) regulations should not apply during the moratorium period. The Respondents contended that SEBI and the Bombay Stock Exchange are not prohibited from taking actions during the moratorium, citing Section 17(2)(e) of the I&B Code.

2. The Tribunal analyzed Section 14(1)(a) of the I&B Code, which declares a moratorium on legal proceedings against the Corporate Debtor. It noted that the Interim Resolution Professional is responsible for complying with all laws on behalf of the Corporate Debtor, including SEBI regulations. The question arose whether penalties under SEBI Act, 1992 could be imposed during the moratorium.

3. The Respondents argued that Section 28A of the SEBI Act, 1992 allows for the recovery of amounts, which they claimed overrides the moratorium under the I&B Code. However, the Tribunal held that Section 238 of the I&B Code gives precedence to its provisions over any other law, thus ruling that SEBI cannot recover amounts or penalize the Corporate Debtor during the moratorium.

4. The Tribunal clarified that the Bombay Stock Exchange cannot take coercive actions against the Corporate Debtor during the moratorium, including suspending trading shares. It emphasized that the Interim Resolution Professional must follow the I&B Code and seek approval from the Committee of Creditors before dealing with any assets, including shares. The Tribunal also highlighted a previous case where statutory dues were considered operational debts, but recovery during the resolution process was not permitted.

In conclusion, the Tribunal modified the impugned order, stating that SEBI cannot recover amounts from the Corporate Debtor during the moratorium period. The appeal was disposed of with the mentioned observations and directions, without any cost orders.

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