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of <h1>BSE debarment for SEBI non-compliance makes resolution applicant ineligible under Section 29A(f) of Insolvency Code</h1> <h3>AGGARSAIN SPINNERS LIMITED, Mr. RAMESH GARG Versus SHREEJI COTFAB LIMITED, MR. JALESH KUMAR GROVER, COMMITTEE OF CREDITORS</h3> AGGARSAIN SPINNERS LIMITED, Mr. RAMESH GARG Versus SHREEJI COTFAB LIMITED, MR. JALESH KUMAR GROVER, COMMITTEE OF CREDITORS - TMI Issues Involved:1. Ineligibility of the Appellant under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016.2. Validity of SEBI's debarment order and its compliance with natural justice principles.3. Delegation of powers by SEBI to BSE.4. Adjudicating Authority's decision-making process and adherence to legal standards.Detailed Analysis:1. Ineligibility of the Appellant under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016:The Appellant was declared ineligible to be a resolution applicant under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016, due to being debarred by SEBI from accessing the securities market. The Adjudicating Authority, in its order dated 24.05.2022, held that the Appellant was ineligible to submit the resolution plan due to the debarment order by SEBI, which was in effect at the time of the submission and approval of the resolution plan by the Committee of Creditors (CoC).2. Validity of SEBI's Debarment Order and Compliance with Natural Justice Principles:The Appellant argued that the SEBI's debarment order was punitive and violated the principles of natural justice, specifically the 'audi alteram partem' rule, as it was passed without providing an opportunity for a hearing. The Appellant contended that the debarment order did not comply with Section 11(4) of the SEBI Act, 1992, which mandates that such orders be in writing and contain reasons. However, the Respondent countered that SEBI's actions were administrative and fell under Section 11(1) of the SEBI Act, which does not require a hearing or a written order with reasons. The Tribunal upheld the Respondent's view, citing the Supreme Court's decision in Sahara India Real Estate Corporation Limited & Ors. Vs. SEBI, which stated that SEBI's regulatory powers under Section 11(1) are broad and not limited by the procedural requirements of Section 11(4).3. Delegation of Powers by SEBI to BSE:The Appellant argued that SEBI did not delegate its powers to BSE as required under Section 19 of the SEBI Act, and hence, BSE could not issue the debarment order. The Tribunal, however, found that BSE acted in accordance with SEBI's circulars dated 10.10.2016 and 01.08.2017, which provided the framework for actions against non-compliant Exclusively Listed Companies (ELCs). The Tribunal noted that the BSE's notice dated 28.03.2018 was based on SEBI's administrative directives and was within the scope of SEBI's regulatory powers under Section 11(1).4. Adjudicating Authority's Decision-Making Process and Adherence to Legal Standards:The Tribunal examined the Adjudicating Authority's process and found that it correctly applied the relevant legal standards. The Authority considered the Appellant's ineligibility under Section 29A(f) due to the SEBI debarment and appropriately dismissed the Appellant's applications. The Tribunal also noted that the Appellant had previously challenged the SEBI debarment in the Punjab and Haryana High Court but had withdrawn the petition, choosing instead to raise the issue before the Tribunal. The Tribunal emphasized that challenges to the validity of SEBI's orders should be addressed in the appropriate forum, such as a writ court, rather than in insolvency proceedings.Conclusion:The Tribunal dismissed the appeals, affirming the Adjudicating Authority's orders declaring the Appellant ineligible under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016. The Tribunal found no merit in the Appellant's arguments regarding the validity of SEBI's debarment order and the delegation of powers to BSE. The Tribunal also excluded the period spent during the proceedings before it from the insolvency resolution process timeline.
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