2021 (12) TMI 907 - AT - Insolvency and Bankruptcy

Appeal Dismissed: Time-barred, Listing Agreement Invalid, Dues Regulatory

BSE LIMITED Versus KCCL PLASTIC LIMITED, (EARLIER KNOWN AS KOSHA CUBIDOR CONTAINERS LIMITED)

The appeal under Section 9 of the Insolvency and Bankruptcy Code was dismissed due to being time-barred by limitation, the invalidity of the Listing ... Right to apply under Section 9 of IBC - Regulatory Dues versus Operational Debt’ - failure to pay requisite Annual Listing fees (“ALF”) on or before the 30th day of April, every year. - Period of limitation - it is apparent that the Respondent’s continuous default is not merely restricted to the initial date of default but on every subsequent occasion when the Respondent was obliged to make payments but failed to pat ALF - HELD THAT:- Ld. Adjudicating Authority has rightly come to the conclusion that the agreement so filed cannot be relied upon, as the same is not a valid agreement in the eye of law, so Learned Counsel for the Appellant relied on an order passed by this Appellate Tribunal in B.S.E. LTD. VERSUS NEO CORP INTERNATIONAL LTD. [2019 (4) TMI 2032 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] is not applicable in this matter. Listing Fees comes under the ambit of ‘Regulatory dues’ which SEBI is entitled to recover. The Respondent being an entitly registered under SEBI, is under an obligation to follow the Regulations prescribed by SEBI for recovery of its dues. The dues so said are not ‘Operational Dues’ but ‘Regulatory Dues’. The Insolvency Law Committee suggests that Regulatory Dues are not to be recovered under ‘Operational Debt’. Appeal dismissed. Issues Involved:1. Whether the right to apply under Section 9 of the Insolvency and Bankruptcy Code (IBC) is subject to limitation.2. Whether the failure to pay Annual Listing Fees (ALF) constitutes a continuous cause of action.3. Validity of the Listing Agreement between the parties.4. Classification of Listing Fees as 'Operational Dues' or 'Regulatory Dues'.Detailed Analysis:Issue 1: Limitation under Section 9 of IBCThe Appellant argued that the default in payment of ALF was a continuous default, not limited to a single date, and thus should not be barred by the three-year limitation period under Article 137 of the Limitation Act. The Learned Counsel for the Appellant contended that the default was ongoing, with separate invoices raised post-2015, which should be considered for the limitation period. However, the Adjudicating Authority found that the debt fell due on 01.04.2015, and since the application was filed beyond three years from this date, it was barred by limitation.Issue 2: Continuous Cause of ActionThe Appellant maintained that the failure to pay ALF constituted a continuous cause of action linked to the services provided by the Appellant and availed by the Respondent until 2019. The Appellant argued that the Respondent's continuous use of the listing services implied acknowledgment of the debt. However, the Adjudicating Authority did not accept this argument, noting that the last payment was made on 31.05.2013, and subsequent defaults did not extend the limitation period.Issue 3: Validity of the Listing AgreementThe Adjudicating Authority questioned the validity of the Listing Agreement, noting discrepancies such as blank pages and the absence of signatures on all pages except the last one. Additionally, the agreement was originally with 'Kosha Cubidor Containers Ltd.,' which later changed its name to 'KCCL Plastic Ltd.' The Authority found no new agreement reflecting this change, thus deeming the agreement invalid. The Appellate Tribunal upheld this view, agreeing that the agreement could not be relied upon as it was not legally valid.Issue 4: Classification of Listing FeesThe Tribunal noted that Listing Fees fall under 'Regulatory Dues' recoverable by SEBI, not 'Operational Dues.' The Insolvency Law Committee suggests that Regulatory Dues should not be recovered under 'Operational Debt.' Therefore, the Appellant's claim for unpaid ALF did not qualify as an operational debt under the IBC. The Tribunal affirmed that the dues in question were regulatory, not operational, and thus not recoverable through the insolvency process.Conclusion:The Tribunal concluded that the application under Section 9 of the IBC was rightly dismissed by the Adjudicating Authority as it was barred by limitation, the Listing Agreement was invalid, and the dues were regulatory in nature. Consequently, the impugned order dated 31.12.2020 was affirmed, and the appeal was dismissed with no order as to costs.