2021 (12) TMI 914 - AT - Insolvency and Bankruptcy

Appeal Dismissed: Listing Fees Not Operational Debts

BSE Ltd. Versus Asahi Infrastructure & Projects Ltd.

The appeal was dismissed as the listing fees were deemed regulatory dues and not operational debts under the Insolvency and Bankruptcy Code. Therefore, ... Initiation of CIRP - Operational Creditors or not - listing fee and its arrears levied by the BSE - The learned Adjudicating Authority after considering the submissions of the parties and after referring to Report of the Insolvency Law Committee, rejected the Application under Section 9 holding that dues of ‘regulatory fee’ cannot be termed as an ‘operational debt’ - HELD THAT:- The Insolvency and Bankruptcy Code, 2016 was published in the Gazette of India on 28th May, 2016. After working the Insolvency and Bankruptcy Code, 2016, the law which consolidate and amend the laws related to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets and working of the Code was keenly watched by all stakeholders, the Government setup a Insolvency Law Committee, to make recommendations to the Government on issues arising from the implementation of the Insolvency and Bankruptcy Code, 2016 as well as on the recommendations received from various stakeholders. A Committee under the Chairmanship of Shri Injeti Srinivas examined the working of the Code and made recommendations proposing amendment to the Code. With regard to Section 5 (8), i.e. ‘financial debt’, there was lot of debate and several stakeholders recommended to the Committee to make suitable amendment to protect the rights of home buyers - When the Insolvency Law Committee has categorically in the Report, as extracted above, held that ‘regulatory dues’ need not be included in the definition of ‘operational debt’, the said opinion of experts, cannot be brushed aside. The recommendations given by Insolvency Law Committee Report is in line with the object of the Code. In event, it is held that all kind of dues including ‘regulatory dues’, the insolvency resolution process can be triggered, then the entire purpose of the object of the IB Code will be lost and insolvency proceedings will turn into recovery proceedings for the dues of creditors, which is not the object of the IB Code. The submission of the learned Counsel for the Appellant that there is no method for recovery of dues provided by the SEBI, cannot be accepted as SEBI is empowered to punish the defaulters for the recovery of regulatory dues. There are ample provisions for recovering under the SEBI Act and the circulars issued by the SEBI from time to time. Adjudicating Authority did not commit any error in rejecting the Application under Section 9 filed by the Appellant - appeal dismissed. Issues Involved:1. Whether the claim of the Appellant regarding listing fee and its arrears are 'operational debt' within the meaning of the Insolvency and Bankruptcy Code (IB Code)Rs.2. Whether the Appellant can initiate insolvency proceedings under Section 9 of the IB Code for recovery of listing feesRs.Issue-wise Detailed Analysis:1. Whether the claim of the Appellant regarding listing fee and its arrears are 'operational debt' within the meaning of the Insolvency and Bankruptcy Code (IB Code)Rs.The Appellant, Bombay Stock Exchange Limited (BSE), filed an application under Section 9 of the IB Code against the Corporate Debtor for non-payment of listing fees amounting to Rs. 8,85,526/-. The Corporate Debtor opposed the application, arguing that the listing fees are not an 'operational debt' but a 'regulatory fee' under Regulation 14 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Adjudicating Authority dismissed the application, stating that regulatory fees cannot be termed as 'operational debt'.The definition of 'operational debt' under Section 5(21) of the IB Code includes claims in respect of the provision of goods or services, including employment, or a debt in respect of payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government, or any local authority. The Tribunal noted that the legislative intent was not to include regulatory fees within the definition of 'operational debt'. The Insolvency Law Committee Report also concluded that regulatory dues need not be included in the definition of 'operational debt'.2. Whether the Appellant can initiate insolvency proceedings under Section 9 of the IB Code for recovery of listing feesRs.The Tribunal considered the purpose and object of the IB Code, which is insolvency resolution of corporate persons, not the recovery of dues of creditors. The Supreme Court in Swiss Ribbons Private Limited & Anr. vs. Union of India and Ors. emphasized that the IB Code is not a mere recovery legislation for creditors but aims to ensure the revival and continuation of the corporate debtor. The Tribunal referred to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, which classify the listing department as a regulatory department, indicating that listing fees are regulatory fees.The Tribunal rejected the Appellant's contention that there is no recovery mechanism for listing fees prescribed by SEBI, noting that SEBI has ample provisions for recovering regulatory dues under the SEBI Act and its circulars. The Tribunal also referenced previous judgments, including the case of Pr. Director General of Income Tax (Admn. & TPS) vs. M/s. Synergies Dooray Automotive Ltd. & Ors., where it was held that statutory dues like Income Tax and Sales Tax are operational debts. However, the Tribunal distinguished the present case as involving 'regulatory dues' rather than statutory dues.The Tribunal concluded that allowing insolvency proceedings for recovery of listing fees would turn insolvency resolution into a recovery mechanism, which is contrary to the purpose of the IB Code. Therefore, the Adjudicating Authority did not err in rejecting the application under Section 9 filed by the Appellant.Conclusion:The appeal was dismissed, affirming that listing fees are regulatory dues and not operational debts under the IB Code. Consequently, the Appellant cannot initiate insolvency proceedings under Section 9 of the IB Code for recovery of listing fees.