https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=772490 https://www.taxtmi.com/caselaws?id=772490 Challenge to admission of applications of the Appellant preferred under Section 122(1) of the I & B Code, 2016 - appellant, Personal Guarantor to the financial assistance extended to BRG Energy Limited, declared as bankrupt - treatment of penalty as 'excluded debt' - HELD THAT:- Section 79(15)(a) of the I & B Code, 2016, as extracted above defines an excluded debt to mean, "Liability to pay fine imposed by a court or tribunal". Thus, the liability of payment of fine has been observed to be "excluded" to be brought within the ambit of the bankruptcy proceedings to be drawn under Section 122 of I & B Code, 2016 - The said writ petition was preferred under Article 226 of the Constitution of India, seeking a direction by way of a writ of mandamus, in a nature of a declaration that, the action of the Respondents in issuing the impugned demand notice dated 23.11.2021 (as under consideration therein) on all the petitioners including late Mr. Anthony Reddy, was illegal, arbitrary and violative of law, and consequently quashing of the recovery proceedings was also sought for. Section 238 of the I & B Code, 2016, which prescribes for that the provisions of this Code, since being part and parcel of a special statute, having a different statutory objective to be met, has been given an overriding effect over the general laws. And that too, in the context of the instant matter, where the writ petition was pertaining to, the recovery proceedings being carried under Section 28A of the Securities and Exchange Board of India Act, 1992, which will not at all cloud the proceedings under Section 122 of the I & B Code, 2016, for the purposes of initiation of the bankruptcy proceedings, if it is to be read in harmony with the provisions contained under Section 238 of the I & B Code, 2016. Consequentially, the aforesaid view taken by the Ld. Single Judge was in context of the various authorities as referred to, in the judgment of the Ld. Single Judge as to, what implication would the provisions contained under Section 238 of the I & B Code, 2016, would have qua the proceedings which are being held under the Securities and Exchange Board of India Act, 1992. Ultimately, the Ld. Single Judge in MR. G. BALA REDDY [2023 (9) TMI 1692 - TELANGANA HIGH COURT] observed that the "penalty" imposed and sought to be recovered from the petitioner, by issuing the recovery certificate under Section 28A of the Securities and Exchange Board of India Act, 1992, will fall to be within the definition of fine, and therefore it will be come under the category of 'excluded debt' under Section 79(15)(a) of the I & B Code, 2016, and therefore, the moratorium imposed under Section 96 of the I & B Code, 2016, will have no application. It is in the light of the observation made by the Division Bench, that the question was left open to be decided, whether the impugned levy of fine or a penalty in the light of the provisions contained under Section 28A of the Securities and Exchange Board of India Act, 1992, whether it will be falling, to be excluded under Section 79(15)(a) of the I & B Code, 2016? It was an issue which was left to be decided in an, 'appropriate proceedings'. 'Appropriate proceedings' therein, was a very wide connotation as expressed by the Division Bench as to, in which proceedings the issue of levy being a fine or a penalty would be decided so as to, decide whether such levy will fall into the category of 'excluded debt' under Section 79(15)(a) of the I & B Code, 2016. In view of a clear mandate as prescribed by the statute itself, once a special statute creates a bar and does not include within itself the debts in the shape of a fine, it has to be excluded as a debt, the same cannot be read in other way than what was intended by the legislature. Thus the fines would be falling within the trapping of exclusion contemplated under Section 79 (15)(a) of the I & B Code, 2016. The part of the observation made in the impugned judgment, limited to the extent of the finding as recorded in para 16, treating the penalty levied by SEBI to be a fine which will then become an 'excluded debt' to be kept outside the scope of the bankruptcy proceedings, was well in consonance to the provisions of the statute itself, and it cannot be said to be arbitrary or contrary to the very intention of law. The penalty imposed by SEBI will be similar, being of a regulatory nature, and hence will have to come within Section 79(15) of the Code. Since, the observation made in Para 16 of the impugned order was is in the light of the statutory provisions contemplated under Section 79(15)(a) of the I & B Code, 2016, treatment of penalty imposed by SEBI as 'excluded debt' cannot be said to be illegal in any manner whatsoever. Conclusion - The impugned order's exclusion of the SEBI penalty from bankruptcy proceedings was legally sound and consistent with the legislative framework and judicial authority. Appeal dismissed. Case-Laws IBC Wed, 30 Apr 2025 00:00:00 +0530