AI Drafter 
TaxTMI 
TaxTMI 
2025 (6) TMI 603
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....d by SEBI, being pecuniary in nature, will come within the meaning of 'Fine' and will be treated as 'excluded debt' under Section 79(15)(a) of the I & B Code, 2016, and thus outside the scope of Bankruptcy proceedings. The Appellant has filed this appeal aggrieved by the above observation. 2. The Appellant in the instant Company Appeal claims her status as to be that of the Personal Guarantor to the financial assistance extended to BRG Energy Limited, being a company, which was incorporated in the year 2006 (25.07.2006) under the provisions of the Companies Act, 1956, with its registered office situated in Hyderabad. It is the case of the Appellant that she, in her capacity as a Personal Guarantor, had filed an application for bankruptcy under Section 122(1) of I & B Code, 2016, to be read with Rule 6 of Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules, 2019, (here and after to be called as the Rules of 2019). The basis of filing of the petition under Section 122(1) of the I & B Code, 2016, was on the ground of failure of the Personal insolvency process by virtue of an order of Ld. Adjudica....
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....the I & B Code, 2016, for initiation of the bankruptcy process. As the petition stipulated satisfied the terms and conditions which was required to be fulfilled therein, the Ld. Adjudicating Authority in the aforesaid proceeding of CP (IB) No. 214/122/HDB/2023 passed an order on 23.01.2025 whereby the Appellant's application under Section 122 of the I & B Code, 2016, was allowed and the proceedings of bankruptcy were directed to be carried. On the first reflection, since the application under Section 122 of the I & B Code, 2016, as preferred by the Appellant for initiation of the bankruptcy proceedings stood allowed, hence as a matter of fact, under law no appeal would lie as against an order passed in her favor. But the Ld. Counsel for the Appellant has drawn a distinction while challenging part of the order as contained in para 16 of the order, which is extracted hereunder:- "The penalty imposed by R3/SEBI, being pecuniary in nature, will come within the meaning of 'fine'. This is to be treated as the "excluded debt" under Section 79(15)(a) of IBC and thus outside the scope of the bankruptcy proceedings." 4. The grievance of the Appellant is against, the observati....
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....of such value as may be prescribed; (15) "excluded debt" means- (a) liability to pay fine imposed by a court or tribunal; (b) liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other legal obligation; (c) liability to pay maintenance to any person under any law for the time being in force; (d) liability in relation to a student loan; and (e) any other debt as may be prescribed; (16) ....................... (17) ...................... (18) ..................... (19) ..................... (20) ..................... (21) ...................... (22) ...................... 6. 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. 7. However, it is being argued by the Ld. Counsel for the Appellant is that the term 'fine' as contemplated under Section....
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....ecovered under Section 28A of the Securities and Exchange Board of India Act, 1992. Meaning thereby the ratio determined was in the context of demand notice under Section 28A of Securities and Exchange Board of India (SEBI) Act, 1992, and it cannot be read beyond the subject which was under consideration before the Hon'ble Single Judge, of the Hon'ble High court. 9. Based upon the aforesaid analogy, Hon'ble Single Judge came to the conclusion that, in terms of Section 79(15)(a) of the I & B Code, 2016, the liability to pay a fine imposed by a Court or a Tribunal is included in the definition of the 'excluded debt', and as such, the argument extended for exclusion, was not accepted by the Ld. Single Judge, in the light of the provisions contained under Section 238 of the I & B Code, 2016, which is extracted hereunder: - "238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 10. Section 238 of the I & B Code, 2016, which prescribes for that the provisions of this....
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....xcluded 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. 13. In fact, during the course of the argument, the Ld. Counsel for the Appellant has concentrated his argument, qua the finding which were recorded in Para 16 of the impugned judgment, in the light of the application of Section 79(15)(a) of the I & B Code, 2016, because, the rest of the impugned order passed under Section 122 of ....