Allow Cookies!
By using our website, you agree to the use of cookies
In a recent order passed by NCLT where IBC override SEBI act, many issues were raised, in relation to that an appeal was filed by SEBI against order in Supreme Court. The Appeal will be considered in July by the court. Some of the issues were "Will the Insolvency and Bankruptcy Code (IBC) override Securities and Exchange Board of India (SEBI) Act? Whether depositors of a Collective Investment Scheme (CIS) can be treated as Financial Creditors under IBC and whether provisions of IBC can be invoked in case of CIS which is regulated by the SEBI Act, 1992?"
SEBI has challenge the order of NCLT, New Delhi passed on April 30 detecting the market regulator to detect the properties of the corporate debtor HBN Dairies and allied limited which was running a Collective Investment Scheme (CIS) and hand them over to resolution professional (RP) to enable them to conduct the insolvency proceeding on the reasoning that IBC will override SEBI act.
SEBI raise the contention that the direction of NCLT to handover the properties to RP is totally “uncalled for” as there is no conflict or inconsistency between IBC and SEBI also the assets of CIS are held by the company in trust on behalf of the investor and that the company has nothing to do with the trust. Along with this it was also mentioned that provisions of IBC are excluded in so far as this scheme are concerned and depositors in the scheme are not lenders but holders of the unit which are tradable in nature and they was not be treated as financial creditor under IBC.
However the contentions of SEBI was opposed by RP Rohit Sehgal by stating that the primary object of IBC is resolution and not winding up and the resolution professional in the present case has received claim of third 300000 investors an attempt to save the company. His further contention was that CIS investors are also financial creditors under IBC which overrides any other statute in view of section 238 IBC.
After hearing both the side the vacation bench directed to plead the matter before the appropriate bench in July.
Thus, the bench made it clear that the status quo order passed by it was with regard to handing over of title deeds by SEBI to RP and that's a we will not create any encumbrance over the properties while RP can continue with his proceeding under IBC.
A point was raised by SEBI in an appeal that while passing the order NCLT completely ignored the fact that the corporate debtor in this case was a business activity which was violation of law and no resolution of such corporate debtor under the code is only for resolution of corporate debtor engaged in lawful activity.
HBN Diaries for running a CSI and was not registered under SEBI and thus violated the provisions of SEBI and also collected nearly rupees 1136 crore from investors. With regard to same SEBI directed attachment of properties of HBN diaries in order to return reduce to the depositors in 2015.
Is there was delay from SEBI to recover the money from HBN diaries some of the investor approached NCLT to initiate insolvency proceeding against HBN Dairies. NCLT admitted the application and appointed Shegal as RP and directed SEBI to detect the properties of HBN and handover them to RP.
The RP wrote to SEBI for the matter of the attachment of property has SEBI did not comply with it RP approached NCLT and made SEBI and income tax department as parties. The NCLT does hold that in view of section 238 of IBC it overrides SEBI act. The order of NCLT was also upheld by the National company law appellate tribunal.
86540
103860
630
114
59824