SEBI Penalty Levied After Commencement Of Liquidation Not Admissible As Claim: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at New Delhi on Friday held that penalties imposed by the Securities and Exchange Board of India (SEBI) after the commencement of liquidation cannot be admitted as claims under the Insolvency and Bankruptcy Code, rejecting SEBI's Rs 21.80 lakh claim against Annies Apparel Pvt. Ltd.

A bench comprising Chaiperson Justice Ashok Bhushan and Technical Member Barun Mitra observed,

“When the claim had not arisen or crystallised on the liquidation commencement date, the LPR clearly did not envisage admission of any such claim. Hence, there was no infirmity in the decision of the Liquidator in not admitting the claim of the SEBI arising out of the AO which had been passed after liquidation commencement date.”

The dispute arose from complaints received by SEBI alleging diversion and misutilisation of funds in Religare Finvest Ltd., a subsidiary of Religare Enterprises Ltd. Annies Apparel Pvt. Ltd., the corporate debtor, was issued a show cause notice on February 15, 2021 in connection with the alleged transactions.

During the pendency of SEBI's inquiry, the company entered liquidation and the liquidator invited claims from stakeholders. SEBI subsequently imposed a monetary penalty on the company after the expiry of the claim submission period.

The penalty amount was then filed as a claim before the liquidator, who rejected it on the ground that the liability did not exist as on the liquidation commencement date.

SEBI's filed a plea challenging this rejection which was dismissed by the NCLT, leading to the present appeal.

Before the NCLAT, SEBI argued that the delay in filing the claim was not deliberate and that the claim should not have been rejected solely because it had not crystallised prior to the liquidation commencement date.

Relying on the Supreme Court's ruling in Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs (2021), SEBI contended that even claims arising after the commencement of liquidation ought to be considered. 

The liquidator opposed the appeal, submitting that the IBC permits admission only of claims existing as on the liquidation commencement date and provides no discretion to entertain subsequent claims.

Rejecting SEBI's submissions, the tribunal held that Regulation 12(2)(a) of the Liquidation Process Regulations requires stakeholders to submit or update their claims strictly as on the liquidation commencement date, while Regulation 13 mandates verification and estimation of liabilities as they exist on that date.

The bench noted that the regulatory framework does not contemplate the admission or estimation of liabilities arising after the liquidation commencement date. It reiterated its earlier view that claims arising after the liquidation commencement date are inadmissible.

Distinguishing the Supreme Court's ruling relied upon by SEBI, the tribunal clarified that the issue in the present case is not the enforcement of an assessment order passed after the liquidation commencement date, but whether a claim arising after such date can be entertained by the Liquidator, and dismissed the appeal.

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