2021 (10) TMI 1132 - Tri - Insolvency and Bankruptcy

Levy of fine on the corporate debtor - delay in making certain compliances in terms of Regulation 7(3) of SEBI (Listing Obligations Disclosure Requirements) Regulations 2015 - corporate debtor is undergoing CIRP during relevant time - moratorium is under effect - HELD THAT - It is to be seen that the fine was levied for the delay in making certain compliances. In view of the fact that due to the failure of the Board of Directors of the corporate debtor in managing the company in a proper manner the company went into the CIRP process. After the company was taken over by the applicant Resolution Professional certain compliances have been made may be belatedly and with regard to other compliances the Resolution Professional explained the impediments being faced by him. In view of the moratorium declared in terms of Section 14 of the Code and also in view of the fact of making certain compliances subsequently and also in view of the fact that the Resolution Professional is facing certain reasonable impediments with regard to certain other compliances the impugned order of National Stock Exchange of India Ltd. is unsustainable. Burdening the corporate debtor with imposition of fines further is against to the interest of the corporate debtor and also against to the object of the Code. The imposition of fine on the corporate debtor for delay in making the subject compliances is condoned - application allowed.

Summary

Issues:
Application filed by Resolution Professional against National Stock Exchange of India Ltd. seeking to quash a fine imposed during CIRP.

Analysis:
The Resolution Professional of a Corporate Debtor filed an application against the National Stock Exchange of India Ltd. seeking to set aside a fine imposed during the Corporate Insolvency Resolution Process (CIRP). The National Stock Exchange of India Ltd. levied a fine on the Corporate Debtor for delays in compliance despite being aware of the ongoing CIRP. The Resolution Professional highlighted the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, which prohibits certain actions against the Corporate Debtor during the insolvency process. The National Stock Exchange of India Ltd. did not reply to the application even after being served notice, leading to the proceedings being conducted ex parte.

The Resolution Professional explained the legal position to the National Stock Exchange of India Ltd. regarding the ongoing CIRP, emphasizing the restrictions imposed by the moratorium. Despite these explanations, the National Stock Exchange of India Ltd. insisted on the fine, citing non-compliance issues predating the initiation of CIRP. The Resolution Professional, after taking over the Corporate Debtor, made certain compliances albeit belatedly, and faced obstacles in fulfilling other obligations.

Considering the moratorium in place and the efforts made by the Resolution Professional to address the compliance issues, the Tribunal found the fine imposed by the National Stock Exchange of India Ltd. unsustainable. The judgment concluded that burdening the Corporate Debtor with additional fines contradicted the objectives of the Insolvency and Bankruptcy Code. Therefore, the Tribunal allowed the application, condoning the fine imposed on the Corporate Debtor while directing the Resolution Professional or the Successful Resolution Applicant to comply with necessary obligations in accordance with the law once impediments are resolved or the resolution plan is approved.

In summary, the Tribunal's decision favored the Resolution Professional, emphasizing the importance of adhering to the moratorium provisions during the CIRP and ensuring fair treatment of the Corporate Debtor in line with the objectives of the Insolvency and Bankruptcy Code.