TMI Blog2021 (12) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... us stakeholders. A Committee under the Chairmanship of Shri Injeti Srinivas examined the working of the Code and made recommendations proposing amendment to the Code. With regard to Section 5 (8), i.e. financial debt , there was lot of debate and several stakeholders recommended to the Committee to make suitable amendment to protect the rights of home buyers - When the Insolvency Law Committee has categorically in the Report, as extracted above, held that regulatory dues need not be included in the definition of operational debt , the said opinion of experts, cannot be brushed aside. The recommendations given by Insolvency Law Committee Report is in line with the object of the Code. In event, it is held that all kind of dues including regulatory dues , the insolvency resolution process can be triggered, then the entire purpose of the object of the IB Code will be lost and insolvency proceedings will turn into recovery proceedings for the dues of creditors, which is not the object of the IB Code. The submission of the learned Counsel for the Appellant that there is no method for recovery of dues provided by the SEBI, cannot be accepted as SEBI is empowered to punish the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat dues of regulatory fee cannot be termed as an operational debt . The Application was dismissed with liberty to the Appellant to approach the appropriate forum and take legal steps. 3. Learned Counsel for the Appellant challenging the judgment passed by the Adjudicating Authority contended that the dues of the Appellant were not covered with the definition of the operation debt as defined in Section 5 sub-section (21) and the Adjudicating Authority committed error in rejecting the Application. It is submitted that there is no procedure prescribed by the SEBI for recovery of dues in respect of listing fees , hence, no exception can be taken to filing of the Application by Appellant under Section 9 of the IB Code. The 2015 Regulation do not prescribe any recovery mechanism for the Annual Listing Fees and Regulation only provide for penal consequences for non-compliance. Learned Counsel for the Appellant has relied on judgment of this Appellate Tribunal in Company Appeal (AT) (Insolvency) no. 309 of 2018 in Sales Tax Department, State of Maharashtra Through Deputy Commissioner of State Tax vs. M/s Raj Oil Mills Limited Ors., where it was held that statutory dues includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors .. 8. It is well settled that provisions of a statute have to be interpreted keeping in light of the object and purpose of the enactment. Operational Debt has been defined under Section 5, sub-section (21) in the following words: (21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 9. The definition of operational debt as contained in above provisions is in very wide terms. 10. Whether the legislative intendment was that for recovery of registration fee, listing fee and other kinds of fee, the provisions of IB Code should be resorted to for recovery of such fees from a Company? In large number of statutes registration fee and fee akin to registration fee are envisaged as fees, which are required to be paid annually by a Company. Whether in event, a default is committed by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely Sh. Shardul Shroff, Sh. Sudarshan Sen and Sh. B. Sriram, differed on this matter. 12. The Committee also deliberated on operational debt . In paragraphs 1.15 to 1.20, operational debt was dealt. One of the issues which was deliberated by the Committee is as to whether regulatory dues need to be included in the operational debt . The Committee negativated the demand. Paragraphs 1.15 to 1.20 of the Report, which are relevant for the purpose of this case are to the following effect: Operational Debt 1.15 Section 5(21) of the Code defines operational debt to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority . The definition of operational debt is key to determine the scope of operational creditors envisaged under the Code. Section 5(20) of the Code defines an operational creditor to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred . Operational creditors are gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard, the Report of the BLRC Volume 1 (2015) ( BLRC Report ) states as follows: The Committee has recommended to keep the right of the Central and State Government in the distribution waterfall in liquidation at a priority below the unsecured financial creditors in addition to all kinds of secured creditors for promoting the availability of credit and developing a market for unsecured financing (including the development of bond markets). In the long run, this would increase the availability of finance, reduce the cost of capital, promote entrepreneurship and lead to faster economic growth. The government also will be the beneficiary of this process as economic growth will increase revenues. Further, efficiency enhancement and consequent greater value capture through the proposed insolvency regime will bring in additional gains to both the economy and the exchequer . 1.20 The Committee after due deliberation, unanimously agreed that regulatory dues need not be included in the definition of operation debt . 13. It is relevant to note that when the Report of the Insolvency Law Committee was submitted on 26th March, 2018, the Committee was aware that several Stock Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory departments, item 3 of which is as follows: (3) Department handling the following functions shall be considered as regulatory departments in a Stock Exchange: (a) surveillance, (b) listing (c) member registration (d) compliance, (e) inspection, (f) enforcement, (g) arbitration, (h) default, (i) investor protection, (j) investor services. 18. The above statutory provisions indicate that the Department handling listing are Regulatory Department and the listing fee is nothing but a regulatory fee . 19. The submission of the learned Counsel for the Appellant that there is no method for recovery of dues provided by the SEBI, cannot be accepted as SEBI is empowered to punish the defaulters for the recovery of regulatory dues. There are ample provisions for recovering under the SEBI Act and the circulars issued by the SEBI from time to time. 20. We may also notice the judgments, which have been relied by learned Counsel for the Appellant. The judgment of this Tribunal in Company Appeal (AT) (Insolvency) No. 205 of 2017 in Pr. Director General of Income Tax (Admn. TPS) vs. M/s. Synergies Dooray Automotive Ltd. Ors. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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