Analysis of Overriding Effect of S. 14 & S. 238 of IBC, 2016 On S. 28A of SEBI Act, 1992

Nikita Mistry, SVKM’S-NMIMS, Kirit P. Mehta School of Law, Maharashtra, Mumbai.

ABSTRACT

SEBI is a statutory regulatory body that governs the capital market incorporated for the purpose to protect the interest; that of the investors. IBC is a time bound process, intended to protect the interest of all stakeholders by maximizing the assets value of; that of the debtor and NCLT is a quasi- judicial body that adjudicate matters related to the Indian companies. Under this present case of SEBI (Appellant) vs. KHFL (Respondent), on the basis of reference from NHB and examination conducted by SEBI into the alleged money mobilization, in 2017 it was concluded that KHFL raised capital from public through issuances of securities to more than 50 people thus violating various provisions of the CA 1956 and 2013/SEBI Rules 2009 and ITA 1961 in respect of issuances of equity shares, non-convertible debentures and preference shares, hence SEBI directed KHFL (corporate debtor-CD) to remit the amount within 6 months with 15% PA but they failed to do so in stipulated time and hence, initiated Recovery proceeding in accordance with Sec. 28A of SEBI Act. However, CD filed a counter-appeal in SAT though it upheld the order of SEBI by prohibiting the CD from selling and disposing all movable and immovable property held by them. After that CIRP was initiated under IBC, 2016 in NCLT. But SEBI challenged it on various grounds one being that NCLT had no jurisdiction to entertain CIRP. However, the tribunal framed the issue of overlapping effect of Sec. 14 and 238 of IBC on the provision of Sec.28A of SEBI Act when it is maintained under Sec7, 9 or 10 of IBC and concluded till moratorium period continues the opposition cannot recover or sell the assets, both the central Act have similar objective. It is to note that however SEBI can file an appeal to the SC challenging the same. Thus, this research paper Aims to focuses on issues pertaining to the overlapping effect of IBC as decided by NCLT in this matter.

Keywords: Overlapping effect, SEBI Act 1992, IBC 2016