NCLAT Upholds NCLT's Decision to Exclude SEBI Penalty from Bankruptcy Proceedings

ENA Sectors 2025-05-07 15:14:32 Hyderabad, May 7 (KNN) The National Company Appellate Tribunal (NCLAT) has upheld the decision of the Adjudicating Authority (NCLT, Hyderabad), admitting a bankruptcy application filed under Section 122(1) of the Insolvency and Bankruptcy Code (IBC), 2016. The tribunal also reaffirmed that the penalty imposed by the Securities and Exchange Board of India (SEBI) qualifies as an 'excluded debt.' As per Section 79(15)(a) of the IBC, this penalty will not be covered under the moratorium imposed during the bankruptcy proceedings. The appellant, a personal guarantor to a company, had filed for insolvency resolution under Section 94(1) of the IBC. The NCLT had initially appointed a Resolution Professional to devise a repayment plan, which was later rejected by the Committee of Creditors (CoC). Following this, the Resolution Professional filed a petition to initiate bankruptcy proceedings, leading to the NCLT's ruling. While the appellant argued that the penalty imposed by SEBI should not be classified as a 'fine' under Section 79(15)(a), the NCLAT dismissed the appeal. The appellant had referred to the Telangana High Court's ruling in a similar matter, but the NCLAT clarified that the High Court's decision was based on a different context and was not applicable here. It further referenced the Hon'ble Supreme Courts judgment, reinforcing the classification of penalties as 'excluded debts,' aligning SEBIs penalties with those imposed by other regulatory bodies like the NCDRC. The NCLAT concluded that the Adjudicating Authority's decision to treat SEBI's penalty as 'excluded debt' was legally sound and consistent with the statutes intent. Consequently, the penalty will not be part of the bankruptcy proceedings under the IBC. (KNN Bureau) 42005 https://knnindia.co.in/news/newsdetails/sectors/nclat-upholds-nclts-decision-to-exclude-sebi-penalty-from-bankruptcy-proceedings 2025-05-07 15:14:32 knnindia.co.in NCLAT Upholds NCLT's Decision to Exclude SEBI Penalty from Bankruptcy Proceedings