Pranav B Prem

The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Anil Raj Chellan (Member–Technical) and K.R. Saji Kumar (Member–Judicial), has held that any penalty imposed by the Securities and Exchange Board of India (SEBI) after the commencement of the Corporate Insolvency Resolution Process (CIRP) cannot be admitted as a valid claim during the insolvency process. The bench observed that penalties or fines determined after the insolvency commencement date cannot have any bearing on the resolution process already initiated under the Insolvency and Bankruptcy Code, 2016 (IBC).

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Background

The case arose during the CIRP of Medybiz Private Limited, against which a moratorium was already in effect. The last date for submission of claims was August 22, 2024. On the same date, SEBI imposed a penalty of ₹25 crore on the corporate debtor for alleged violations of securities laws. The Resolution Professional (RP) neither paid the penalty amount nor preferred any appeal against the order.Subsequently, SEBI filed its claim before the RP for inclusion in the list of creditors. However, the RP rejected the claim on the ground that the penalty had been imposed after the commencement of CIRP. Aggrieved by this rejection, SEBI approached the NCLT, Mumbai, seeking admission of its claim.

Contentions

SEBI’s Submissions:
The applicant relied on the Supreme Court’s judgment in Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs [(2022) SCC Online SC 1101], contending that regulatory authorities are entitled to determine liabilities such as tax, interest, fines, or penalties even during the moratorium. It was argued that the imposition of penalty was part of SEBI’s statutory functions and could not be invalidated merely due to the pendency of insolvency proceedings.

Respondent’s Submissions:
The respondent-RP submitted that the SEBI order was void ab initio, as no proceeding culminating in a financial or penal liability can be initiated or continued after the imposition of the moratorium under Section 14 of the IBC. It was argued that SEBI’s action violated the statutory bar on the continuation of such proceedings and that any liability created post-commencement of CIRP cannot form part of the resolution process.

Findings of the Tribunal

The NCLT examined Regulation 13 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which requires the Resolution Professional or Interim Resolution Professional to verify every claim as on the insolvency commencement date within seven days of the last date of receipt of claims. The bench noted that the scheme of the Code allows only those claims that exist on or before the insolvency commencement date to be verified and admitted. Claims arising after that date, including penalties or fines imposed subsequently, cannot be entertained.

The Tribunal emphasized that the recognition of belated claims is permissible only when the claim existed on the date of insolvency commencement, even if filed later. However, fresh liabilities or penalties determined after initiation of CIRP fall outside the purview of admissible claims. “Any assessment or determination of tax, interest, fines, or penalty occurring after the commencement of CIRP will not be admitted, irrespective of whether it pertains to a period prior to insolvency commencement,” the bench observed. The Tribunal also clarified that the power of statutory authorities to pass orders of determination does not extend to creating new financial obligations during the moratorium. “Assessment or determination of tax, interest, fines, or any penalty by any authority after commencement of the insolvency resolution process will not have a bearing on the resolution process already initiated under the Code,” the order stated.

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Holding that the penalty was imposed after the initiation of CIRP, the NCLT concluded that SEBI’s claim was not maintainable under the IBC. The bench dismissed SEBI’s application, affirming that no new liability or penalty determined post-commencement of insolvency can be recognized or included in the CIRP process.Accordingly, the application filed by SEBI was rejected.

Appearance

For Applicant: Sr. Adv. Shiraz Rustom Jee, Adv. Nishit Dhruva, Adv. Khusbhu Chajjed, Adv. Niyati Merchant & Adv. Khushbu Trivedi

For Respondent: Adv. Mily Ghoshal with Adv. Shweta Thanekar

Cause Title: Securities and Exchange Board of India v. IPE-NPV Insolvency Professionals Private Limited

Case No: I.A. No. 1784 of 2025 in C.P. (IB) No. 116/MB/2024

Coram: Shri Anil Raj Chellan (Member-Technical), Shri K. R. Saji Kumar (Member-Judicial)