Dues on listing fees are not recoverable under operational debt: NCLAT
According to the National Company Law Appellate Tribunal, dues on a company's listing fees are'regulatory dues' in nature and cannot be recovered in insolvency proceedings as 'operational debt.'
The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal by stock exchange BSE, saying that dues on listing fees are’regulatory dues’ in nature and cannot be recovered under ‘operational debt’ through bankruptcy processes.
The defaulting company, as an entity registered with Sebi, is under an obligation to follow the regulations prescribed by the regulator for the recovery of its dues, according to the NCLAT. Listing fees fall under the category of’regulatory dues,’ which markets regulator Sebi is entitled to recover, and the defaulting company, as an entity registered with Sebi, is under an obligation to follow the regulations prescribed by the regulator for the recovery of its dues.
“The dues are referred to as “regulatory dues” rather than “operational dues.” According to the Insolvency Law Committee, regulatory obligations are not recoverable as ‘operational debt.’ “A two-member NCLAT bench, consisting of Justice Anant Bijay Singh and Shreesha Merla, made the observation.
The NCLAT also affirmed a judgement issued by the National Company Law Tribunal (NCLT) on December 31, 2020, dismissing the BSE’s request to file an insolvency petition against KCCL Plastic Ltd.
“We carefully reviewed the case’s pleadings and concluded that the assailed order does not warrant any interference. As a result, the NCLT, Ahmedabad Bench’s challenged order of December 31, 2020 is hereby affirmed. The appeal is overturned “The NCLAT opined.
On October 27, 1993, the stocks of Ahmedabad-based KCCL Plastic Ltd were listed on the BSE’s trading platform, and it was required to pay an annual listing fee (ALF) on or before April 30 each year, as per the listing agreement.
According to the BSE, KCCL Plastic paid the ALF until the financial year 2013-14, after which it stopped paying.
The BSE has raised multiple ALF invoices with arrears, which KCCL Plastic intentionally failed to remit, according to the bourses.
The respondent failed to accept the service of a demand note for Rs 10.66 lakh dated March 15, 2019. It went on to say that Demand Notices sent to addresses were returned undeliverable.
Following this, the BSE filed a petition with the NCLT claiming an operating debt under Section 9 of the Insolvency and Bankruptcy Code.
It stated that ALF is an ongoing cause of action that is inextricably related to the services enabled and given by the BSE, which KCCL Plastic has continued to use despite the defaults until 2019.
The BSE’s plea, however, was denied by the NCLT on technical grounds. It stated that the BSE’s complaint was prohibited since it was brought after the three-year limitation period had expired. It had said that the loan was past due on April 1, 2015.
Furthermore, the NCLT noted that several of the pages/places in the agreement between the parties are blank, with no comments to that effect.
However, the agreement only has the parties’ initials on the last page, and none of the other pages have the parties’ signatures. It was also discovered that the agreement was made between ‘Kosha Cubidor Containers Ltd’ and the Stock Exchange of Bombay.
“However, there is no seal or signature on behalf of the Bombay Stock Exchange.” The name of ‘Kosha Cubidor Containers Ltd’ was changed to KCCL Plastic Ltd., although the petitioner had not entered into any agreement with KCCL Plastic Ltd,” the NCLT had stated.
“We are of the considered judgement that the adjudicating body (NCLT) has rightly come to the conclusion that the agreement so filed cannot be relied upon, as the same is not a legitimate agreement in the light of the law,” the NCLAT stated.
