The Securities and Exchange Board of India (SEBI) has approached the Supreme Court after the capital-markets regulator and the National Company Law Tribunal (NCLT) passed separate orders under the SEBI Act and the Insolvency and Bankruptcy Code (IBC), about Collective Investment Schemes (CIS).
The recovery of more than Rs 1,000 crore which New Delhi-based HBN Dairies had illegally collected from thousands of individuals through a scheme lies at the heart of the dispute.
Earlier, SEBI had probed into the same and attached the assets of HBN Dairies as well as its promoters. The Securities Appellate Tribunal had upheld SEBI’s action.
However, a delay in recovery proceedings prompted a few HBN Dairies investors to approach the NCLT and start proceedings against the company under the Insolvency and Bankruptcy Code.
The SEBI had passed orders against HBN Dairies as early as 2015, to attach all immovable assets of the company as well as promoters and sell these to repay investors.
Yet, the NCLT took the view that Insolvency and Bankruptcy Code provisions override the SEBI Act.
So, the NCLT urged SEBI to hand over attached properties of HBN Diaries to an insolvency resolution professional.
The NCLT order took the stand that once a company is admitted for insolvency proceeding, a payment moratorium kicks in to help complete the resolution within 270 days.
The National Company Law Appellate Tribunal (NCLAT) order also upheld the NCLT order, forcing SEBI to move the Supreme Court, which is scheduled to hear the matter in July.
Earlier in 2019, the NCLT had passed a verdict stating that the Insolvency and Bankruptcy Code would prevail over the SEBI Act.
The NCLT verdict was based on a special clause in Section 238 of the Insolvency and Bankruptcy Code (IBC), which states that if there are any inconsistencies between IBC and other laws, the IBC would prevail.