Monnet Ispat & Energy Limited Vs Securities and Exchange Board of India (Securities Appellate Tribunal, Mumbai)
Summary: The Securities Appellate Tribunal, Mumbai allowed the appeal of Monnet Ispat & Energy Limited and quashed the Adjudicating Officer’s order imposing a penalty of Rs.6,00,000 for alleged violations of Regulations 52(4) and 54(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 relating to the period 2013-14. The appellant had entered corporate insolvency resolution proceedings after the Reserve Bank of India directed lenders to commence insolvency proceedings and the State Bank of India approached the NCLT, Mumbai. The NCLT admitted the petition on 18.07.2017 and ultimately approved a resolution plan submitted by a consortium comprising AION Investments Private II Limited and JSW Steel Limited on 24.07.2018. Management control was acquired by the consortium on 31.08.2018. Despite this, SEBI issued a show cause notice on 18.10.2019 concerning disclosure defaults occurring before the acquisition.
The appellant contended that the approved resolution plan extinguished all financial liabilities relating to the pre-acquisition period and prevented initiation of fresh proceedings or imposition of penalties upon the company or its new management. SAT examined Section 31(1) of the Insolvency and Bankruptcy Code, 2016 and held that an approved resolution plan binds creditors as well as the Central Government, State Governments, local authorities and other stakeholders. The resolution plan expressly provided for extinguishment of financial liabilities, including penalties, fines and liabilities arising from investigations, inquiries, show cause notices and non-compliance with laws relating to the period before acquisition. It also provided for withdrawal or dismissal of regulatory and administrative proceedings concerning the pre-acquisition period. SAT relied upon Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, where the Supreme Court explained that a successful resolution applicant must be permitted to take over the corporate debtor on a fresh slate without being confronted with undecided claims after approval of the resolution plan.
