THE SEBI-IBC RIFT

 IBC is a consolidating act aiming to prevent delays. SEBI is a regulatory authority which was established by the SEBI act 1992 to protect the interest of investors and it has the power to encompass the stock exchange regulations.
Recently IBC and SEBI has a rift over the issue of jurisdiction. SEBI was ordered by the NCLT to de-attach the property belonging to the corporate firm which was admitted in the corporate insolvency resolution process under IBC.
As soon as SEBI came to know about this, they attached the assets of the corporate firm to compensate the investors under sections 11 and 11B of the act but in that time investors filled for the CIRP in NCLT against the company. Layman's CIRP definition "the corporate insolvency resolution process (CIRP) is a recovery mechanism given under the IBC to the creditors when the firm becomes insolvent". Thus property attached by SEBI should be de-attached because investors have already applied for the process of CIRP to declare the firm insolvent held by NCLT.
NCLT placed stress on section 238 of IBC- “if any law became inconsistent with IBC then provisions of this code will override other laws." Therefore, NCLT held "moratorium provisions contained in section 14 of IBC will override section 28A of SEBI act which confers SEBI with the status of recovery officer empowered the regulatory body to sell the movable and immovable property of a corporate debtor for the recovery process.” And thus matter has been taken to Supreme Court by SEBI in case of SEBI V ROHIT SEHGAL
NCLAT in Shobha Limited v Pan Card Clubs Limited held section 238 would not override the provisions of other activities. However, NCLAT in Bhanu Ram v HBN Diaries And Allied Limited, took an opposite approach in the context of section 238.
Thus NCLAT should realize that these two legislations are not inconsistent with each other and section 238 should not be applied as it can only override in the case of inconsistency.
Submitted by-
Kalpita Yadav

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