Annual Listing Fee is the fee payable by a listed entity to the respective stock exchanges where its securities are listed. Regulation 14 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) states that the listed entity shall pay all such fees or charges, as applicable, to the recognised stock exchange(s), in the manner specified by the SEBI or such recognised stock exchange(s). The listing agreement entered by a listed entity with stock exchanges contain a clause mandating the listed entity to comply with the Listing Regulations. It can be inferred that non-payment of such listing fee amounts to contravention of the Listing Regulations and thereby leads to breach of the listing agreement. Since, it is a contractual obligation which is breached, such act of non-payment of listing fee should technically lead to operational due and hence the stock exchange(s) can approach the National Company Law Tribunal (“NCLT”) as an operational creditor and may file for an application for Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). On the other hand, Regulation 98 of the Listing Regulations provide for procedure for action in case of contravention of any of the provisions of the Listing Regulations by a listed entity which include imposition of fines, suspension of trading, freezing of promoter/promoter group holding etc. In this case, it is noteworthy that it would fit within the meaning of a regulatory due and as such relief under IBC cannot be claimed.
So the question before us is whether such listing fee is a regulatory due or an operational due?
To answer this, we need to go through the order passed by the Mumbai Bench of the NCLT in the matter of Bombay Stock Exchange Limited (“BSE/Operational Creditor”) v. Asahi Infrastructure & Projects Limited (“Corporate Debtor”) wherein the BSE filed a petition under Section 9 of the IBC against the Corporate Debtor for non-payment of annual listing fee considering it as an operational debt under the IBC. However, the Corporate Debtor pleaded for dismissal of such petition on the ground that listing fees comes under the ambit of regulatory dues which are out of the definition of operational debt. To counter this, the BSE contended that the dues of non-payment of listing fees are contractual in nature and not regulatory.
The NCLT, Mumbai in its findings had laid out that in case of non-payment of the listing fees by the Corporate Debtor, the BSE was empowered vide Regulation 98 of the Listing Regulations to initiate appropriate action against the Corporate Debtor for violation of Listing Regulations in the manner prescribed by the Circular dated 30.11.2015 issued by the SEBI. The Hon’ble Judicial Member noted that there is no mention of initiating IBC proceedings for non-payment of listing fees in the said or any of the circulars issued by the SEBI. It is ascertained by the NCLT, Mumbai that “SEBI being a regulatory body of the Operational Creditor, the dues above said are not the ‘operational’ dues or ‘contractual’ dues. Rather they come under the ambit of ‘Regulatory’ dues as they can be recovered only under the set guidelines prescribed by SEBI.”
Reliance was placed on the Report of the Insolvency Law Committee dated March 26, 2018, wherein the Committee after due deliberation, unanimously agreed that regulatory dues need not be included in the definition of “operation debt” and it also observed that the SEBI has wide ranging powers to enforce their orders and recover dues.
The NCLT, Mumbai further opined that “SEBI is already empowered to execute not only its recovery mechanism, but also enshrined with power to punish the defaulter, hence, the insolvency proceedings shall not be gainful either to the Regulator or the Exchange.”
Finally, the NCLT, Mumbai vide its order dated February 11, 2019, dismissed the petition filed by the BSE and held that “the right forum to initiate recovery proceedings for non-payment of Listing Fees is not NCLT”.
To answer our question, listing fee is a regulatory due and hence is out of the ambit of the operational debt.