Monet Ispat & Energy Ltd. (Resolution ... vs Government Of India, Ministry Of Coal

(Arising out of Order dated 16th January, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai in MA 17/2018 in CP No. 1139/I&BP/NCLT/MAH/2017)

IN THE MATTER OF:

Monnet Ispat & Energy Ltd. ...Appellant Resolution Professional for the Corporate Debtor)

Vs

Government of India, ....Respondent Ministry of Coal

Present:

For Appellant: Dr. U.K. Choudhary, Mr. S.N. Mookherjee, Mr. Debjal Banerji and Mr. Arun Kathpalia, Senior Advocates with Ms. Anne Mathew, Mr. Nishant Anand, Mr. Vishnu Sharma, Mr. Himanshu Vij, Ms. Aswathy Mena and Ms. Goutami Budhapriya, Advocates.

For Respondent: Mr. Sanjib Kumar Mohanty, Senior Panel Central Govt. Counsel and Ms. P.S. Chandralekha, Advocate.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

Pursuant to an application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 ('I&B Code' for short) filed by the 'State Bank of

India'- ('Financial Creditor'), the 'Corporate Insolvency Resolution Process'

was initiated against 'Monnet Ispat & Energy Ltd.'- ('Corporate Debtor').

Company Appeal (AT) (Insolvency) No. 26 of 2018 2

2. Much before filing of the application under Section 7, the

Government of India, Ministry of Coal, reached 'Coal Mines Development

and Production Agreement' dated 2nd March, 2015 with the 'Corporate

Debtor' and vesting order 104/18/2015/NA dated 23rd March, 2015 was

issued in favour of the 'Corporate Debtor' in respect of Gare Palma IV/7

Coal Mine at Karwahi, Teh, Tomnar, Dist-Raigad, Chattisgarh (hereinafter

referred as "the Mine").

3. After initiation of the 'Corporate Insolvency Resolution Process', the

Government of India, issued notice dated 30th December, 2017 for

termination of 'Coal Mines Development and Production Agreement' dated

2nd March, 2015 and vesting order 104/18/2015/NA dated 23rd March,

2015.

4. The 'Resolution Professional' of 'Monnet Ispat & Energy Ltd.'

challenged the letter of termination dated 30th December, 2017 issued by

the Government of India, Ministry of Coal, on the ground that it is against

the provisions of Section 14 of the 'I&B Code' whereunder 'Moratorium' has

been declared by the Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai.

5. It was submitted that during the period of 'Moratorium', the right

vested with the 'Corporate Debtor' cannot be taken away by the

Government of India.

6. The Adjudicating Authority, Mumbai Bench, Mumbai, by impugned

order dated 16th January, 2018, considered as to whether or not the

Company Appeal (AT) (Insolvency) No. 26 of 2018 3

termination order dated 30th December, 2017, is hit by Section 14 of the

'I&B Code' and on hearing the parties held that the said letter is not

violative of Section 14(1)(d) of the 'I&B Code'. The Adjudicating Authority

has also noticed that the Government of India is incurring an estimated

loss of revenue of Rs. 314.3 crores to the State Exchequer annually, which

was the reason for the Central Government to terminate the 'Coal Mines

Development and Production Agreement'.

7. For determining the issue, it is desirable to refer the relevant

documents, including the 'Coal Mines Development and Production

Agreement' dated 2nd March, 2015, which reads as follows:

"THE COAL MINE DEVELOPMENT AND PRODUCTION AGREEMENT BY AND BEWTEEN THE PRESIDENT OF INDIA AND M/S MONNET ISPAT & ENERGY LIMITED IN RESPECT OF GARE PALMA-IV/7 COAL MINE

This Coal Mine Development and Production Agreement is made by and between following:

PARTIES:

1. The President of India, acting through the Central Government represented by the Nominated Authority appointed under Section 6 of the Coal Mines (Special Provisions) Ordinance, 2014) read with Coal Mines (Special Provisions) second Ordinance, 2014 (the "Nominated Authority").

2. Monnet Ispat & Energy Limited incorporated in India under the Companies Act, 1956 with corporate identify number L02710CT1990PLC009826, whose registered office is at Monnet Marg, Mandir Hasaud, Raipur, Chattisgarh- 492101, India and principal place of business is at Monnet House, 11 Masjid Moth, Greater Kailash Part

Company Appeal (AT) (Insolvency) No. 26 of 2018 4

II, New Delhi- 110048, India (the "Successful Bidder").

xxx xxx xxx

5.3. The Mining Lease

5.3.1. Pursuant to Section 8(4)(b) read with Section 8(8) of the Ordinance, the Successful Bidder shall become entitled to the mining lease with respect to the Coal Mine (the "Mining Lease") to be granted by the State Government upon issuance of the Vesting Order.

5.3.2. The Successful Bidder shall promptly upon issuance of the Vesting Order make an application to the State Government for grant of a Mining Lease in the name of the Successful Bidder."

8. The 'Coal Mines Development and Production Agreement' dated 2nd

March, 2015 shows that the President of India acting through the

Government of India reached the agreement with 'Monnet Ispat & Energy

Ltd.'- ('Corporate Debtor'), the 'Corporate Debtor' being the successful

bidder. The conditions for vesting has been shown in Clause 3 which is

subject to compliance of all the eligibility conditions, payment of upfront

amount in installments and furnishing of performance security etc.

Completion of vesting condition and notice has been shown therein.

9. Post vesting obligations have been shown in Clause 5 which includes

payment of the upfront amount in installments. At Clause 5(3), it is

mentioned that 'the Mining Lease' pursuant of Section 8(4) (b) read with

Section 8(8) of the Ordinance, the Successful Bidder shall become entitled

to the mining lease with respect to the Coal Mine to be granted by the State

Government upon issuance of the Vesting Order.

Company Appeal (AT) (Insolvency) No. 26 of 2018 5

10. The copy of the Vesting Order dated 23rd March, 2015 shows that the

coal entitlement was for one or other plant of the 'Corporate Debtor' but

there is nothing on the record to suggest that mining lease has been issued

by the State Government(s) in terms of the provisions as mentioned in the

'Coal Mines Development and Production Agreement' dated 2nd March,

2015.

11. It is not being made clear whether in terms of the agreement total

amount has been paid by the 'Corporate Debtor' or not.

12. Section 14 of the 'I&B Code' relates to 'Moratorium'. Clause (d) of

sub-section (1) of Section 14 reads as follows:

"14. Moratorium.--(1) Subject to provisions of sub-

sections (2) and (3), on the insolvency

commencement date, the Adjudicating Authority

shall by order declare moratorium for prohibiting all

of the following, namely:--

(d) the recovery of any property by an owner

or lessor where such property is occupied by

or in the possession of the corporate debtor."

13. In the present case, as we find that the vesting of the Coal Mines is

not complete in absence of any agreement with the State Government in

respect to the mines in question, we hold that the 'Resolution Professional'

on behalf of the 'Corporate Debtor' cannot claim that pursuant to lease the

mines are under occupation or in possession of the 'Corporate Debtor'. Company Appeal (AT) (Insolvency) No. 26 of 2018 6

14. The Government of India by its letter dated 13th April, 2017 issued

show cause notice to the 'Corporate Debtor' before issuance of the

termination letter dated 30th December, 2017 i.e. much prior to initiation of

the 'Corporate Insolvency Resolution Process' (18th July, 2017). The

'Corporate Debtor' having failed to act in terms with the said show cause. If

the order of cancellation have been passed by the Government of India on

30th December, 2017, it cannot be held to be in violation of Section 14(1)(d)

of the 'I&B Code'.

15. In view of the aforesaid findings, no interference is called for against

the impugned order dated 16th January, 2018. The appeal is dismissed.

Interim order passed by this Appellate Tribunal on 8th February, 2018 is

vacated. It will be open to the Respondent- 'Government of India' to accept

any bid and to create third party interest with regard to mines in question

which were earlier allotted vide 'Coal Mines Development and Production

Agreement' dated 2nd March, 2015 to the 'Corporate Debtor'. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

30th November, 2018

AR

Company Appeal (AT) (Insolvency) No. 26 of 2018