2007 (3) TMI 398 - HC - Companies Law

Issues Involved:

1. Recall of interim orders dated 5-7-2006 and 20-9-2006.
2. Legality of the sale of assets of U.P. State Cement Corporation Ltd. (in liquidation).
3. Validity of the mining leases and renewal of Bari Dolomite mines.
4. Jurisdiction of the Company Court in selling assets not owned by the company in liquidation.
5. Rights of SMPL and UPSMDC in the Bari Dolomite mines.
6. Compliance with statutory requirements for mining leases.

Issue-wise Detailed Analysis:

1. Recall of Interim Orders Dated 5-7-2006 and 20-9-2006:

The application filed by M/s. Sonbhadra Minerals Pvt. Ltd. (SMPL) and its Director sought to recall the interim orders restraining illegal mining activities. The court noted that SMPL had been restrained from mining due to these orders, which were based on complaints about illegal mining activities. The court found no merit in SMPL's application, as the interim orders were necessary to prevent unauthorized mining.

2. Legality of the Sale of Assets of U.P. State Cement Corporation Ltd. (in Liquidation):

The court detailed the background of the liquidation proceedings and the sale of assets. The U.P. State Cement Corporation Ltd. was declared a Sick Industrial Company and recommended for winding up. The sale of assets was carried out through a transparent process involving global advertisements and a competitive bidding process. Jaiprakash Associates Ltd. (JAL) emerged as the highest bidder with an offer of Rs. 459 crores, and the sale was confirmed in its favor. The court emphasized that the sale was conducted under its supervision and in compliance with the legal framework.

3. Validity of the Mining Leases and Renewal of Bari Dolomite Mines:

The court examined the history of the mining leases for the Bari Dolomite mines. The original lease was granted to UPSIDC and later transferred to UPSMDC, with the lease expiring in 1987. The renewal application was made in 1986 but was not disposed of within the statutory period, rendering it deemed refused. The court noted that UPSMDC continued mining operations without a valid lease, and the subsequent renewal order by the State Government in 2004 was ultra vires.

4. Jurisdiction of the Company Court in Selling Assets Not Owned by the Company in Liquidation:

The court addressed the jurisdictional issue, stating that ordinarily, the Official Liquidator, under the supervision of the court, can sell only the assets of the company in liquidation. However, in this case, the State Government, as a promoter and shareholder, actively participated in the sale process and included additional assets and concessions to make the sale attractive. The court found that the inclusion of these assets was necessary for the expeditious disposal of the company's assets and for the benefit of creditors and workmen.

5. Rights of SMPL and UPSMDC in the Bari Dolomite Mines:

SMPL claimed rights to the Bari Dolomite mines based on a joint venture agreement with UPSMDC. However, the court noted that the lease renewal was conditional and not executed, and the State Government had subsequently included these mines in the sale package. The court found that SMPL had no legal or subsisting rights to the mines and could only seek compensation from the State Government.

6. Compliance with Statutory Requirements for Mining Leases:

The court emphasized the importance of complying with statutory requirements for mining leases, including the submission of mining plans and obtaining necessary approvals. The court found that SMPL and UPSMDC had not fulfilled these requirements, and the mining activities were not legally sanctioned.

Conclusion:

The court rejected SMPL's application to recall the interim orders and upheld the sale of assets, including the Bari Dolomite mines, to JAL. The court emphasized the need for compliance with statutory requirements and the jurisdiction of the Company Court in supervising the sale of assets. The decision aimed to ensure the expeditious disposal of assets for the benefit of creditors and workmen while preventing unauthorized mining activities.

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