2019 (3) TMI 198 - HC - Companies Law

Disbursement of subsidy - Requisite capital investment for grant of subsidy - Special Incentive Package - refuse disbursement of subsidy on the ground that the petitioner s viability in question - HELD THAT - Since there appears to be no dispute that the petitioner had defaulted in payment of liabilities towards lease rentals related to the assets, which are capitalized as investment, the decision that the petitioner has not made the requisite investment cannot be faulted. The respondents were entitled to verify the capital investments made by the petitioner and since the petitioner had failed to provide the necessary documents evidencing such investments, the same could not be considered by the respondents. This Court finds no infirmity with this decision. If the investment of ₹ 96.95 crores is excluded, the NPV of the investments made would fall within the threshold limit of ₹ 1000 crores and the petitioner would not be entitled for any subsidy under the scheme. The subsidy was required for sustaining the project and not necessarily incurring capital expenditure. More importantly, there is no material to indicate that the subsidy would be used for capital investment as originally envisaged that the same would result in the petitioner meeting the criteria of capital investment (NPV of ₹ 1000 crores). The decision of the respondents to refuse disbursement of subsidy on the ground that the petitioner s viability in question also cannot be faulted. Plainly, the object of the Scheme was to support eligible projects. In the given set of facts where the viability of the petitioner s project is itself under serious question, the respondent cannot be expected to disburse any subsidy which was envisioned for long term benefits. The opening paragraph of the Scheme indicated that the same was in expectation of return by way of contribution to the GDP of the country. Petitioner could not dispute that even if the NPV was calculated on the basis as accepted in Indosolar (supra), the NPV of the petitioner s capital investment would not exceed the threshold of ₹ 1000 crores if the outstanding lease rentals and the capital expenditure amounting to ₹ 96.95 crores was excluded from such calculation. - Petition dismissed.

Summary

Issues:
1. Eligibility for subsidy under a government scheme.
2. Disbursement of subsidy during insolvency proceedings.
3. Capital investment threshold for subsidy entitlement.
4. Viability of the petitioner's project.
5. Calculation of Net Present Value (NPV) for subsidy determination.

Eligibility for Subsidy under Government Scheme:
The petitioner, a company engaged in solar power projects, sought a subsidy under a government scheme. The petitioner claimed entitlement to the subsidy despite facing insolvency proceedings initiated by a creditor. The court reviewed the petitioner's application history and communication with the respondent ministry. The petitioner argued that the subsidy was crucial for project completion and rehabilitation. However, the respondent ministry rejected the subsidy claim, citing outstanding lease rentals and doubts about project viability.

Disbursement of Subsidy during Insolvency Proceedings:
During insolvency proceedings initiated by a creditor, the resolution professional sought subsidy disbursement from the respondent ministry. The National Company Law Tribunal (NCLT) dismissed the petitioner's application for subsidy disbursement, stating it was beyond its jurisdiction. The petitioner then approached the High Court seeking directions for subsidy disbursement, which was initially rejected by the ministry.

Capital Investment Threshold for Subsidy Entitlement:
The court analyzed the capital investment threshold required for subsidy eligibility under the scheme. The petitioner's claimed capital expenditure fell short of the threshold due to unverified investments and outstanding lease rentals. The court emphasized that a petitioner cannot claim benefits for investments not paid for, and upheld the ministry's decision to reject the subsidy based on inadequate capital investment.

Viability of the Petitioner's Project:
The respondent ministry refused subsidy disbursement, citing the petitioner's project's acute liquidity shortage and doubts about its viability. The ministry aimed to support viable projects and not those facing financial distress. The court agreed with the ministry's decision, considering the long-term benefits of the subsidy and the project's contribution to the country's GDP.

Calculation of Net Present Value (NPV) for Subsidy Determination:
The court addressed the petitioner's argument regarding the calculation of NPV for subsidy determination. The petitioner referenced a previous court decision but failed to dispute that even with a revised NPV calculation method, the petitioner's capital investment would not meet the subsidy threshold. The court concluded that the petitioner's petition lacked merit and dismissed it, leaving each party to bear their own costs.

This detailed analysis of the judgment highlights the key issues addressed by the court regarding subsidy eligibility, disbursement during insolvency, capital investment thresholds, project viability, and NPV calculation for subsidy determination.