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2019 (7) TMI 636 - Tri - Insolvency and BankruptcyExtension of mining lease - initiation of Corporate Insolvency Resolution Process - Corporate Debtor - It is alleged by the Corporate Debtor/Applicant that that the order dated 26.09.2018 passed by the 1st Respondent, rejecting the request of the Applicant for deemed extension of the Mining lease, is in violation of Section 14 of the Insolvency and Bankruptcy Code, 2016. Whether the order dated, 26.09.2018 passed by the Respondents No.1 to 3 by which Mining Lease bearing No. ML-2293 is terminated and the request for Deemed Extension of the said Mining Lease is rejected, violates the Moratorium declared by this Authority on 12.03.2018 while initiating the CIRP against the Corporate Debtor/Applicant? HELD THAT - The intention of the legislature in relation to Section 14 is to ensure that after the declaration of moratorium, there is a standstill period during which there is a bar on creating any encumbrance, sale or alienation of the assets of the Corporate Debtor, so that the financial position of the Corporate Debtor must remain preserved and transparent as a going concern. The suspension of all proceedings against the Corporate Debtor is essential as it stabilizes the assets of the Corporate Debtor thereby giving the creditors clarity regarding the financial health of the Corporate Debtor and providing them a drawing board to formulate a Resolution Plan, which could effectively restructure the outstanding debts. Thus, the language of Section 14 of the Code is wide enough to include legal proceedings of any nature within its ambit. The Corporate Debtor must continue to be a going concern during the moratorium, and any action which is likely to frustrate the object of the CIR process is prohibited. Thus, any violation of the moratorium will certainly derail the CIR process and Resolution Plan, which the Committee of Creditors ( CoC ) may be considering, thereby defeating the scope and purpose of the Code. In view of it, the Tribunal/Court has to make a purposive Interpretation of the provisions of Section 14 of the Code, so as to give effect to the same by keeping in mind the purport and object of the Code - In the case on hand, Clause (d) of Sub-Section (1) of Section 14 of the IBC is relevant, which provides that the declaration of the Moratorium prohibits the recovery of any property by any owner or lessor where such property is occupied by or in possession of the Corporate Debtor. The Respondent Nos. 1 to 3 are directed to execute Supplement Deeds in favour of the Corporate Debtor/Applicant extending the period of the Mining Lease bearing ML No.2293 up to 31.03.2020, in accordance with Sec. 8 A (6) of the M.M.D.R Act, 1957 as amended under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, within a period of two weeks from the date of the receipt of the certified copy of this Order. Application disposed off.
Issues Involved:
1. Violation of Section 14 of the IBC. 2. Validity of the mining lease extension under Section 8A(6) of the MMDR Act. 3. Jurisdiction of the Tribunal to examine the validity of the impugned order. 4. Overriding effect of the IBC over the MMDR Act. 5. Compliance with the conditions of the mining lease. Detailed Analysis: 1. Violation of Section 14 of the IBC: The Tribunal noted that the moratorium declared under Section 14 of the IBC prohibits any action to recover or enforce any security interest created by the corporate debtor in respect of its property. The order dated 26.09.2018 terminating the mining lease ML No. 2293 during the moratorium was deemed to violate Section 14(1)(d) of the IBC, as it took away the interest created in favor of the Corporate Debtor, thereby frustrating the objective of the Corporate Insolvency Resolution Process (CIRP). The Tribunal emphasized that the moratorium aims to preserve the financial position of the Corporate Debtor and maintain it as a going concern. 2. Validity of the Mining Lease Extension under Section 8A(6) of the MMDR Act: The Tribunal held that the mining lease ML No. 2293 is deemed to be valid up to 31.03.2020 as per Section 8A(6) of the MMDR Act, 1957, as amended by the Mines and Minerals (Development and Regulation) Amendment Act, 2015. The Tribunal referred to the Supreme Court's judgment in Common Cause v. Union of India, which provides for the extension of lease periods under specific contingencies. 3. Jurisdiction of the Tribunal to Examine the Validity of the Impugned Order: The Respondents contended that the Tribunal lacked jurisdiction to examine the validity of the order dated 26.09.2018, arguing that such power lies with the Central Government under Section 30 of the MMDR Act. However, the Tribunal dismissed this argument, asserting its jurisdiction to interpret and enforce the provisions of the IBC, especially during the moratorium period. 4. Overriding Effect of the IBC over the MMDR Act: The Tribunal cited Section 238 of the IBC, which states that the IBC will override any inconsistent provisions in any other enactment, including the MMDR Act. The Tribunal referred to the Supreme Court's judgment in Pr. CIT v. Monnet Ispat and Energy Ltd., which affirmed the overriding effect of the IBC over other laws. Thus, the Tribunal concluded that the provisions of the IBC take precedence over the MMDR Act in the context of the CIRP and moratorium. 5. Compliance with the Conditions of the Mining Lease: The Tribunal found that the Corporate Debtor had complied with the conditions of the mining lease and the provisions of the Mines and Minerals (Development & Regulation) Act, 1957. The Tribunal noted that previous inspections and reports, including those by the Director of Mines & Geology and the Central Empowered Committee (CEC), did not find any violations by the Corporate Debtor. The Tribunal dismissed the allegations of violations of Rule 37 of the Mineral Concession Rules, 1960, and the conditions of the lease, stating that these issues were previously resolved and could not be reconsidered. Conclusion: The Tribunal declared the order dated 26.09.2018 null and void and directed the Respondents to execute Supplement Deeds extending the period of the mining lease ML No. 2293 up to 31.03.2020, in accordance with Section 8A(6) of the MMDR Act. The Tribunal emphasized the need to preserve the Corporate Debtor's assets and maintain its operations as a going concern during the CIRP. The order was pronounced in open court and a certified copy was to be issued to the Resolution Professional for compliance.
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