9911796707
TMI Blog2007 (3) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... and proper in the circumstances of the case. 2. The application was filed on 12-12-2006. On the same day the notices were accepted by Official Liquidator, State of U.P., UPSMDC and Jaiprakash Associates Ltd. (JAL). The matter was heard on 19-12-2006, when the court prima facie did not find any good ground to vacate the interim order and then on 11-1-2007 when it was noticed that both UPSMDC and Official Liquidator do not want to file any reply. JAL filed its reply and State Government took further time to file counter affidavit. On 24-1-2007, UPSMDC, changed its stand and filed a counter affidavit. The applicant took time to give reply to the counter affidavit of UPSMDC and a rejoinder affidavit to the counter affidavit of JAL. On 19-2-2007 the State Government took further time and filed its reply on 22-2-2007. The matter was heard on 22-2-2007, and the orders were reserved. 3. Shri Viplav Sharma assisted by Shri S.K. Singh appeared for SMPL the applicant; Shri Ashok Mehta for Official Liquidator; Shri Sanjai Om for UPSMDC; Shri Anil Mehrotra for State of UP and Shri Yashwant Verma for JAL. 4. In order to consider the prayers made in the application, it is necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that the advertisements were published by the State Government in newspapers inviting tenders for taking over cement plants of the company (In Liq.). The advertisements were published in Economic Times and Business Standards on 10-2-2001 and 12-2-2001, offering the assets and a number of reliefs and concessions to be granted by the State Government. It was alleged that the State Government adopted a transparent process of sale in which three cement companies were initially interested, however, finally only one company namely M/s. Grasim Industries Ltd. had made an offer. The Sale Committee comprised of the Commissioner Industrial Development, Chairman; the Secretary, Small Industries Development; the Secretary, Finance Department; the Secretary, Heavy Industries and the Managing Director, UPSIDC. The reliefs and concessions and the assets offered for sale were included in the Memorandum of Information (MoI) the guidelines for submitting of tenders. Apart from other reliefs and concessions including renewal of limestone leases in favour of the company, the State Government offered limestone leases at Ninga Kajrahat having over hundred million tons of lime stone depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P., Lucknow and as such he is fully acquainted with the facts deposed to below. (2) That the present affidavit is being filed in compliance with the Order dated 20-12-2001 passed in the aforesaid matter, by the Hon ble Court. (3) That the State Government s primary concern has been revival of unit at the earliest though privatization in the interest of the workers. The idea is not merely disposal of assets by their transfer to a purchaser who has the necessary resources, competence and experience to run the unit. (4) That the offer of M/s. Grasim Industries has been received after open public tender and they are one of the largest cement producers in the country. (5) That the request made by the State Government to the Hon ble Court was by way of helping and assisting the Liquidator in the disposal of the Company s property under section 457(1)( c ) to save time instead of initiating the process afresh at his level. (6) That the State Government has no objection to this Hon ble Court exploring the possibility of a higher bid and the State Government would in that event extend the same reliefs and concessions as those offered to M/s. Grasim Industries. However, it is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be carried out by making wide advertisement in global markets after approval of draft advertisement from the court. The tender document prepared by the State Government was to be considered as basic document for such purpose, with modification and changes to be considered and proposed by the company with the approval of the court. Apart from the global tender the invitation was to be sent to all leading cement manufacturers in the country. All the prospective bidders were to be allowed inspection and the bids were to be received in sealed covers with reserve price at Rs. 271 crores (Rs. 241 crores offered by Grasim Industries Ltd. + assets of Rs. 30 crores, which were excluded by the State Government). 13. The first valuation report of the assets was submitted by M/s. A.F. Ferguson and Co. (1995), and the second valuation report was prepared by M/s. N.K. Aggarwal (2001). In the Special Appeal filed by State Government, Allahabad Bank and Grasim Industries Ltd., a third valuation was carried out by G.S. Birdie (2002). In the course of hearing of the special appeal, initially some offers and counter offers were made in the court, however, these offers were not accepted and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1465 ( sic ) were dismissed by the Division Bench on 16-1-2006. With the consent of all the parties the matter was taken up in chambers for financial bidding in which JAL was declared to be highest bidder with the offer of Rs. 459 crores. M/s. Dalmia Cement (Bharat) Ltd. the next highest offered bidder Rs. 376 crores. Lafarge India Private Ltd. made an offer at the reserved price of Rs. 271 crores. Grasim Industries Ltd. did not offer any bid. The highest bid of JAL with a difference of Rs. 83 crores was accepted. JAL deposited 25 per cent of the offer on 15-2-2006 and made an offer to deposit the balance in three instalments, the last of which was due on 19-9-2006. The offer was accepted with the condition that the JAL will furnish bank guarantees for the remaining money. The JAL deposited the last and final instalment on 11-11-2006 and the sale was confirmed in its favour. 17. In the meantime the Court was engaged almost every week in proceedings for finalisation of provident fund accounts, taking over of the schools and hospitals, giving direction for summoning and preservations of records, preparing maps and identifying the assets spread over 80 kms. area, advertisemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that the proven reserves of Blocks I to IV were only 85 million tons whereas the total reserves in the four Blocks were stated in MoI to be 140 million tons and that even if the proven reserves as set out in MoI were taken into consideration, the reserves in Blocks I to IV could not be 140 million tons. The finding recorded by the court in the matter of RPJMPL in the Order dated 20-9-2006 in paragraphs 46 to 57 on the basis of which the application of RPJMPL was rejected are quoted as below: "46. The facts and circumstances set out in detail, establish on record that a promise was held out in MOI calling for expression of interest, and thereafter bids, for sale of all that, which was contained in the document titled as MOI; prepared by the State Government. The State Government, in preparing the document had prepared a basket, for sale of the unit for not only exploiting the mineral resources of the State but also to pay to the workmen, the creditors, their dues and for rapid industrialization of the State, bringing in revenue and other benefits. This basket prepared by the State Cabinent in the year 2001 included the assets other than the assets of the company. The State was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded into 7 blocks. (24 27 : 83 0') to (24 27 : 83 9') The infrastructure in terms of rail road link is fairly well developed. The Chunar-Garawa road railway line passes from the western part of this belt, Chopan, Billi Obra dam, Salai-Banwa railway stations are located close to this belt. The Dalla Cement Factory has it s independent link with Salai-Banwa-Mirzapur highway. The Varanasi-Shaktinagar highway passes through Dalla village. The eastern, central and western part of this belt can be approached from Tilgurwa Kota road, Dalla Kajrahat road and Dalla Obra road respectively. 48. The dimension of the block and reserves detailed against the location and approach were given as follows : Dimension of each block Reserves (estimated in millions tons) Phy. Character Grade Average Chemical Composition (%) Proved Probable Cao Mgo SiO2 Block I= (1.72 Kms. X 0.35 Km.) 7.18 2.60 The limestone occurs in massive and thick beds. Shale beds are narrow and occur along well defined zones. Cement 45.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en as 0.3 Km. 0.15 Km. with 7.28 million tons as proved reserves. The Ghurma Limestone deposits are given on page 15 of MOI. 50. The details of properties of the Corporation to be part of the offer given on page 11 of MOI of the State Government are as follows : Name of Unit Location Area (Acres) Usage Dalla Kota Village 417.531 Dalla Billi Markundi Village 5.812 Chunar Village Muao, Dumduma, Jamuhar, Bakiabad 106.44 Factory Land Chunar -do- 120.6 Colony Land Chunar -do- 158.952 Hilly Land 51. The reliefs and concessions and the assets put by the State Government in the basket made the sale a unique proposition. It was an offer by the State Government and not by the court. Ordinarily the court can offer for sale only the assets of the company (In Liq.). In this case since some more was added by way of reliefs and concessions, to make the package attractive including the surface rights of the properties, which may not have belonged to the company (In Liq.), with the permission of the State Government and by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the Kajrahat Mines in the package for the intending purchaser of the asset of the company (In Liq.). 55. It is admitted to UPSMDC that mining lease renewed in its favour for the second time had expired. A decision has been taken by the State Government to renew the lease. This decision, however, taken on 25-2-2004 to renew the lease for 20 years with effect from 2-1-2002 is subject to condition that UPSMDC will transfer the lease in accordance with the condition of the agreement dated 5-6-2002 with M/s. RPJ Minerals and only after the terms and conditions of the agreement are fulfilled. The renewal as such is conditional. The UPSMDC has not placed on record the agreement with M/s. RPJ Minerals and the conditions, which are to be fulfilled before the transfer of the lease. Even after two years and seven months the lease deeds have not been executed. The UPSMDC was only given a conditional right for execution of the lease deeds. It is apparent that the State Government acted illegally in giving the sanction, against, its own decision taken by the State Cabinent in the year 2001, to include these mining rights in package of sale of assets to the intending purchaser of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent to MoU, the UPSMDC vide its letter dated 6-2-2004 accorded permission to the joint venture to carry out mining activities of Dolomite mines in Bari mines. The Bari Dolomite mines were first leased to UP State Industrial Development Corporation (UPSIDC) by Lease Agreement with Government, UP dated 10-5-1967 for 20 years. Subsequently by a Tripartite Transfer Deed dated 6-5-1976 between UPSIDC, the State Government and UPSMDC, these mines were transferred to UPSMDC for the remaining term of lease period. The State Government, by Order dated 19-2-2004 on a renewal application, ordered its renewal and accorded permission to carry out mining activities in the area, which is not covered by reserve forest and for the remaining area subject to approval of the Forest Department. The Government by the said Order dated 19-2-2004 also accorded its approval to the MoU for working on Bari Dolomite mines and decided that in the event UPSMDC is wound up, the Bari Dolomite mines will be transferred in favour of SMPL. 22. Shri Viplav Sharma appearing for the applicant states that since March 2004, SMPL is lawfully carrying out its mining activities in the Bari Dolomite mines in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the ex-employees of the company regarding unlawful mining activities. In any case the complaint did not include Bari Dolomite mines. These mines were subject of Joint Venture Agreement for which the State Government by Order dated 19-2-2004 has accorded approval to the MoU and for renewal of mines; which were never the assets of the company (in liquidation) and were never advertised for sale either by the State Government or by part of MoI by the court. The fact, that the representative of the State Government, was member of the Asset Sale Committee will not make any difference as the State Government had no authority to include any mines, which were not assets of the company in the advertisement of sale of the company (in liquidation). There was no such offer by the State Government to sell Bari Dolomite mines as part of the sale of the assets of the company (in liquidation). The injunctive orders are not in accordance with the law and take away valuable constitutional rights of the petitioner under article 300A of the Constitution of India. He further submits that the sale in the present case is under section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 years, i.e., up to 16-5-2007. Further no lease deed has been executed since 1987. The Government on 19-2-2004 accorded permission to UPSMDC to transfer the said lease to M/s. Katni Minerals Limited, Satna, besides, these there are no other mining right holders in this properties. 26. That, in view of the aforesaid, it is apparent that so far as the stand of State Government, with regard to the Block Nos. V, VI and VII is concerned, the same is absolutely clear and the decision has been taken by the State Government as mentioned in the office memorandum dated 13-10-2006, to accept the said impugned order dated 20-9-2006, at this stage, to the extent thereby the Hon ble Company Judge has held the Block Nos. V, VI and VII to be the part of the MOI, and for compensating M/s. UPSMDC for its losses on account of the same at the appropriate state." 27. In paras 8, 9 and 10 of the affidavit of Shri J.P.N. Dwivedi, Under Secretary, Industrial Development Department, Government of U.P. it is stated as follows : "8. That it is further relevant to mention here that the aforesaid application is related to Bari Dolomite Mines only and from the submissions made in the said affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that after winding up of the UPSMDC, the said MOU, which was signed during the period of UPSMDC would be transferred in favour of successor organization/corporation. It has further been provided therein that as per the said MOU, the transfer of the lease rights of Bari Mines would be made in favour of M/s. Sonbhadra Minerals Pvt. Limited (applicant herein) incorporated under the Companies Act, 1956, as a joint venture between M/s. Katni Minerals Pvt. Ltd. Associates and UPSMDC. 9. That it is also pertinent to mention here that through the permission for the renewal of the Bari Dolomite Mines by the State Government on 19-2-2004 has already been granted, however, the execution of the relevant instrument has not taken place till now. 10. That it is also relevant to mention here that this Hon ble court vide Order dated 20-9-2006 has already held that the area in question of the aforesaid application, i.e., Bari Dolomite Mines is an integral part of the MOI issued by the State Government in the year 2001, and the same became an integral part of the package of sale in the MOI issued in the year 2005 and with regard to which the bid of M/s. JAL has been accepted. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Shri U.S. Pandey, Chief General Manager (Tech.), UP State Mineral Development Corporation Ltd. with its registered office at Pragati Kendra Kapoorthla Commercial Complex, Aliganj, Lucknow stating therein in paras 6, 8 and 9 as follows: "6. That in reply to the contents of para No. 7 it is submitted that UPSMDC had valid lease of 1656.32 acres of dolomite in Bari Bhagmanwa. As per the submission made by UPSMDC before this Hon ble Court on 23-8-2006, Bari Bhagmanwa lease was not part of assets of UPSCCL (in liquidation). The Hon ble High Court vide its Order dated 20-9-2006 rejected the plea of UPSMDC and held this lease also to be an integral part of Memorandum of Information (MoI) prepared for the sale of assets of UPSCCL (in liquidation) which was subsequently accepted by UP Government vide its office memo dated 13-10-2006 and through an affidavit filed before this Hon ble Court on 26-10-2006. 8. That in reply to the contents of para No. 9 it is submitted that the Government of U.P. accepted the order of Hon ble High Court dated 20-9-2006 and decided to compensate UPSMDC for the likely losses at an appropriate stage vide office memo dated 13-10-2006 and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out mining activities in Bari Dolomite mines. These mines form part of the lease rights together with renewal permission which were to be transferred to the prospective buyers and were detailed in Part-IV of MoI issued by the Official Liquidator. The Lease Deed of Bari Dolomite mines dated 18-5-1967 for a period of 20 years computed from 18-5-1967 expired in May 1987. By the Deed of Transfer dated 8-5-1976, UPSMDC transferred these rights to UPSMDC for the remaining terms of the lease, UPSMDC did not transfer the rights to UPSMDC beyond May 1987. These transfers did not cast any obligation upon UPSMDC to seek its further renewal nor did it grant a right to UPSMDC to secure renewal of the said lease. After May 1987 no right over the Bari Dolomite mines was inherited or vested in UPSMDC post May 1987 and therefore no right over the said mine can be asserted either by UPSMDC or the applicant on the date when the MoI was executed between UPSMDC and Katni Mineral Pvt. Ltd. on 10-4-2002. No right inhered in UPSMDC over Bari Dolomite mines and the mining operations which continued after May 1987 were in violations of the provisions of the Mines and Minerals (Regulation and Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of these provisions provide that if the renewal application is not disposed of within six months, the maximum available period is for one year and that beyond one year application would be deemed to be refused. The lease dated 7-5-1986 expired in May, 1987, on the expiry of one year period, which was the outer limit. Thereafter no mining could be carried out and that the application for renewal of lease will be deemed to be refused. The application made by UPSMDC dated 7-5-1987 shall be deemed to be refused upon expiry of six months from its filing and even otherwise could not survive for consideration after May, 1988 on 19-2-2004. The State Government had no jurisdiction to consider or pass orders on the renewal application. The order dated 19-2-2004 is thus ultra vires to the provisions of the Act of 1957 as well as Rules of 1960. The necessary permission of the Forest Department has not been obtained and for the remaining area of 300.779 acres, permission of the State Government is without any pre-condition. The Bari Dolomite mine is included under the notification under section 4 of the Indian Forest Act, 1927 and that no mining activity could be carried out after 12-12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SMDC transferred the Bari Dolomite mines to UPSMDC for the remaining terms of the period of lease. There is no averment regarding the date nor there is any document on record to show that UPSIDC or UPSMDC applied for renewal within the prescribed period before the expiry of the leases in May, 1987. Further, there is no averment or proof that UPSMDC was carrying out any mining operations after expiry of the lease. In any case any application for renewal, if made before the expiry of lease, would be deemed to be refused, if the lease was not renewed within one year. The lease deed as such expired in May, 1988, with no further action of renewal and mining in the area for about seventeen years. 36. The renewal of the mining lease is not an empty formality. After an application for renewal is made, a person applying for renewal has to fulfil the statutory conditions including the submissions of mining plan and requisite permissions after depositing the renewal fees. In the meantime, the State Government decided to close business operations of UPSMDC and that from 1996 and 2002 the UPSMDC was not in business. During this period the Company (in liquidation) was wound up on 9-12-1999. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and concessions and the assets put State Government in the basket was a unique proposition. The inclusion of properties and rights, which were not assets of the company, was an offer made by the State Government and not by the Court. The State Government agreed to add some more assets and offered reliefs and concessions to make the package more attractive. It also included the surface rights of the properties which may not have belonged to the company. The sale was made with active representation and permission of the State Government. The stand taken by the State Government and UPSMDC have made it absolutely clear that they do not recognise the rights of any other person in these areas and have no objection to include these assets in this unique sale, for the purposes of development of the area and for expeditious disposal of the assets of the company (in liquidation) for the benefit of secured creditors including banks and financial institutions and about 6,000 workmen starving for last eight years. If the State Government allows the mining rights to be exploited for the purposes of development of an industry, and for proper and expeditious use of the natural wealth of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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