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TMI Blog2019 (7) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents 1 to 3 to execute supplement Deeds extending upto 31.03.2020, the period of the Mining Lease bearing M.L.No.2293 vide Annexure ___ 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, in the interest of justice and equity. iv. Issue and other Relief, order or direction as deemed fit under the circumstances of the case, in the interest of justice. 2. At the outset it is pertinent to note that originally MA/632/2018 was filed by the Resolution Professional challenging the order dated 26.09.2018 passed by the 2nd Respondent and the same was allowed by this Tribunal vide its order dated 11.12.2018 by setting aside the impugned order. The Respondents filed a writ petition W.P. No. 5002/2019 before the Hon ble High Court of Karnataka challenging the order of this Tribunal. The Hon ble High Court of Karnataka by its order dated 22.03.2018 set aside the order of this Tribunal and remanded the matter back for re-consideration. Factual matrix: 3. The application on hand has been filed by the Resolution Professional for the M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded the M.L. No. 2293 of the Corporate Debtor/Applicant herein under Category A i.e. mining lease with no illegalities or minor illegalities. Based on the report submitted by the CEC, the Hon ble Supreme Court lifted the ban by passing interim order on 03.09.2012, in respect of A category Mining Leases. Submission of the Applicant 7. The Counsel for the Corporate Debtor/Applicant has submitted that the Director of Mines Geology has issued a Show Cause notice dated 12.09.2012 to the Corporate Debtor/Applicant on the basis of a complaint filed by Sri. C. Satyanarayana. After conducting the hearing and inspecting the mining area, the Director of Mines Geology had passed an order dated 22.11.2012 permitting the Applicant Company to resume the mining operations. 8. The Counsel for the Applicant/Corporate Debtor has further submitted that the provisions of Mines Minerals (Development Regulation) Act, 1957 were amended by virtue of the Mines 8b Minerals (Development Regulation) Amendment Act, 2015 (in short MMDR Act) which came into effect from 12.01.2015. In view of provision contained under Section 8A (6) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 of Mineral Concession Rules, 1960. It is further submitted that as on date, the only civil dispute pending between the Applicant herein and Sri C. Satyanarayana is before the Sole Arbitrator and in the recent claim filed by Sr. C. Satyanarayana before the Insolvency Resolution Professional. There are no other proceedings pending between the applicant and Sri C. Satyanarayana in any other Court and all the other cases have been closed without any relief being granted in favour of Sri. C. Satyanarayana. Further issues have been framed by the Sole Arbitrator but the proceedings have presently been kept in abeyance in view of Sec. 14 of the Insolvency Bankruptcy Code with an order dated 04/07/2018 passed by the Arbitrator instructing the parties to take appropriate proceedings under the Code by moving the appropriate authority at the earliest for modification of the order of moratorium by allowing the continuation of proceedings before the Arbitrator. 12. Based on the enquiry, an Order came to be issued on 26.09.2018 by the Under Secretary to Government, Commerce Industries Department (Mines), State of Karnataka whereby the Application filed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Moratorium under IBC does not take away the statutory power given to the state Government under the MMDR Act. Merely because, CIRP proceedings are pending in respect of the Corporate Debtor and that Moratorium has been declared, does not automatically enable or entitle the Corporate Debtor to seek extension of the lease deed granted in its favour. 17. The Counsel for the answering Respondents has further contended that while considering the request for extension under Section 8A (6), the State Government was required to satisfy itself that the Applicant/Lessee is entitled for such extension of lease up to 31.03.2020. In the present case, the 2nd Respondent has categorically recorded a finding that the Applicant herein has entered into various agreements deeds with the third party, with an intention to transfer or assign or sublet the mining lease granted in its favour, thereby contravening Rule 37 of MC Rules, 1960 read with Rule 24 of MOAHCEM Rules, 2016 and also terms and conditions of the lease. In view of the said findings, the proposal for deemed extension of lease in favour of the Applicant was rejected. 18. The Counsel for the answering Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Respondents has submitted that Rule 55 of the MOAHCEM Rules, 2016 saves the things done or omitted to be done under the MC Rules, 2016. The Respondents are within their powers to initiate action both under Rule 37 of MC Rules, 1960, Rule 24 of MOAHCEM Rules, 2016 and in terms of the conditions of lease. 22. The Counsel for the Respondents has submitted that the permission/order dated 22.11.2012 was issued pursuant to the inspection conducted by CEC and the joint inspection team constituted by the Hon ble Supreme Court. The said team was only concerned with the issues as to whether all the statutory clearances have been obtained by the Corporate Debtor/lessee and as to whether the mining is being carried out strictly within the boundaries of the lease granted to it. The issue as to whether there are violations of the terms of the lease or Rule 37 of the MC Rules, 1960 was never considered either by the inspection team or the Director, DMG while passing the said order dated 22.11.2012. 23. The main issue here is as to whether the order dated, 26.09.2018 passed by the Respondents No.1 to 3 by which Mining Lease bearing No. ML-2293 is termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny nature within its ambit. In order to buttress this view a reference may be made to the notes on Clause for Section 14, which read as follows; the purposes of the moratorium include keeping the corporate debtor s assets together during the insolvency resolution process and facilitating orderly completion of the processes envisaged during the insolvency resolution process and ensuring that the company may continue as a going concern while the creditors take a view on resolution of default and the moratorium on initiation and continuation of legal proceedings, including debt enforcement action ensures a stand-still period during which creditors cannot resort to individual enforcement action which may frustrate the object of the corporate insolvency resolution process. (Emphasis supplied). As per the notes on clauses as mentioned above, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIR Process and there may not be any occasion for the CoC to consider any Resolution Plan, as no Resolution Applicant would come forward for revival of the business of the Corporate Debtor/Applicant due to the termination of the lease. Therefore, the action of the Respondents 1 to 3 terminating the lease, M.L. No. 2293 during the moratorium declared vide order dated 12.03.2018 by this Authority is in violation of Clause (d) of Sub Section (1) of Section 14 of the IBC, as the interest created in favour of Corporate Debtor/Applicant by virtue of the lease, M.L. No 2293, has been taken away, on which the whole of the business of the Corporate Debtor/Applicant Company was dependent. Thus, the order dated 26.09.2018 passed by the Respondents 1 to 3 [particularly of Respondent No. 2] is declared null and void and stands set aside. 27. Besides the above, this Adjudicating Authority cannot lost sight of some of the other relevant facts, which clearly bring out that the Director of Mines Geology has issued a Show Cause notice dated 12.09.2012 to the Corporate Debtor/Applicant on the basis of a complaint filed by Sri. C. Satyanarayana. After conducting the hearing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Resolution Process under the Code. Therefore, the plea taken by the counsel for the Respondent No. 1 to 3 is perverse and the same stands rejected. Thus, the provisions of the IBC, 2016 will override anything inconsistent contained in the MMDR Act. 30. Once the order dated 26.09.2018 terminating the lease M.L. No. 2293 is set aside, the lease is valid up to the period ending on the 31st March, 2020, by virtue of the provision of Clause (6) of Section 8A of the Mines and Minerals (Development and Regulation) Amendment Act, 2015. In this connection a reference may be made to the decision of the Apex Court given in Common Cause v. Union of India [2016] 11 SCC 455, the operative part of which is extracted as follows;- 37.6 Consequent upon the amendment of Section 8A of the MMDR Act, the regime introduced through sub-sections (5) and (6) thereof, provides for three contingencies where benefits have been extended to leaseholders whose lease period had earlier been extended by a renewal. Firstly, for a leaseholder whose renewal period had expired before 12.1.2015, and the leaseholder had moved an application for renewal at least twelve months before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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