9911796707
TMI Blog2024 (10) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor as AMCC would be returned to the Corporate Debtor every 5 years and the balance would be returned after completion of the final mine closure. Thus, when the Escrow Agreement itself provides that the entire amount is to be returned to the Corporate Debtor after completing mine closure activities, it cannot be persuaded by the argument canvassed by the Respondent No. 1 2 that AMCC was money held in trust and are more inclined to agree with the Appellant that this sum clearly belonged to the Corporate Debtor for discharge of mine closure obligations. The Corporate Debtor stood admitted into the rigours of CIRP on 12.08.2022 under the provisions of the IBC. Pursuant to the admission of the Corporate Debtor into CIRP, moratorium in terms of Section 14 of the IBC stood imposed against the Corporate Debtor. IBC places moratorium on all past dues of the Corporate Debtor. Once moratorium is declared in respect of any company, the institution of suits or continuation of pending suits or proceedings against such company including execution of any judgement, decree or any other order in any court of law, tribunal, arbitration panel or other authority is statutorily barred. Under the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and Bankruptcy Code 2016 ( IBC in short) by the Appellant arises out of the Order dated 06.02.2024 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-I) in I.A. No. 4460 of 2023 in CP (IB) No. 1807 of 2018. The Appellant had filed the I.A. No. 4460 of 2023 seeking direction against the Secretary, Ministry of Coal- Respondent No.1 and Coal Controller-Respondent No.2 not to withdraw the mine opening permission in respect of Marki Mangli I Coal Block. By the impugned order, the Adjudicating Authority directed the Respondent No. 2 to withdraw the withdrawal letter of mine opening permission and also directed the Appellant to keep aside the Annual Mine Closure Cost besides directing the Appellant personally liable for disposal of the mined coal in accordance with the terms of the Mine Agreement. Aggrieved with the last two directions given to the Appellant in the impugned order, the present appeal has been preferred by the Appellant. 2. Coming to the salient facts of the case, the same are as outlined below: The Ministry of Coal, Government of India, vide order dated 04.06.2015 under Rule 8(2) of the Coal Mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.2022 the IRP informed the nominated authority about the commencement of CIRP and operation of moratorium under Section 14 and requested for time extension for furnishing the PBG. On 22.08.2022 Respondent No. 1 initiated the process for cancelling and termination of the CMDPA and issued an appropriation notice to the Corporate Debtor for appropriating bank guarantee as performance security. On 12.09.2022 Respondent No. 1 terminated the CMDPA by issuing a termination notice. Aggrieved by the said termination notice, the IRP approached the Hon ble Delhi High Court by way of a Writ Petition No. 13282 of 2022. The Hon ble Delhi High Court on 15.09.2022 granted an interim stay on the operation of the said termination notice and directed the Respondent No. 1 and Respondent No. 2 not to take any coercive action against the Corporate Debtor pursuant to the said termination notice. The Writ Petition is still pending before the Hon ble Delhi High Court. The Committee of Creditors-Respondent No. 3 in the 2nd CoC meeting held on 20.02.2023 appointed the Appellant as the Resolution Professional ( RP in short) of the Corporate Debtor. IRP issued Form G inviting expression of interest ( EoI ) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of IBC. The AMCC being in the nature of an operational debt, the Respondents cannot be paid in preference to other creditors as that would defeat the purpose of CIRP and would prejudice other secured financial creditors who are members of the CoC. However, the directions of the Adjudicating Authority by allowing the AMCC to be kept outside the CIRP of the Corporate Debtor tantamount to giving the Respondents No.1 and 2 a special status that is not recognised by law. It has also been contended by the Appellant that Section 29 of the CMSPA cannot override the provisions of IBC. It has been vehemently contended by the Appellant that the Respondents having filed their claim in Form-B on 23.11.2023 as operational creditor by treating AMCC as a Pre-CIRP cost they cannot be allowed to reprobate now and claim that AMCC is not an asset of the Corporate Debtor and that the same be kept out of CIRP altogether. In any case this relief could not have been granted by the Adjudicating Authority as this was neither sought nor pleaded by the Appellant or Respondents no.1 and 2. Thus, by granting such a relief which was not pleaded by either parties, the Adjudicating Authority had clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of trust as it is Union s duty to act as a trustee of nature s resources for the welfare of public. These costs are designated for environmental restoration and safety measures to be executed upon cessation of mining activities rather than ongoing business operations. Treating them as part of running costs would misrepresent the nature of these obligations which are future oriented and contingent upon closure of the mine. AMCC cannot be considered as an expense or cost incurred in running the business of the Corporate Debtor as a going concern. It was also contended that this obligation to pay AMCC is a pre-requisite condition for functioning of mining operation and cannot be considered as a fee, tax or dues payable to the government. It was vociferously contended that AMCC did not fall within the purview of Section 5(13) of the IBC and cannot be subjected to any haircut. It has also been submitted that the CCO acquired the powers and duties to monitor mineclosure and operate the Escrow Account for funding mine closure activity from Rule 10A of the Colliery Control Rules, 2004 and Section 18 of MMDR Act. The Escrow Account opened by the Corporate Debtor had the CCO as the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al letter, the Appellant had filed IA No. 4460 of 2023 before the Adjudicating Authority seeking the following reliefs: a. To quash and set aside the Withdrawal Letter dated 05.09.2023 issued by the Respondent No. 2; b. During pendency or disposal of this Application, direct the Respondent No. 1 and Respondent No. 2 to not take any coercive action in light of the Withdrawal Letter dated 05.09.2023; c. During pendency or disposal of this Application, suspend the effect of Withdrawal Letter dated 05.09.2023 allowing the Corporate Debtor to continue with the mining operations; d. For interim and ad-interim reliefs; and e. Pass such other necessary orders as this Hon ble Tribunal may deem fit. 10. When we look at para 24 of the impugned order, we find that the Adjudicating Authority had delineated two issues to be answered: 24. At the outset, it is hereby clarified that the issue for determination before us is (a) whether the withdrawal letter dated 05.09.2023 could have been issued in view of the CIRP commencement on 12.08.2022 and consequential imposition of moratorium in terms of Section 14 of the Code; (b) Whether the Mine closure cost upto the CIRP commencement date are operationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cut shall become obligation of the Successful Resolution Applicant, as Government cannot be asked to fund such hair cut under any circumstances. The Code contemplates waivers of fiscal liabilities which has arisen in present, whereas the mine closure obligation is a future obligation, because the failure in fulfilment of progressive fulfilment of obligation cannot discharge the lessee from the final obligation of closing the mined land in accordance with the guidelines and statutory mandate. Accordingly, we are of considered view that annual mine closure charges are in nature of moneys held in trust in an Escrow Account to ensure fulfilment of obligation towards the Public at large for complete closure of mine and development of mined area, and such money cannot be part of Liquidation estate. 33. Accordingly, we direct the Applicant to consider the Annual Mine closure costs as money not belonging to the Corporate Debtor and keep the same aside. Our observation in this Order shall not prejudice the rights of the Respondent to take appropriate action, except termination of the Coal mine agreement on that ground, in relation to allegation of sale of coal in open market in violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to be used for fulfilling the statutory obligation of rehabilitation of land and environment and therefore did not form the asset of the Corporate Debtor and that the Adjudicating Authority correctly held that the pre-CIRP AMCC due is fully recoverable. It was contended that AMCC cannot be treated as a fee, tax or dues payable to the government but was a payment in the nature of trust to fulfil the social obligation of mine-closure. It therefore falls outside the scope of CIRP costs as defined under Section 5(13) of the IBC and hence cannot be subjected to any haircut. It has also been contended by the Respondents that though the Corporate Debtor was obligated to pay the mining closure cost in annual instalments over the period of mine-life this was consistently breached by the Corporate Debtor which had led to issue of several reminders followed by issue of show cause notice calling upon the Corporate Debtor to explain why the mining operations should not be withdrawn. Hence withdrawal of mining permission arises out of breach of Escrow Agreement and not in pursuance of Termination Notice dated 12.09.2022. 16. This brings us to the first limb of the argument of the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractory plant. The Hon ble Supreme Court had upheld the validity of Industries (Development and Regulation) Act by holding that there is a direct and rational nexus between the objective of the enactment and the principles contained in Article 39 of the Constitution. The present is, however, not a case where the constitutional validity of IBC has been put on the test and hence this case law also does not come to the rescue of the Respondent No.1 2. 19. Yet another judgment of the Hon ble Supreme Court which has been relied upon by Respondent No. 1 2 is Reliance Natural Resources Ltd. Vs Reliance Industries Ltd. (2010) 7 SCC 1 wherein the Hon ble Supreme Court held that the public trust doctrine is part of Indian law and that it is thus the duty of the Government to provide complete protection to the natural resources as a trustee of the people at large. This ratio also does not render any assistance to Respondent No. 1 2 since the Appellant has nowhere questioned the purpose and objective of AMCC or denied the obligation cast on the Corporate Debtor to take necessary measures for fulfilling mine-closure responsibilities. This is also clearly evidenced by the fact that AMCC has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government to take all such steps as may be necessary for the conservation and systematic development of minerals in India and for the protection of environment by preventing or controlling any pollution which may be caused by prospecting or mining operations. Further, Section 29 of the Coal Mines (Special Provisions) Act, 2015 vests overriding powers which reads as follows: The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, or in any instrument having effect by virtue of any such law. Further as per Clause 14 and 15 of the CMDPA, upon exhaustion of the extractable coal reserves at the Coal Mine, the Coal Mine shall be closed in the manner provided in the closure plan. In addition, Rule 10A and 12A of the Colliery Control Rules empowers the Coal Controller to monitor mine-closure and operate the Escrow Account formed for funding mine-closure activity for which an Escrow Agreement was drawn up. 23. This brings us to salient terms of the Escrow Agreement, which provides for the modalities of the operation of the Escrow Account as extracted hereunder: 1. As per the guidelines of the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to be issued after giving an opportunity to be heard. Operation Of Escrow Account Deposit i) The Escrow Account shall continue as a fixed deposit account subject to withdrawal of 80% of total deposited amount including interest accrued in the Escrow Account after 5 years of every deposit in line with the periodic examination of the closure plan. The balance amount shall be released to the mine owner/leaseholder at the end of the final Mine Closure on compliance of all provision of closure Plan. ii) The M/s. Topworth Urja Metals Ltd. shall cause deposit in such Escrow Account in the following manner on yearly basis as would be communicated by the Coal Controller from time to time to it: . h) If the Mine owner fail to deposit the annual amount required to be deposited, the Government can withdraw the mining permission. 24. When we look at the terms of the Escrow Agreement, it is clear that Clause 3 provides that the AMCC was to be placed in the Escrow Account to perform the mine closure obligations. Undisputedly, the same clause also provides that CCO is to be the exclusive beneficiary and that AMCC is to be verified by the CCO. It is equally significant to note that in the very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these enactments may contain a non-obstante clause, the IBC being a later non-obstante clause, it would override CMSPA. In support of their contention, the Appellant has relied on the judgment of Hon ble Supreme Court in A.P. State Financial Corporation Vs Official Liquidator (2000) 7 SCC 291 and R.S. Raghunath Vs State of Karnataka (1992) 1 SCC 335 which has approved the Rule of Lex Posteriori. We quite agree that IBC being a subsequent enactment, the provisions of the IBC shall have an overriding effect and neither CMSPA nor MMDR Act can claim itself as not being subservient to the provisions of the IBC. 27. For ease of reference, Section 238 of the IBC is reproduced below: 238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. We also agree that there is a catena of judgments of the Hon ble Supreme Court as in Sundaresh Bhatt, Liquidator of ABG Shipyard Limited Vs Central Board of Indirect Taxes and Customs- Civil Appeal No. 7667 of 2021 and A. Navinchandra Steels Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC framework, the assets of the Corporate Debtor are to be taken over by the RP for resolution of the Corporate Debtor. The RP has to make every endeavour to protect and preserve the value of the property of the Corporate Debtor. Payment of pre-CIRP dues to creditors cannot be made by RP outside the resolution framework. If Respondents are allowed to recover their AMCC dues of pre-CIRP period in full by keeping it outside CIRP process, it would be a discriminatory arrangement which has not been envisaged or contemplated under the IBC. Respondent No. 1 2 cannot stand on different footing with other creditors of the Corporate Debtor who have filed their claims for the pre-CIRP period with the Appellant-RP. Such differential treatment is also contrary to the settled law which prescribes for non-differential treatment of similarly situated Operational Creditors or the Financial Creditors. The payment of pre-CIRP dues is not sustainable since any such payment to any creditor is not only discriminatory to other similarly situated creditors, but also dilutes the scheme of the IBC. The Respondent No. 1 2 are entitled to receive pre-CIRP dues as per resolution framework. Hence, the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMCC was held in the nature of trust and that it was not an asset of the Corporate Debtor either in the pleadings before the Adjudicating Authority or even in communications exchanged by them with the RP or with SRA. It was also asserted that keeping this asset outside the CIRP would not achieve the purpose of securing mine closure obligations. 33. The counter-contention of Respondent No. 1 2 is that they had filed their claim in Form-B as Operational Creditor without prejudice to their contention that AMCC cost should not be subjected to waterfall mechanism as it is not part of the estate of the Corporate Debtor and is not subject to haircut. On the rejection of their claim, it has also been contended that in view of the law laid down by the Hon ble Supreme Court in State Tax Officer Vs Rainbow Papers Ltd. (2023) 9 SCC 545 ( Rainbow in short) if a resolution plan fails to include statutory demands payable to the government, the resolution plan is bound to be rejected. 34. We are not inclined to agree with the above standpoint of Respondent No. 1 2 for Rainbow judgment does not support the argument that all government dues will be secured dues under all circumstances. The reasonin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislative intents behind IBC. The Adjudicating Authority grossly erred in holding that the AMCC is not part of the estate of the Corporate Debtor and that the same needs to be kept aside. Basis the foregoing discussion, we do not agree with the reasoning offered by Adjudicating Authority to allow AMCC to be kept out of the CIRP process to enable its recovery dehors the scheme of IBC. If the AMCC is allowed to be kept outside the CIRP of the Corporate Debtor, it would tantamount to giving the Respondents a special status that is not recognised by law. Respondents cannot be paid in preference to other creditors as that would defeat the purpose of CIRP and would prejudice other secured financial creditors who are members of the CoC. This would cause serious prejudice to the discipline of IBC and would set at naught the salutary provisions of the IBC. Such ingenious method of recovering pre-CIRP dues will be setting a bad precedent and open room for government/statutory entities to device contrivances to recover pre-CIRP dues in the garb of public trust doctrine. This will open flood-gates for innovating new strategies to defeat the statutory scheme of IBC which is a complete code in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
