Delhi High Court: In an appeal filed under Clause X of the Letters Patent Act, 1866 to challenge the judgment dated 26-07-2024 wherein the Single Judge decided the underlying writ petition titled OCL Iron and Steel Ltd. v. Union of India 2024 SCC OnLine Del 5095 in favour of OCL Iron and Steel Ltd. (‘OCL’) (respondent), a Division Bench of Manmohan, CJ. and Tushar Rao Gedela*, J. said that Nominated Authority – Ministry of Coal (‘Nominated Authority’) (appellant) had failed to indicate as to what steps were taken by it to resurrect its claim and thus found no reason to interfere with the impugned judgment.
Background
OCL executed a Coal Mine Development and Production Agreement dated 02-03-2015 with Nominated Authority regarding allocation and development of Ardhagram coal mine. Clause 24.3.3 of the Coal Mine Agreement provided for the forfeiture of the Performance Bank Guarantee (‘PBG’) in the event of termination of the Agreement by OCL.
On 31-12-2021, Nominated Authority issued a communication terminating the Agreement for breach of its terms, specifically the non-renewal of the PBG for an amount of Rs. 92,25,20,000/- which had lapsed on 20-03-2021 as per Clause 6.15 of the said Agreement. The Resolution Professional (‘RP’) challenged Nominated Authority’s decision to terminate the Agreement before the National Company Law Tribunal (‘NCLT’), which was dismissed.
Thereafter, an appeal was preferred before the National Company Law Appellate Tribunal (‘NCLAT’) wherein interim order dated 24-01-2022 was restored thereby staying the operation of the Termination Order.
Meanwhile, NCLT initiated Corporate Insolvency Resolution Process (‘CIRP’) against OCL at the behest of Indian Bank on 20-09-2021. The RP notified the onset of CIRP and invited claims from the public through publication in the newspaper ‘Business Standard’ on 23-09-2021. The Nominated Authority submitted two claims — one as a financial creditor to claim Rs. 92,25,20,000/- towards the PBG and the second for the incremental fixed cost of Rs. 9,21,44,029/- which was due towards the prior allottee of the Ardhagram coal mine.
On 06-01-2022, the authorized representative of the RP issued a communication to Nominated Authority to inform that the claim pertaining to the PBG and other supporting documents did not disclose a ‘financial debt’ as per the proviso to Section 3(31) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) and thus, the Nominated Authority was not found to be a ‘financial creditor’.
On 07-01-2022, another email was addressed to the Nominated Authority, permitting it to file its claim in an appropriate form with supporting documents for consideration of the said claim by the RP. However, it was admitted by the Nominated Authority that no subsequent claim/form was submitted by it.
Subsequently, Resolution Plan dated 27-05-2022 that was formulated by the successful Resolution applicant was approved by the NCLT under Section 31(1) of the IBC on 20-03-2023. The reconstituted management of OCL applied for participation in bidding process for the Lalgarh South coal mine on 15-02-2024 but its name was omitted in the list of qualified bidders. OCL submitted several representations seeking permissions to participate in the prospective coal mine auctions but the Nominated Authority debarred it till the repayment of outstanding dues of Rs. 92,25,20,000/- arising from the failure to renew the PBG and the incremental fixed cost of Rs. 9,21,44,029/- which was allegedly unsettled.
Aggrieved, OCL filed the underlying writ petition to challenge the decision of the Nominated Authority dated 22-05-2024. Vide impugned judgment dated 26-07-2024, the Single Judge set aside the decision of the Nominated Authority and held that OCL could not be held accountable for the liabilities that had been legally extinguished and that based on IBC, OCL was entitled to proceed on principle of ‘clean slate’. Aggrieved by this, the Nominated Authority preferred the present petition.
Analysis and Decision
The Court said that it was manifest that one of the claims of the Nominated Authority for dues towards the prior allottee of the Ardhagram coal mine to the extent of Rs. 9.21 crores were included in the Resolution Plan. It was noted that this claim was calculated at Rs. 49,262/- representing 0.051 percent of the admitted amount and disbursed by the Resolution applicant on 03-05-2023.
The Court perused the records and said that the amount was finally remitted into the account only on 26-03-2024. Thus, it was said that this claim was settled.
The Court said that the entire controversy revolved around Nominated Authority’s claim of Rs. 92.25 crores arising out of the termination of the Agreement due to non-renewal of the PBG, which consequently led to the disability to forfeit the said PBG furnished by the Corporate Debtor.
The Court said that once the claim was returned to Nominated Authority to be re-filed, it did not take any action in pursuance thereto. Thus, there was no claim to be processed by the RP, to be placed before the Committee of Creditors, or before the NCLT for approval of Resolution Plan.
The Court noted that the Resolution Plan was approved by the NCLT on 20-03-2023 and second claim of Nominated Authority in respect of Rs. 9.21 crores were calculated and disbursed to it by the successful Resolution Applicant. It was said that despite having notice of all the events and facts, Nominated Authority neither objected nor challenged the Resolution Plan at any time. Further, the Court said that once the resolution Plan is formally approved by the NCLT, any other remaining claims would be deemed to have extinguished.
The Court said that Nominated Authority had failed to indicate as to what steps were taken by it to resurrect its claim once the Resolution Plan was approved or the steps taken after having received the compensation for the other claim.
The Court stated that as far as the present claim is concerned, there was no document on record to indicate any action taken by Nominated Authority for its redemption. Thus, the Court said that the Nominated Authority appeared to have let the claim get extinguished without a protest or demur and that merely because the waiver was not allowed by the NCLT while approving the Resolution Plan, the right of claim would not be ipso facto resurrected.
Further, the Court opined that the right of Nominated Authority to the claim was clearly extinguished post approval of the Resolution Plan. Lastly, the Court did not find any reason to interfere with the impugned judgment even on the basis of the ‘clean slate’ principle and thus, dismissed the appeal.
[Union of India v. OCL Iron and Steel Ltd., 2024 SCC OnLine Del 7338, Decided on 22-10-2024]
Advocates who appeared in this case :
For Appellant — CGSC Kirtiman Singh, Advocate Waize Ali Noor, Advocate Maulik Khurana, Advocate Varun Pratap Singh, Advocate Ranjeev Khatani
For Respondent — Sr. Advocate Sandeep Sethi, Advocate Divyakant Lohoti, Advocate Kartik Lohoti, Advocate Anushka Awasthi, Advocate Riya Kumari, Advocate Praveena Bisht, Advocate Vindhya Mehra, Advocate Samridhi Bhat, Advocate Adith Menon