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2019 (7) TMI 636

..... 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 effec .....

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..... s deemed to be valid upto 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, in the interest of justice and equity and that the Corporate Debtor has the statutory right under Mines and Minerals (Development & Regulation) Act, 1957 & Minerals (other than Atomic and Hydro Carbons and Energy Minerals) Concession Rules, 2016, to carry on the mining operations and transport the extracted mineral from 28.05.2018 to 31,03.2020 from the mining lease area covered under the Mining Lease Deed bearing M.L.No.2293 vide Annexure ___ in the interest of justice and equity. iii. Consequentially direct the Respondents 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 t .....

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..... te Debtor/Applicant. The joint team constituted by the Hon ble Supreme Court had conducted the survey of the area comprised under M.L No. 2293 and the said survey was supervised by the Central Empowered Committee (CEC). The entire records pertaining to the lease bearing M.L. No. 2293 of the Corporate Debtor/Applicant were verified by the Joint Team and CEC, not only with regard to boundaries but also as regards to the other illegalities. Subsequently, the CEC filed its final report dated 03.02.2012 before the Hon ble Supreme Court of India categorising of Mining Leases in Karnataka. The CEC had included 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 conduct .....

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..... f Karnataka, Vikasa Soudha, 1st Floor, Dr. Ambedkar Road, Bangalore - 560 001 has conducted the enquiry, which was attended by the Resolution Professional and written submissions were filed. The operative part of the submissions contained at page 63 onwards under Paras 24 to 26 is reproduced as under:- It is also necessary to state that till date, there has been no specific allegation made by the Department of Mines & Geology pointing out the transactions which would violate the provision contained under Rule 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 .....

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..... rnataka. 16. The Counsel for the answering Respondents has submitted that this Tribunal does not have the jurisdiction to examine the validity, merits or demerits of the impugned order dated 26.09.2018 passed by the second Respondent herein. The said power is to be exercised only by the Central Government under Section 30 of the MMDR Act. Counsel for the answering Respondents has further submitted that the declaration of 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 .....

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..... MOAHCEM Rules, 2016, as on date when the mineral winning cum sale agreement and the partnership deed were entered into between the Applicant and Sri. C. Satyanarayana, the said MC Rules, 1960 were in force. The violations committed by the Corporate Debtor/Applicant during the subsistence of the said Rules can continue to be taken note of. 21. The Counsel 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 .....

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..... late 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. 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, a .....

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..... cannot carry on mining business as a going concern which frustrates the object 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 compla .....

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..... ncy 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 leaseholder s existing lease wa .....

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