The National Company Law Appellate Tribunal (NCLAT) rejected a plea by the insolvency professional against Union Ministry of Coal’s termination of mining agreement with Monnet Ispat & Energy Ltd., citing the moratorium period under the insolvency and bankruptcy code (IBC).
The company was brought under the insolvency process in a case filed by State Bank of India.
In 2015, the Coal Ministry had entered into a development and production agreement with Monnet Ispat for a mine in Chhattisgarh.
In December 2017, after the initiation of the insolvency proceedings, the mining agreement was terminated.
The resolution professional of Monnet Ispat challenged the termination on the ground that it is against the provisions of Section 14 of the IBC in case where a moratorium had been granted. During the period of ‘moratorium,’ the right vested with the company cannot be taken away by the Government of India, the resolution professional argued.
Recurring losses
Earlier, the Mumbai Bench of National Company Law Board (NCLT) rejected the plea against the termination of the agreement. It also noted that the Government of India is incurring an estimated revenue loss of ₹314.3 crore annually, which was the reason for the termination of the agreement.
NCLAT noted that the vesting of the coal mines is not complete in absence of any agreement with the State government in respect to the mines in question.
The resolution professional cannot claim that pursuant to the lease, the mines are under occupation or in possession of the company, it added. NCLAT also noted that the government had issued a show cause notice before the termination and the company failed to act in terms with the said show cause notice. It also ruled that it would be open to the Government of India to accept any bid and create third party interest with regard to the mines in question.
