Karnataka Government's rejection of mining lease extension violated Section 14 IBC moratorium provisions, tribunal sets aside rejection order

NCLT Chennai held that Karnataka Government's rejection of deemed extension application for Mining Lease ML No.2293 violated Section 14 moratorium provisions of IBC. The tribunal set aside the rejection order dated 26.09.2018 issued by Under Secretary, Commerce Industries Department, finding it contravened the moratorium declared on 12.03.2018. Respondents were directed to execute supplement deeds extending the mining lease period until 31.03.2020 in accordance with MMDR Act provisions within two weeks of receiving certified copy of the order.

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Issues:
1. Termination of Mining Lease during moratorium
2. Request for Deemed Extension of Mining Lease

Analysis:
1. The issue in this case revolves around the termination of a Mining Lease (ML-2293) during the declaration of moratorium and the subsequent request for a Deemed Extension of the said Mining Lease. The Resolution Professional filed an application seeking to nullify the order dated 26.09.2018, which rejected the request for Deemed Extension of the Mining Lease, citing a violation of Section 14 of the IBC. The Resolution Professional argued that the Corporate Debtor had a statutory right to continue mining operations until 31.03.2020 under the Mines and Minerals (Development & Regulation) Act, 1957. The Respondent Nos. 1 to 3 failed to participate in the proceedings despite being duly served, leading to them being proceeded ex parte.

2. The Resolution Professional initiated the Corporate Insolvency Resolution Process (CIR Process) against the Corporate Debtor on 12.03.2018, informing the concerned parties about the declaration of moratorium and requesting a Deemed Extension of the Mining Lease. Subsequently, the Government of Karnataka conducted an enquiry regarding the matter, attended by the Resolution Professional, where submissions were made regarding the ongoing civil dispute and the proceedings under the Insolvency & Bankruptcy Code. The enquiry revealed that no specific allegations were made against the Corporate Debtor, and the Resolution Professional sought the continuation of mining operations until 31.03.2020.

3. Following the enquiry, an order was issued on 26.09.2018 rejecting the application for Deemed Extension of the Mining Lease, despite recommendations in favor of the extension. The Tribunal set aside this order, stating that it was in violation of the moratorium declared under Section 14(1) of the I&B Code, 2016. Consequently, the Respondent Nos. 1 to 3 were directed to execute Supplement Deeds extending the Mining Lease period up to 31.03.2020 within two weeks from the date of the order. The Resolution Professional was tasked with delivering the certified copy of the order to ensure compliance with the directive, leading to the disposal of the application (MA/632/2018).

In conclusion, the Tribunal's judgment favored the Resolution Professional's request for a Deemed Extension of the Mining Lease, emphasizing the importance of adhering to the moratorium provisions under the I&B Code. The decision highlighted the statutory rights of the Corporate Debtor and directed the concerned parties to act accordingly within the specified timeline for compliance.

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