Government's Recovery Notice Violates Insolvency Moratorium; Tribunal Orders Stay and Claims Process

The Tribunal held that the Government of India's notice dated 22.10.2018 demanding the allocation of sale proceeds to recover a sum was in violation of the moratorium under Section 14 of the Insolvency and Bankruptcy Code. The Tribunal directed the Government not to press or implement the notice during the insolvency proceedings and advised the Ministry of Petroleum to lodge its claim with the Resolution Professional. Other entities were restrained from remitting sale proceeds to Videocon Industries Limited and were directed to maintain the status quo.

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Issues Involved:
1. Validity of the Notice dated 22.10.2018 issued by the Ministry of Petroleum & Natural Gas.
2. Enforcement of Foreign Arbitral Awards.
3. Application of Moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016.

Detailed Analysis:

1. Validity of the Notice dated 22.10.2018:
The Resolution Professional (RP) filed a Miscellaneous Application in response to a Notice dated 22.10.2018 issued by the Ministry of Petroleum & Natural Gas, demanding the allocation of 100% of the sale proceeds/oil and gas invoices to recover a provisional sum of USD 314 million. This demand was based on unpaid Government share of Profit Petroleum. The RP argued that this notice was issued unilaterally and was in breach of the Production Sharing Contract (PSC) and the Arbitration Tribunal's Award dated 31.03.2005, which had become final and binding upon the Government of India (GoI). The RP further contended that the GoI had acted on the part of the Award favorable to it but ignored the part favorable to Videocon Industries Limited (VIL).

2. Enforcement of Foreign Arbitral Awards:
The GoI argued that the Awards dated 31.03.2005 and 18.01.2011 were foreign awards and needed to be enforced under Part II of the Arbitration and Conciliation Act, 1996. The GoI stated that the awards were not enforceable as they had not been recognized as valid decrees by any court. The RP countered that the GoI's claim for Profit Petroleum was not yet crystallized and that the GoI's attempt to recover the amount was a violation of the Insolvency Code, which prohibits recovery actions during the moratorium period.

3. Application of Moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016:
The Tribunal noted that an order was pronounced on 06.06.2018 under Section 7 of the IBC, declaring a moratorium on recovery proceedings against VIL. The moratorium prohibits any recovery actions, including the institution of suits or execution of judgments, decrees, or orders of any court, tribunal, or arbitration panel. The Tribunal held that the GoI's notice dated 22.10.2018 was in violation of the moratorium and directed the GoI not to press or implement the notice during the insolvency proceedings. The Tribunal also directed the Ministry of Petroleum to lodge its claim with the appointed Resolution Professional.

Findings:
The Tribunal found that the GoI's notice dated 22.10.2018 was a repetition of an earlier attempt to recover USD 118 million from VIL, which had been previously thwarted by an interim restrain order from the Arbitral Tribunal in 2014. The Tribunal reiterated that the scope of the Miscellaneous Application was limited to determining whether the GoI could recover the amount during the insolvency proceedings, not the enforcement of a foreign award. The Tribunal emphasized that the moratorium under Section 14 of the IBC prohibits any recovery actions against the corporate debtor during the insolvency process.

Conclusion:
The Tribunal directed the GoI not to implement the notice dated 22.10.2018 during the insolvency proceedings and as long as the moratorium is applicable. The Ministry of Petroleum was advised to lodge its claim with the Resolution Professional. Additionally, Chennai Petroleum Corporation Ltd., Mangalore Refinery and Petrochemicals Limited, GAIL (India) Limited, and Bharat Petroleum Corporation Ltd. were restrained from remitting sale proceeds due to VIL and were directed to maintain the status quo. The Miscellaneous Application was disposed of accordingly.

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