2024 (5) TMI 901 - SC - Companies Law

Supreme Court sets aside mining lease renewal committee for expired leases of defunct company

CHIEF SECRETARY GOVERNMENT OF ODISHA Versus BHARAT PROCESS & MECHANICAL ENGINEERS LIMITED (IN LIQUIDATION) AND OTHERS

The SC set aside the HC Calcutta's direction to form a High-Powered Committee for renewing three mining leases originally granted to a company. The Court ... Renewal of the three mining leases that were granted to Bird and Co. - whether the High Court at Calcutta was justified in directing the formation of a High-Powered Committee comprising no more than three members, representing the Union of India, State of Odisha, and OMDC? - Non-payment of dues to creditors and workmen of BPMEL - HELD THAT:- OMDC has been operating the mining leases throughout. The undertakings with respect to the mining leases were vested with BPMEL, which had executed a power of attorney in favour of OMDC to continue the mining activities. BPMEL itself never undertook any winning or mining activities from the three mines. On liquidation of the holding company, BPMEL, the power of attorney stood terminated, per Section 201 - Moreover, OMDC, a subsidiary of BPMEL, is a separate juristic entity. The plea that the juristic entity should be ignored has not been raised or argued. The three leases, namely, Kolha-Roida, Thakurani and Dalki, had expired by effluxion of time in 1996, 2004 and 1994 respectively. At this distant point in time, when BPMEL has been non-operational and undergoing winding-up proceedings, we do not see any reason to even remotely consider the exercise of power under Section 457(1)(b) of the Companies Act, 1956 to sanction the Official Liquidator to carry on business of the company so far as necessary for winding up, or for that matter the Official Liquidator to appoint OMDC as agent to conduct business in the place of BPMEL. It is evident that entertaining any notion of lease renewal would be an exercise in futility, devoid of any practical or tangible benefit. The sheer magnitude of the liabilities involved renders the prospect of renewal implausible. Besides, the proposition advanced doesn’t have any discernible plan or vision for the requisite financial, technical, and managerial support. BPMEL went into liquidation in 1996 and has been defunct for nearly three decades. OMDC is also barely operational. As such, it cannot be considered a viable option to undertake mining activities. In light of these facts, it is imperative to bring this dispute to an end. Prolonging it any further, sans a feasible resolution in sight, would be otiose. Non-payment of dues to creditors and workmen of BPMEL - HELD THAT:- The workers' dues are pending. During the course of the hearing, an appearance was made on behalf of 57 workers and it is stated that they have received payment of Rs.99,00,000/- of the admitted amount of Rs.3,00,00,000/-. The workers are also entitled to interest on the unpaid amount - However, non-payment of the workers' dues does not merit an order of the nature as sought by TGP. The workers will be paid in terms of the Companies Act, 1956. The direction to constitute a High Powered Committee is set aside. The question of renewal of lease, would not be examined by the Company Court - the impugned judgement is set aside - appeal allowed. Issues Involved:1. Renewal of mining leases for Kolha-Roida, Thakurani, and Dalki.2. Validity of the assignment agreement between UCO Bank and TGP.3. Payment of dues to creditors and workmen of BPMEL.Summary:Issue 1: Renewal of Mining LeasesThe Supreme Court addressed the renewal of three mining leases originally granted to Bird and Company Limited (Bird & Co.) for Kolha-Roida, Thakurani, and Dalki. The leases expired in 1996, 2004, and 1994 respectively. Bird & Co. was nationalized in 1980, and its undertakings were transferred to Bharat Process & Mechanical Engineers Limited (BPMEL). BPMEL, which became a sick company, was directed to be wound up in 1996. The High Court at Calcutta had directed the formation of a High-Powered Committee to decide on the renewal of these leases, considering the potential adverse consequences of non-renewal, including non-payment of dues to creditors and workmen. However, the Supreme Court found that the Union of India and the State of Odisha did not want to renew the leases. The Court noted that BPMEL had been non-operational for nearly three decades and that OMDC, a subsidiary of BPMEL, was not in a position to continue mining activities due to financial constraints. Consequently, the Supreme Court set aside the High Court's direction to form a High-Powered Committee and upheld the State of Odisha's decision to reject the renewal of the Kolha-Roida lease. Applications for renewal of Thakurani and Dalki leases were also treated as rejected.Issue 2: Validity of the Assignment AgreementTGP had entered into an assignment agreement with UCO Bank for a consideration of Rs. 55,00,000/-, which was neither stamped nor registered. The Supreme Court did not delve into the validity of this assignment for the purposes of the present case but noted that TGP had been impleaded in place of UCO Bank by an ex parte order of the Debts Recovery Tribunal (DRT). TGP's claim against BPMEL was admitted by the Official Liquidator, and TGP had received partial payment against the certified debt.Issue 3: Payment of Dues to Creditors and WorkmenThe Supreme Court acknowledged that the workers' dues were pending and that TGP, as an assignee, was entitled to amounts certified by the Official Liquidator. The Court emphasized that payments to TGP and the workmen would be made in accordance with the Companies Act, 1956. The Court found that entertaining any notion of lease renewal would be futile given the magnitude of liabilities and the lack of a feasible plan for financial, technical, and managerial support. The proceedings would continue before the Company Court of the High Court at Calcutta for payment and enforcement of dues as per law.Conclusion:The Supreme Court allowed the appeal filed by the State of Odisha, set aside the High Court's direction to form a High-Powered Committee, and dismissed TGP's appeal against the order of the High Court of Orissa. The question of lease renewal would not be examined by the Company Court, and the applications for renewal of Thakurani and Dalki leases were treated as rejected. The proceedings would continue for payment of dues to creditors and workmen in accordance with the Companies Act, 1956. No order as to costs was made.