TaxTMI 
TaxTMI 
2007 (3) TMI 398
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....be deemed fit and proper in the circumstances of the case. 2. The application was filed on 12-12-2006. On the same day the notices were accepted by Official Liquidator, State of U.P., UPSMDC and Jaiprakash Associates Ltd. (JAL). The matter was heard on 19-12-2006, when the court prima facie did not find any good ground to vacate the interim order and then on 11-1-2007 when it was noticed that both UPSMDC and Official Liquidator do not want to file any reply. JAL filed its reply and State Government took further time to file counter affidavit. On 24-1-2007, UPSMDC, changed its stand and filed a counter affidavit. The applicant took time to give reply to the counter affidavit of UPSMDC and a rejoinder affidavit to the counter affidavit of JAL. On 19-2-2007 the State Government took further time and filed its reply on 22-2-2007. The matter was heard on 22-2-2007, and the orders were reserved. 3. Shri Viplav Sharma assisted by Shri S.K. Singh appeared for SMPL the applicant; Shri Ashok Mehta for Official Liquidator; Shri Sanjai Om for UPSMDC; Shri Anil Mehrotra for State of UP and Shri Yashwant Verma for JAL. 4. In order to consider the prayers made in the application, it is necessa....
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....t the advertisements were published by the State Government in newspapers inviting tenders for taking over cement plants of the company (In Liq.). The advertisements were published in 'Economic Times' and 'Business Standards' on 10-2-2001 and 12-2-2001, offering the assets and a number of reliefs and concessions to be granted by the State Government. It was alleged that the State Government adopted a transparent process of sale in which three cement companies were initially interested, however, finally only one company namely M/s. Grasim Industries Ltd. had made an offer. The Sale Committee comprised of the Commissioner Industrial Development, Chairman; the Secretary, Small Industries Development; the Secretary, Finance Department; the Secretary, Heavy Industries and the Managing Director, UPSIDC. The reliefs and concessions and the assets offered for sale were included in the Memorandum of Information (MoI) the guidelines for submitting of tenders. Apart from other reliefs and concessions including renewal of limestone leases in favour of the company, the State Government offered limestone leases at Ninga & Kajrahat having over hundred million tons of lime stone deposits and Dolom....
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.... such he is fully acquainted with the facts deposed to below. (2) That the present affidavit is being filed in compliance with the Order dated 20-12-2001 passed in the aforesaid matter, by the Hon'ble Court. (3) That the State Government's primary concern has been revival of unit at the earliest though privatization in the interest of the workers. The idea is not merely disposal of assets by their transfer to a purchaser who has the necessary resources, competence and experience to run the unit. (4) That the offer of M/s. Grasim Industries has been received after open public tender and they are one of the largest cement producers in the country. (5) That the request made by the State Government to the Hon'ble Court was by way of helping and assisting the Liquidator in the disposal of the Company's property under section 457(1)(c) to save time instead of initiating the process afresh at his level. (6) That the State Government has no objection to this Hon'ble Court exploring the possibility of a higher bid and the State Government would in that event extend the same reliefs and concessions as those offered to M/s. Grasim Industries. However, it is submitted that the following c....
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....t in global markets after approval of draft advertisement from the court. The tender document prepared by the State Government was to be considered as basic document for such purpose, with modification and changes to be considered and proposed by the company with the approval of the court. Apart from the global tender the invitation was to be sent to all leading cement manufacturers in the country. All the prospective bidders were to be allowed inspection and the bids were to be received in sealed covers with reserve price at Rs. 271 crores (Rs. 241 crores offered by Grasim Industries Ltd. + assets of Rs. 30 crores, which were excluded by the State Government). 13. The first valuation report of the assets was submitted by M/s. A.F. Ferguson and Co. (1995), and the second valuation report was prepared by M/s. N.K. Aggarwal (2001). In the Special Appeal filed by State Government, Allahabad Bank and Grasim Industries Ltd., a third valuation was carried out by G.S. Birdie (2002). In the course of hearing of the special appeal, initially some offers and counter offers were made in the court, however, these offers were not accepted and that on 8-12-2004 the Special Appeal was dismissed ....
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....-1-2006. With the consent of all the parties the matter was taken up in chambers for financial bidding in which JAL was declared to be highest bidder with the offer of Rs. 459 crores. M/s. Dalmia Cement (Bharat) Ltd. the next highest offered bidder Rs. 376 crores. Lafarge India Private Ltd. made an offer at the reserved price of Rs. 271 crores. Grasim Industries Ltd. did not offer any bid. The highest bid of JAL with a difference of Rs. 83 crores was accepted. JAL deposited 25 per cent of the offer on 15-2-2006 and made an offer to deposit the balance in three instalments, the last of which was due on 19-9-2006. The offer was accepted with the condition that the JAL will furnish bank guarantees for the remaining money. The JAL deposited the last and final instalment on 11-11-2006 and the sale was confirmed in its favour. 17. In the meantime the Court was engaged almost every week in proceedings for finalisation of provident fund accounts, taking over of the schools and hospitals, giving direction for summoning and preservations of records, preparing maps and identifying the assets spread over 80 kms. area, advertisement and entertaining claims of the workmen and other creditors fo....
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....hereas the total reserves in the four Blocks were stated in MoI to be 140 million tons and that even if the proven reserves as set out in MoI were taken into consideration, the reserves in Blocks I to IV could not be 140 million tons. The finding recorded by the court in the matter of RPJMPL in the Order dated 20-9-2006 in paragraphs 46 to 57 on the basis of which the application of RPJMPL was rejected are quoted as below:- "46. The facts and circumstances set out in detail, establish on record that a promise was held out in MOI calling for expression of interest, and thereafter bids, for sale of all that, which was contained in the document titled as MOI; prepared by the State Government. The State Government, in preparing the document had prepared a basket, for sale of the unit for not only exploiting the mineral resources of the State but also to pay to the workmen, the creditors, their dues and for rapid industrialization of the State, bringing in revenue and other benefits. This basket prepared by the State Cabinent in the year 2001 included the assets other than the assets of the company. The State was party to the sale proceedings all throughout. The Principal Secretary, In....
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....ture in terms of rail road link is fairly well developed. The Chunar-Garawa road railway line passes from the western part of this belt, Chopan, Billi Obra dam, Salai-Banwa railway stations are located close to this belt. The Dalla Cement Factory has it's independent link with Salai-Banwa-Mirzapur highway. The Varanasi-Shaktinagar highway passes through Dalla village. The eastern, central and western part of this belt can be approached from Tilgurwa Kota road, Dalla Kajrahat road and Dalla Obra road respectively. 48. The dimension of the block and reserves detailed against the location and approach were given as follows : Dimension of each block Reserves (estimated in millions tons) Phy. Character Grade Average Chemical Composition (%) Proved Probable Cao Mgo SiO2 Block I= (1.72 Kms. X 0.35 Km.) 7.18 2.60 The limestone occurs in massive and thick beds. Shale beds are narrow and occur along well defined zones. Cement 45.0 2.56 11.3 Dimension of each block Reserves (estimated in millions tons) Phy. Character Grade Average Chemical Composition (%) Often crosscutting Dolomite b....
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....p; Chunar Village Muao, Dumduma, Jamuhar, Bakiabad 106.44 Factory Land Chunar -do- 120.6 Colony Land Chunar -do- 158.952 Hilly Land 51. The reliefs and concessions and the assets put by the State Government in the basket made the sale a unique proposition. It was an offer by the State Government and not by the court. Ordinarily the court can offer for sale only the assets of the company (In Liq.). In this case since some more was added by way of reliefs and concessions, to make the package attractive including the surface rights of the properties, which may not have belonged to the company (In Liq.), with the permission of the State Government and by approval of the State Cabinet. 52. A careful consideration of the geological survey map prepared by J.B. Auden in 1934 a Geologist of the Geological Survey of India, geological survey map of 1963 and maps produced by Shri V.K. Sharma, Geologist in the Directorate of Geology and Mining, Government of U.P. and Shri B.P. Yadav, Mining Officer, Sonbhadra clearly demonstrated that Block Nos. V, VI and VII are beyond the Kazrahat Nalla towards west and up to the Obra residential area. There is a dispute whether these three bloc....
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.... and only after the terms and conditions of the agreement are fulfilled. The renewal as such is conditional. The UPSMDC has not placed on record the agreement with M/s. RPJ Minerals and the conditions, which are to be fulfilled before the transfer of the lease. Even after two years and seven months the lease deeds have not been executed. The UPSMDC was only given a conditional right for execution of the lease deeds. It is apparent that the State Government acted illegally in giving the sanction, against, its own decision taken by the State Cabinent in the year 2001, to include these mining rights in package of sale of assets to the intending purchaser of the assets of the company (In Liq.). 56. Shri A.K. Verma submits that sub-rule (7) of rule 24A of Mineral Concession Rules, 1960 has been omitted with effect from 17-1-2000 and thus the permission of the Central Government for second renewal is not required. He submits that Government Order dated 25-2-2004 amounts to disposal of the application for renewal. His submission overlooks the fact that there is no positive statement of the terms of the agreement and whether the terms and conditions in the agreement between UPSMDC and RPJ....
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....er dated 19-2-2004 on a renewal application, ordered its renewal and accorded permission to carry out mining activities in the area, which is not covered by reserve forest and for the remaining area subject to approval of the Forest Department. The Government by the said Order dated 19-2-2004 also accorded its approval to the MoU for working on Bari Dolomite mines and decided that in the event UPSMDC is wound up, the Bari Dolomite mines will be transferred in favour of SMPL. 22. Shri Viplav Sharma appearing for the applicant states that since March 2004, SMPL is lawfully carrying out its mining activities in the Bari Dolomite mines in terms of MoU and the orders of the State Government dated 19-2-2004 SMPL has made substantial effort and made Bari Dolomite mines feasible and viable and has secured high valuable Dolomite supply orders worth several crores from Steel Authority of India Ltd. after furnishing bank guarantees of huge amounts as securities for timely performance of such high valued supply orders. He submits that by an erroneous injunction Order dated 20-9-2006, the applicant company No. 1 has been wrongly restrained to carry their legitimate and lawful Dolomite mining a....
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....ttee will not make any difference as the State Government had no authority to include any mines, which were not assets of the company in the advertisement of sale of the company (in liquidation). There was no such offer by the State Government to sell Bari Dolomite mines as part of the sale of the assets of the company (in liquidation). The injunctive orders are not in accordance with the law and take away valuable constitutional rights of the petitioner under article 300A of the Constitution of India. He further submits that the sale in the present case is under section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985 and as such could not be effeced by the Official Liquidator. The State Government, under article 162 of Constitution of India in exercise of its executive powers, could not grant reliefs and concessions with regard to the assets, property, effects and auctionable claims of sick industrial company (in liquidation) ordered to be wound up under SICA/Companies Act, 1956 to the intending purchaser. 26. The State Government has filed a short counter affidavit of Shri J.P.N. Dwivedi, Under Secretary, Industrial Development Department, Government of U.P., L....
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....ated 13-10-2006, to accept the said impugned order dated 20-9-2006, at this stage, to the extent thereby the Hon'ble Company Judge has held the Block Nos. V, VI and VII to be the part of the MOI, and for compensating M/s. UPSMDC for its losses on account of the same at the appropriate state." 27. In paras 8, 9 and 10 of the affidavit of Shri J.P.N. Dwivedi, Under Secretary, Industrial Development Department, Government of U.P. it is stated as follows :- "8. That it is further relevant to mention here that the aforesaid application is related to Bari Dolomite Mines only and from the submissions made in the said affidavit of the said Sri Atul Kumar Gupta the then Industrial Development Commissioner and Principal Secretary, Department of Industrial Development, Government of U.P., Lucknow as well as from the perusal of the relevant paragraphs of the said affidavit, as quoted hereinbefore, and further from the perusal of the said office memorandums, i.e., office memorandum dated 10-10-2006 of the Department of Industrial Development, Government of U.P. and office memorandum dated 13-10-2006 of the Department of Industrial Development, Government of U.P. and office memorandum dated 13....
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....ri Dolomite Mines by the State Government on 19-2-2004 has already been granted, however, the execution of the relevant instrument has not taken place till now. 10. That it is also relevant to mention here that this Hon'ble court vide Order dated 20-9-2006 has already held that the area in question of the aforesaid application, i.e., Bari Dolomite Mines is an integral part of the MOI issued by the State Government in the year 2001, and the same became an integral part of the package of sale in the MOI issued in the year 2005 and with regard to which the bid of M/s. JAL has been accepted. On the other hand vide MOU dated 10-4-2002, executed between the UPSMDC and M/s. Katni Minerals Pvt. Ltd. which was subsequently approved by the State Government vide Order dated 19-2-2004, the applicant herein has also been accorded permission to excavate the dolomite minerals in the name and style M/s. Sonbhadra Minerals Pvt. Ltd. which is a joint venture of the UPSMDC and M/s. Katni Minerals Pvt. Ltd." 28. In the end the State Government has clarified its stand in para 12 of the affidavit of Shri J.P.N. Dwivedi as follows :- "12. That in view of the aforesaid, the stand of the State of U.P. w....
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....PSMDC and held this lease also to be an integral part of Memorandum of Information (MoI) prepared for the sale of assets of UPSCCL (in liquidation) which was subsequently accepted by UP Government vide its office memo dated 13-10-2006 and through an affidavit filed before this Hon'ble Court on 26-10-2006. 8. That in reply to the contents of para No. 9 it is submitted that the Government of U.P. accepted the order of Hon'ble High Court dated 20-9-2006 and decided to compensate UPSMDC for the likely losses at an appropriate stage vide office memo dated 13-10-2006 and accordingly filed an affidavit on 26-10-2006. In this affidavit Government accepted that the said lease along with limestone blocks 5, 6 and 7 of Kajrahat belt formed an integral part of the package of sale of assets of UPSCCL (in liquidation). Subsequently, UPSMDC have also accepted the decision of the State Government which was communicated vide office memo dated 13-10-2006. 9. That in reply to the contents of para Nos. 10 and 11 it is submitted the matter has been clarified in the preceding paras and since the State Government vide G.O. 13-10-2006 has accepted the order of Hon'ble High Court dated 20-9-2006 and have....
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....r renewal nor did it grant a right to UPSMDC to secure renewal of the said lease. After May 1987 no right over the Bari Dolomite mines was inherited or vested in UPSMDC post May 1987 and therefore no right over the said mine can be asserted either by UPSMDC or the applicant on the date when the MoI was executed between UPSMDC and Katni Mineral Pvt. Ltd. on 10-4-2002. No right inhered in UPSMDC over Bari Dolomite mines and the mining operations which continued after May 1987 were in violations of the provisions of the Mines and Minerals (Regulation and Development) Act, 1957 read with Mineral Concession Rules, 1960. The renewal applications were not accompanied by any mining plan as statutorily required under the provi- sions of rule 22(3) of the Rules of 1960 and in fact no mining plan was approved by the Central Government/Indian Bureau of Mines was ever submitted or accompanied the renewal application submitted by UPSMDC dated 19-2-2004 when the State Government passed the order. The Dolomite mineral forms part of the First Schedule to the Mines and Minerals (Regulation and Development) Act, 1957. Section 8 of the Act, at the relevant time, provides that no mining lease granted i....
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....04. The State Government had no jurisdiction to consider or pass orders on the renewal application. The order dated 19-2-2004 is thus ultra vires to the provisions of the Act of 1957 as well as Rules of 1960. The necessary permission of the Forest Department has not been obtained and for the remaining area of 300.779 acres, permission of the State Government is without any pre-condition. The Bari Dolomite mine is included under the notification under section 4 of the Indian Forest Act, 1927 and that no mining activity could be carried out after 12-12-1996 without prior approval of the Central Government vide T.N. Godavarman Thirumulkpad v. Union of India AIR 1997 SC 1228. 33. It is further stated by JAL that till date no lease deed renewing the earlier lease has been executed by the State Government in favour of UPSMDC and there is no transfer deed in favour of SMPL. The applicant has no legal or subsisting right at all to mining over the area. The application by SMPL, is not maintainable. It is further stated that now when UPSMDC has accepted the order of the court dated 20-9-2006, it is not open to the present applicant to claim any right over Bari Dolomite mines. The SMPL claim....
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....ng in the area for about seventeen years. 36. The renewal of the mining lease is not an empty formality. After an application for renewal is made, a person applying for renewal has to fulfil the statutory conditions including the submissions of mining plan and requisite permissions after depositing the renewal fees. In the meantime, the State Government decided to close business operations of UPSMDC and that from 1996 and 2002 the UPSMDC was not in business. During this period the Company (in liquidation) was wound up on 9-12-1999. In this period State Government included the Bari Dolomite mines in the proposed sale to Grasim Industries Ltd. The MoI prepared by the State Government included Bari Dolomite mines in Part-IV and that the court adopted the same MoI without any objection or protest for the purposes of sale of assets after rejecting the application of State Government for sale of assets to the Grasim Industries Ltd. The Principal Secretary, Industrial Development was a member of the Asset Sale Committee. The State Government was a party in the proceeding throughout before BIFR and in the court after the date of winding up, and was closely associated with the sale at all ....