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Supreme Court’s Verdict Shapes Industry Landscape: Mining Lease Saga

Case Title: Chief Secretary Government of Odisha vs. Bharat Process & Mechanical Engineers Limited (In Liquidation) And Others

Case No.: Civil Appeals a/o. SLP (C) Nos.7315-7316 of 2021

Dated on: MAY 17, 2024

Coram: J. SANJIV KHANNA, J. DIPANKAR DATTA

Facts:

In this case, the Government of Odisha is appealing a decision involving the renewal of mining leases for three ore blocks. The dispute centres around Bharat Process & Mechanical Engineers Limited (BPMEL), a company in liquidation, and its subsidiary, Odisha Mineral Development Company Ltd (OMDC), which managed the mining operations. The leases were originally granted to Bird and Company, which was nationalized in 1980, transferring ownership to the Central Government and later to BPMEL. However, BPMEL became financially troubled and was ordered to be wound up in 2004. UCO Bank, a creditor, assigned its recovery rights to TGP Equity Management, leading to legal complexities. The High Court had directed the formation of a committee to decide on the lease renewals, involving the Central and Odisha governments, OMDC, and hearing TGP. Now, this appeal challenges various court decisions about the lease renewals and the legal standing of TGP.

Issues

  • 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.

Legal Provisions:

  • Rule 72 of the Mineral (Other than Atomic and Hydrocarbon Energy) Concessional Rules, 2016: It states that before January 12, 2015, all mining leases for minerals given to a government company or corporation are automatically considered to have been granted for a duration of fifty years.
  • Section 4A (4) of the Mines and Minerals (Development and Regulation), Act 1957: It states that if the holder of a mining lease doesn’t start producing and dispatching minerals within two years of receiving the lease, or if they stop production and dispatch for two years after starting, the lease will end two years from when it was granted or from when production stopped.
  • Section 446(2)(d) of the Companies Act, 1956: It gives the company court the power to entertain or dispose of any suit or proceeding against a company, or any claim made against it.
  • Section 457(1)(b) of the Companies Act, 1956: Under this Section the company is allowed to continue its operations to the extent required for the purpose of winding up the company in a manner that is beneficial.
  • Section 201 of the Indian Contract Act, 1872: Termination of agency.

Contentions of the Appellant:

The appellant, the Government of Odisha, contends that the High Court’s decision to form a committee for lease renewals involving the Central Government, the Odisha Government, and other stakeholders, including TGP Equity Management, is erroneous. They argue that the lease renewal decisions should be within the jurisdiction of the state government alone, without the involvement of other parties. Additionally, the appellant challenges the High Court’s rulings regarding the liquidation proceedings of BPMEL and the assignment of recovery rights to TGP, asserting that these matters should be handled differently.

Contentions of the Respondent:

Bharat Process & Mechanical Engineers Limited (BPMEL) and others, herein the respondents, contended that the directions given by the High Court regarding the renewal of mining leases were justified, given the history of ownership and management of the leases involving BPMEL and its subsidiary, Odisha Mineral Development Company Ltd (OMDC). Further, they argued that the involvement of all stakeholders, including TGP Equity Management, was necessary for a fair and equitable decision on the lease renewals. Additionally, they raised objections to the delay in the liquidation proceedings of BPMEL and any attempts by the appellant to overturn previous court decisions regarding the lease renewals. However, it can be determined that their contentions focused on upholding the High Court’s decisions and ensuring a just resolution considering the complex legal and financial history of the mining leases involved.

Court’s Analysis & Judgement:

Based on the intricate analysis made by the hon’ble court, it examined the history of mining leases granted to Bird and Company, which were later transferred to Bharat Process & Mechanical Engineers Limited (BPMEL) and its subsidiary, OMDC. BPMEL faced financial difficulties and was ordered to be wound up, leading to legal disputes with creditors like UCO Bank, whose rights were later assigned to TGP Equity Management. Further, the court considered the validity of lease renewals and the involvement of various stakeholders and upheld a decision directing the formation of a committee involving the Central and Odisha governments, OMDC, and TGP to decide on the lease renewals. Moreover, it can be said that the court’s judgment emphasized on fair consideration of all parties’ interests and adherence to legal procedures in the resolution of the mining lease issues.

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Judgement Reviewed By- Shramana Sengupta

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Electricity Authority’s Actions Ultra Vires: Himachal Pradesh HC Orders Connection and Compensation to Petitioner

Case Tittle:  M/S PURE & CURE HEALTHCARE Pvt. Ltd vs. HPSEBL

Case No.: CWP No.2585 of 2024

Dated on: 04.04.2024

Coram: HON’BLE MR. JUSTICE SANDEEP SHARMA

Facts of the Case:

The Petitioner in this case, had applied for new electricity connection but their application was rejected by the respondent because a huge amount was due to the previous owner, M/S Ankur Drug Pvt. Ltd, as the petitioner did not pay that amount to the previous owner. After rejection of such application by the electricity authority. The petitioner approached to the Hon’ble High Court of Himachal Pradesh by filling a writ application under Article 226 of the Constitution of India and urged before the hon’ble court for issuing writ of Mandamus for quashing the communication dated on 02.03.2024(Annexure P2) as it was ultra vires and also provide for compensation because respondent had breached the terms of the Himachal Pradesh   Electricity Regulatory   Commission (Distribution   Performance Standards) Regulations, 2010.

Legal Provisions:

Article 226 of the Constitution of India: It empowers the High Court to issue writ.

Section 13 of the SARFAESI Act: It states about the enforcement of security interest.

Section 77 of Companies Act, 2013: It provides for the duty to register charges.

Section 78 of Companies Act, 2013: Application for Registration of Charge.

Section 100 of the Transfer of Property Act: Charges

Contentions of the Appellant:

M/s Pure & Cure Healthcare Pvt. Ltd., herein the petitioner contended that they shouldn’t have to pay the previous owner’s outstanding electricity dues because they bought the property in an auction free of any past debts, as confirmed by the Sale Certificate. Further, they claimed that it was unfair and against the law for the electricity board to demand payment of old dues before granting a new electricity connection. Additionally, they sought compensation for the delay caused by the board’s refusal to provide the connection.

Contentions of the Respondents:

The HPSEBL, herein the respondent contended that according to their regulations, the new owner must either clear the previous owner’s outstanding electricity dues of Rs. 20,43,837 with interest or pay an advance cost along with an average bill amount to get a new electricity connection. They maintained that these payments were necessary for providing the new connection, regardless of the property’s sale through an auction.

Court’s Analysis & Judgement:

The court reviewed the case and determined that M/s Pure & Cure Healthcare Pvt. Ltd., herein the petitioner, bought the property in an auction, which included a Sale Certificate stating the property was free of previous debts. Further, the court found that it was unfair for the electricity board to demand that the new owner pay the former owner’s outstanding electricity dues. However, the hon’ble bench decided that the electricity board’s condition regarding the requirement of payment of the old dues before granting a new connection was unlawful. Therefore, the court ordered the electricity board to provide the new electricity connection without insisting on the payment of the old dues and also addressed the issue of compensating the company for the delay.

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Judgement Reviewed By- Shramana Sengupta

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Delhi High Court Transfers Winding-Up Petition to NCLT Due to Rent Payment Defaults.

Case Title: ATAMJIT SINGH & ORS. Vs. SPORTS FIT WORLD PVT. LTD.

Case No.: CO.PET. 48/2016

Dated on: May 07, 2024

Quorum: HON’BLE MR. JUSTICE DHARMESH SHARMA

Facts of the Case:

The case involves a petition filed by Atamjit Singh & others against Sports Fit World Pvt. Ltd. under Sections 433(e) and (f) of the Companies Act, 1956, seeking winding up of the respondent company due to non-payment of outstanding rent amounting to Rs. 1,99,70,730/- for the period from June 2013 to November 2015. The petitioner leased commercial property to the respondent with a monthly rental of Rs. 9,25,000/-, but the respondent repeatedly defaulted on payments, leading to legal notices and court proceedings. Despite the petitioner’s efforts, no liquidator was appointed, prompting the court to transfer the case to the National Company Law Tribunal (NCLT) as per the provisions of the Companies Act, 2013.

Issues framed by the Court:

  1. Whether there lies a default in fulfilling lease agreement obligations?
  2. Whether the failure of the respondent to reply to legal notice discharge its liabilities?
  3. Whether the proceedings should be transferred to the National Company Law Tribunal based on the stage of the winding-up proceedings?

Legal Provisions:

Section 433 (e) of the Companies Act, 1956: Deals with the power of the court to wind up a company.

Section 433 (f) of the Companies Act, 1956: It states that a company can be wound up if the company has acted against the interests of the sovereignty and integrity of India, security of the State, friendly relations with foreign States, public order, decency or morality.

Section 434 of the Companies Act, 1956: It pertains to the jurisdiction of the court for the winding up proceedings.

Section 439 of the Companies Act, 1956: Empowers the HC to make rules for regulating the proceedings under the Act.

Section 13 of the Punjab Rent Control Act: It provides for the tenant’s obligation to pay rent.

Section 485 (1) of the Companies Act, 1956: Deals with the power of the Central Government to make rules for carrying out the provisions of the Act.

Rule 26 of the Companies (Court) Rules, 1959: Pertains to the submission of documents and petitions in court proceedings under the Companies Act. It outlines the requirements and procedures for filing documents, petitions, or applications with the court.

Section 290 of the Companies Act, 2013: Pertains to the power of the Central Govt. to make rules regarding the winding up of companies.

Contentions of the Appellant:

The contentions of the appellants, Atamjit Singh & Ors., revolve around their petition seeking the winding-up of Sports Fit World Pvt. Ltd. due to non-payment of rent. The appellants assert that Sports Fit World Pvt. Ltd. has constantly defaulted on rent payments for the commercial property leased to them. Despite agreements and legal actions taken against the respondent, the outstanding rent remains unpaid. Further, they highlight that they served legal notices to the respondent regarding the outstanding rent and initiated legal proceedings under Section 138 of the Negotiable Instruments Act, 1881, and Section 13 of the Punjab Rent Control Act. However, the respondent failed to respond adequately, leading to the filing of the present petition.

The appellants argue that the respondent’s failure to pay its debts in the ordinary course of business justifies the filing of a winding-up petition under Sections 433(e) and (f) of the Companies Act, 1956, read with relevant provisions of the Act. They acknowledge the enactment of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013, during the proceedings. They contend that given the absence of appointed liquidators and the progression of legal frameworks, transferring the case to the National Company Law Tribunal (NCLT) is appropriate, as per Section 434 of the Companies Act, 2013.

Contentions of the Respondent:

A mere interpretation can be brought in order to determine the contentions of the respondent herein, which may include: Dispute over Rent Payment, Legal Defenses, Counterclaims, Procedural Objections and Request for Alternative Remedies. 

Court’s Analysis and Judgement:

The court’s analysis and judgment focus on the petitioner’s request for winding up of the respondent company due to non-payment of rent. The court notes the sequential default by the respondent in rent payments, legal actions taken by the petitioner, and the absence of appointed liquidators in the case.

However, it cites certain relevant legal provisions, including Section 434 of the Companies Act, 2013, which allows for the transfer of winding-up proceedings from High Courts to the National Company Law Tribunal (NCLT). The court also references a Supreme Court decision indicating that cases at a nascent stage should be transferred to the NCLT. Therefore, the court decides to transfer the case to the NCLT, disposing of the current petition and directing the electronic record to be transmitted to the NCLT. The judgment emphasizes the NCLT’s authority to consider the matter further and pass appropriate orders.

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Judgement Reviewed By- Shramana Sengupta

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Delhi High Court Upholds Petitioner’s Appeal, Transfers Case to NCLT and Dismisses Tribunal’s Liability Order

 Case Name: Gurbakhsh Singh Ba, Buliders Private Limited v. Fortis Hospital Limited Escort Heart Institute & Research Centre 

Case No.: CO.APPL. 1353/2015 

Dated: May 14,2024 

Quorum:  Justice Dharmesh Sharma  

 

FACTS OF THE CASE: 

In order to carry out specific work at Fortis Hospital in Ludhiana, the respondent company issued a work order on May 15, 2014, with No. LDH-1/Addl Work/0101/R-1, in favour of the petitioner company. The petitioner completed the work to the satisfaction of the respondent company within the time frame specified in the work order.  

The petitioner company raised bills in accordance with the work completed. Dated August 14, 2014, and August 20, 2014, for a total of INR 2,52,59,522/- and transferred the same to the respondent company’s office for money exchange. The petitioner in this instance is the one who, via email dated on August 21, 2014, the responding company verified the amount of the work completed and provided the petitioner with an assurance that the sum owed will be properly compensated.  

But in spite of several reminders, the respondent company refused to release the outstanding payment. As a result, the petitioner was forced to serve the respondent company with a formal demand notice dated October 16, 2014. Following that, the petitioner company served the respondent company with a statutory legal notice dated November 13, 2014, in accordance with Sections 271 (1)(a) and 271 (2) (a) and (c) of the Companies Act, 2013. 

In response to the aforementioned legal notices dated 16.10.2014 and 13.11.2014, the respondent company, through its counsel, responded on 11.12.2014 and 26.12.2014, respectively. Suffice it to say, while the respondent company acknowledged issuing the Work Order, they denied any further obligation to pay the petitioner, claiming that the payment had already been made in accordance with the Memorandum of Understanding dated 22.05.2014 and that the Work Order in question was an internal adjustment issued for accounting purposes.  

 

 

LEGAL PROVISIONS: 

  • Section 433 of the Companies Act, 1956. Circumstances in which company may be wound up by Tribunal. The Tribunal has the authority to wind up a company for the following reasons: if the company has decided by special resolution to be wound up by the Tribunal; if the company defaults on delivering the statutory report to the Registrar or on holding the statutory meeting; if the company does not begin operations within a year of its incorporation, or suspends operations for an entire year; if the number of members is reduced below two, or below seven in the case of a private company; if the company is unable to pay its debts 

 

 

ISSUES: 

  • Whether respondent is entitled to the recovery of Rs.5,91,906/- towards balance amount for supply of goods to the appellant? 
  • Whether respondent is entitled to interest claimed @ 18%per annum w.e.f. July, 2019 till the filing of the suit, amounting to Rs.2,57,479/- from the appellant? 

 

CONTENTIONS OF THE PETITIONERS: 

The petitioners vehemently argued that the petitioner company is requesting the respondent company be wound up because it has unpaid debts totaling Rs. 2,48,39,128 and Rs. 2,34,53,258 in two different petitions. In compliance with the work orders dated May 15, 2014, and May 12, 2014, the petitioner finished the work to the respondent’s satisfaction within the allotted time.  

The respondent company promised payment and validated the amount of work completed via email, however they did not transfer the money in spite of several reminders. In order to recover money, the petitioner issued the respondent business with statutory legal notices and legal demand notices in accordance with the Companies Act of 2013.  

 

CONTENTIONS OF THE RESPONDENT:  

The respondent’s counsel strongly contends that the issuing of the work order but disclaimed any further responsibility, claiming that payment had been made in accordance with a Memorandum of Understanding (MoU) dated May 22, 2014, which had nothing to do with the work carried out in accordance with the Work Order dated May 14, 2014. 

They asserted that the disputed Work Order was an internal modification made for accounting purposes. According to the respondent, the work order dated May 12, 2014, was revoked, and a new work order dated May 14, 2014, was issued for internal accounting purposes. This new work order adjusted the amount already paid under the May 22, 2015, memorandum of understanding.  

 

COURT’S ANALYSIS AND JUDGMENT: 

The court found that a review of the record confirms that the current winding up petitions are completely unworkable. The current procedures are in its early stages, to the extent that neither an Official Liquidator nor a Provisional Liquidator has been designated to assume control over the assets and operations of the responding company. Therefore, in these company petitions, no significant orders have been issued.  

The parties’ learned counsels have made representations in this regard. On behalf of the Petitioner’s learned Counsel, it has been argued that the purpose of the provisions pertaining to the transfer of pending winding up proceedings—particularly the fifth proviso to Section 434—is to prevent the emergence of parallel proceedings. In relation to the current case. 

As per the court’s ruling, all cases filed before the date in any District Court or High Court under the Companies Act, 1956 (1 of 1956), including those pertaining to arbitration, compromise, arrangements, reconstruction, and winding up of companies, will be transferred to the Tribunal. The Tribunal will then be able to handle these cases starting from the point where they were filed.  

Additionally, the court held that the Supreme Court had taken into consideration the entire statutory framework pertaining to company winding up as well as a number of rulings when it held that, even after admission, the High Court may transfer a petition of this kind to the NCLT, provided that no irreversible actions have been taken in connection with the company’s winding up. In addition, the petitioner’s experienced counsel has submitted that no application has been moved to transfer the current petitions to the NCLT, and this cannot be accepted.  

The court after considering the previous debate, this Court believed that the current petitions cannot be allowed to be continued before it because no substantive actions have been made to wind up the corporation. The instant petitions are therefore moved to the NCLT. The NCLT has the authority to decide these cases based on their merits and issue relevant rulings that comply with the law. 

 

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Judgment reviewed by Riddhi S Bhora 

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Doon Valley Institute of Education’s Recognition Restored by Delhi High Court, Criticizes NCTE’s Withdrawal Decision for Lack of Merit

Case Title – Doon Valley Institute of Education Vs. National Council for Teacher Education & Anr.

Case Number – W.P. (C) 6277/2024

Dated on – 10th May, 2024

Quorum – Justice C. Hari Shankar

FACTS OF THE CASE
In the case of Doon Valley Institute of Education Vs. National Council for Teacher Education & Anr., the Doon Valley Trust was initially formed and registered on the 13th of November, 2000 as a society under the Societies Registration Act, 1860. The Trust procured around 2 Acres of land in Karnal, Haryana, for the purpose of establishment of a teacher training educational institution. The institution was named as Doon Valley Institute of Education and was granted recognition by the National Council for Teacher Education (NRC) for the conduction of a B.Ed. course with an initial admission of 100 seats, later increased to 300 seats. In the year 2011, the Trust sought for surrendering its registration under the Societies Registration Act, 1860 and acquired permission to incorporate as a private limited company under Section 25 of the Companies Act, 1956. The Trust was thereafter incorporated as a private limited company on the 18th of April, 2011. On the 21st of March, 2023, the NRC issued a show cause notice to the Appellant Institution, stating concerns about its change from a trust to a private limited company and questioning its compliance with the regulations of the NCTE. The Appellant responded to the show cause notice, still the NRC decided to issue another show cause notice. This decision was challenged by the Appellant, which was later disposed of by the court with the directions to respond to the show cause notice and for the NRC to decide according to the law. The Appellant, on the 8th of May, 2023, submitted its reply to the show cause notice, but the NRC decided to withdraw the recognition granted to the Appellant institution on the 15th of September, 2023, stating the reason as non-compliance with the regulations of the NCTE regarding the change in the nature of the Trust. The Appellant instituted a statutory appeal against the withdrawal order, which was dismissed on the 12th of April, 2024, by the Appellate Committee, confirming the withdrawal of recognition.

ISSUES
The main issue of the case whirled around whether the conversion of the Doon Valley Trust from a society to a private limited company complies with the regulations of the NCTE?

Whether the withdrawal of recognition by the NRC was justifiable on the basis of the change in the nature of the Trust and the compliance of the institution of the Appellant with the regulations of the NCTE?

LEGAL PROVISIONS
Section 25 of the Companies Act, 1956 prescribes the Power to dispense with “Limited” in name of charitable or other company

Section 14(3) of the National Council for Teacher Education Act, 1993 prescribes the Recognition of institutions offering course of training in teacher education
Section 17(1) of the National Council for Teacher Education Act, 1993 prescribes that Once the recognition of a recognized institution is withdrawn under sub-section(1), such institution shall discontinue the course or training in teacher education, and the University or the examining body shall cancel affiliation of the institution in accordance with the order passed under sub-section(1), with effect from the end of the academic session next following the date of communication of the said order
Section 18(1) of the National Council for Teacher Education Act, 1993 prescribes that Any person aggrieved by an order made under Section 14 or 15 or 17 of the Act may prefer an appeal to the council within such period as may be prescribed

CONTENTIONS OF THE APPELLANTS
The Appellants, through their counsel, in the said case contented that the impugned order violates the Section 17(1) of the NCTE Act, 1993, which only allows the withdrawal of the recognition if there is a contravention of the Act, Rules, Regulations, or Conditions of Recognition and that there are no such provisions prohibiting the change of management from a registered society to a company.

The Appellants, through their counsel, in the said case contented that the reliance of the Respondent on an internal communication from the NCTE to SRC is unjustifiable as it does not constitute a legal basis for the withdrawal of the recognition.
The Appellants, through their counsel, in the said case contented that there was no change in the management when the institution transitioned from a registered society to a company and that the same individuals continued to manage the institution, and both the societies and companies are eligible for recognition under the regulations of the NCTE.
The Appellants, through their counsel, in the said case contented that the Respondents could not invoke a condition from the Regulations of the 2007 which was omitted in subsequent regulations to withdraw recognition.
The Appellants, through their counsel, in the said case contented that the accusations of a change in management was only made in the Appellate order and wasn’t mentioned in the show cause notice or withdrawal order, which is unjust.

CONTENTIONS OF THE RESPONDENTS
The Respondents, through their counsel, in the said case contented that this case involves more than just a change in the management and that it is about an entirely new entity running the institution, different from the one granted recognition by the NRC.

The Respondents, through their counsel, in the said case contented that there is no explicit prohibition on changing from a society to a company, the new entity is not the one originally granted recognition, and hence, making the withdrawal of recognition is justified.
The Respondents, through their counsel, in the said case contented that there is no provision explicitly prohibiting such a change, but since the entity running the institution changed entirely, the question of continuing the recognition does not arise.

COURT ANALYSIS AND JUDGMENT
The court in the case of Doon Valley Institute of Education Vs. National Council for Teacher Education & Anr., post hearing all the arguments from both the Appellant as well as the Respondents, examined the legal provisions and factual circumstances scrupulously. The court scrutinized the relevant regulations, especially the Regulation 4 of the 2014 Regulation, to determine the eligibility criteria for recognition. The court emphasized that the focus should be on the institution itself rather than the entity managing it. Both the Trusts and the Companies were deemed eligible to seek recognition, and a change in the managerial control did not automatically invalidate the recognition. The court conducted a scrupulous review of the show cause notice and withdrawal order issued by the NCTE and observed that the accusations pertained to the change in the status of the managing entity, rather than any violation committed by the institution itself. Thus, the withdrawal of recognition was deemed unjustifiable. The court held that the withdrawal of the recognition lacked merits and quashed the order of the withdrawal and directed the restoration of the recognition of the institution of the Appellant. Additionally, the court instructed that the NCTE to update the status of the institution on its website and inform relevant bodies accordingly.

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Judgement Reviewed by – Sruti Sikha Maharana

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