High Court Judgment on Renewal of Mining Leases: State of Odisha vs. Thakurani Global Processors

The Supreme Court of India recently delivered a crucial judgment in the case of State of Odisha vs. Thakurani Global Processors concerning the renewal of mining leases. The High Court’s directive to establish a High-Powered Committee has been revisited, with significant implications for all stakeholders involved. Let’s delve into the details of this landmark decision and its impact on the mining sector.

Facts

• The Dalki lease came to an end on 30.09.1994.
• BPMEL was ordered to pay Rs 1,92,12,957/- and Rs. 2,16,13,312.35p.
• TGP claims BPMEL applied for Kolha-Roida lease renewal on 14.07.1995.
• TGP challenged the order dated 13.10.2023, which dismissed their review application.
• UCO Bank loaned BPMEL.
• Undertakings of Bird and Co. transferred to the Union of India.
• UCO Bank entitled to 19.5% interest from 08.05.1991.
• UCO Bank initiated recovery proceedings in 1991.
• The winding up order for BPMEL was passed on 27.07.2004.
• OMDC filed a revision application.
• TGP was impleaded in place of UCO Bank by the DRT.
• Assignment agreement between UCO Bank and TGP for Rs 55,00,000/-.
• Official Liquidator paid Rs.2,99,12,461/- to TGP in September 2011.
• Assignment of undertaking to Bharat Process & Mechanical Engineers Limited.
• Kolha-Roida lease renewed twice, the last renewal from 15.08.1976 to 14.08.1996.
• Thakurani lease renewed for the second time from 01.10.1984 to 30.09.2004.
• BPMEL referred to BIFR as a sick company.
• Bird and Company had three mining leases granted by the Raja of Keonjhar.
• Liquidation proceedings for BPMEL are pending despite BIFR order in 1996.
• Appointment of Official Liquidator by the High Court at Calcutta on 27.02.2004.
• The Company Judge’s order emphasizes the potential repercussions of non-renewal of the leases in favor of the Official Liquidator, facilitated by OMDC or TGP.
• Renewal of the leases could lead to optimal mine utilization and subsequent income, which could be used to settle the company’s outstanding debts.
• Failure to renew the leases could lead to adverse consequences in terms of settlement of debts and creditor claims.
• The judgment directs the formation of a High Powered Committee to decide on the renewal of mining leases within three months.
• The Committee will consist of not more than three members representing the interests of the stakeholders.
• TGP Equity Management Private Ltd will be given the opportunity to present their case.
• The decision will also impact the appeal by TGP against the judgment of the High Court of Orissa at Cuttack.
• The High Court’s order of 09.03.2023 setting aside the revisional authority’s order of 02.02.2009 is also under consideration.

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Issue

• Key issue: Justification of the High Court at Calcutta in directing the formation of a High-Powered Committee
• Composition of the Committee: No more than three members, representing Union of India, State of Odisha, and OMDC

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Analysis

• Penalties of around Rs.800 crores levied on OMDC for the mines.
• Liquidator appointed for BPMEL in 2004 after 8 years.
• BPMEL non-operational for 30 years, OMDC operating leases.
• TGP admitted as preferential creditor post liquidation of BPMEL.
• Payments to TGP to be made as per the Companies Act, 1956.
• Argument for renewal of leases rejected due to incongruity.
• Workers’ dues pending, TGP’s submissions needing consideration.
• Conditions of lease satisfied as per affidavits filed by BPMEL to OMDC.
• Applications for renewal pending but not rejected till 2015.
• TGP claims leases did not lapse, relying on specific conditions.
• Arguments by TGP summarized regarding BPMEL’s entitlement.
• Termination of power of attorney post BPMEL liquidation.
• OMDC as a separate juristic entity from BPMEL.
• Union of India against lease renewals, workers’ interests paramount.
• TGP accepting partial payments, need for third-party funding for OMDC.
• No practical benefit in considering lease renewal given BPMEL’s position.
• The court has the authority to address any question, whether of law or fact, that is related to or arises during the winding up of the company.
• According to Sections 457(1)(b) and 457(2)(5)(2) of the Companies Act, 1956, the liquidator can continue the business operations of the company with the approval of the Court, if it is deemed necessary for the successful winding up of the company.
• OMDC is barely operational.
• BPMEL went into liquidation in 1996 and has been defunct for nearly three decades.
• It cannot be considered a viable option to undertake mining activities.

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Decision

• Applications for renewal of Thakurani and Dalki leases treated as rejected or dismissed.
• Proceedings to continue before the Company Court of the High Court at Calcutta.
• No order as to costs in this case.
• Parties to raise all pleas and contentions available under the Companies Act, 1956 for payment and enforcement of dues.
• Further prolonging without a feasible resolution deemed unnecessary.
• State of Odisha’s appeals allowed, setting aside the High Court judgment.
• High Powered Committee direction also set aside.
• Company Court will not examine the question of lease renewal.
• TGP’s appeals dismissed against the High Court of Orissa’s order.
• Condonation of delay in filing appeals.
• State of Odisha’s rejection of Kolha-Roida lease renewal request upheld.
• Entitlement of workmen and TGP acknowledged.

Case Title: CHIEF SECRETARY GOVT. OF ODISHA Vs. BHARAT PROCESS AND MECHNICAL ENGINEERS LTD. (2024 INSC 440)

Case Number: C.A. No.-006529-006530 – 2024

Click here to read/download original judgement