Jeevagan Narayana Swami Nadar v. Union of India & Ors.

1. This hearing has been done through hybrid mode.

2. The Petitioner - Jeevagan Narayana Swami Nadar, who is a suspended Director of Sinnar Thermal Power Limited (hereinafter “STPL”) has filed the present petition seeking relief against South Eastern Coalfields Limited/Respondent No.3 (hereinafter “SECL”). The grievance of the Petitioner is with respect to the letter dated 22nd November, 2022, by which show cause notice was issued by SECL, as to why the Fuel Supply Agreement dated 3rd September, 2013, executed between STPL and SECL (hereinafter “FSA”), ought not to be terminated and consequential forfeiture of the security deposit ought not to be resorted to.

3. The said FSA was for the supply of 27,16,000 tonnes of coal for four units of the Petitioner’s Nasik Thermal Power Project, Sinnar, Dist. Nasik (Maharashtra). Various bank guarantees for a total sum of approximately Rs.25 crores were furnished in terms of the FSA. However, for various reasons which are not relevant for the present purposes, there was a delay in the formal commissioning of the plant.

4. In the meantime, the Ministry of Power was also considering solutions to solve the problems in the power sector. At the same time, owing to a petition filed by M/s Shapoorji Pallonji Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter “IBC”), the NCLT, vide order dated 19th September, 2022 initiated insolvency resolution proceedings against STPL and a Resolution Professional (hereinafter “IRP”) was also appointed. Vide the said order, a moratorium has also been declared by the NCLT qua STPL.

5. Thereafter, in an appeal filed before the NCLAT, the following order was passed on 26th September, 2022: “ Issue notice. All Respondents are represented by learned counsel who accept notice. Let reply be filed by the Respondents within three weeks. List this Appeal on 04.11.2022. Shri Ramji Srinivasan, learned senior counsel for the Appellant submits that the proceedings for initiation of Arbitration were already initiated before filing of Section 9 application, which statement is disputed by learned counsel for Respondent No.1. Mr. Ramji Srinivasan further submits that against the award dated 22.04.2022, application under Section 34 of the Arbitration and Conciliation Act has already been filed in the High Court which is pending consideration. He further submits that in the minutes of meeting held on 02.05.2022 and 06.05.2022, the Ministry of Power is already taking steps to start commissioning of the plant and he has referred to minutes at Sl. No. 4.4.5. In view of the above submission, we are of the view that IRP in pursuance of the impugned order may not take any steps and it shall be open for the Appellant to participate further with the Ministry of Power in continuation of the earlier minutes of meetings.”

6. In this background of the insolvency resolution proceedings involving the Petitioner’s company, and the Petitioner receiving the show cause notice alleging various breaches of the FSA, the prayer in this petition is for the show cause dated 22nd November, 2022 to be quashed.

7. Today, it has also been brought to the Court’s notice that post the filing of this writ petition, SECL has terminated the FSA on 8th December, 2022 and has forfeited the security deposit of Rs.21,24,99,840/-. Ld. Counsel for the Petitioner highlights that the amount of the bank guarantee invoked is different in the invocation letter sent to the Petitioner and that sent to the banks on 8th December, 2022, which cites the amount of Rs.23,40,60,400/-.

8. At the outset, Mr. Dass, ld. Counsel for Respondent No.3, doubts the maintainability of the present petition considering that the IRP has not authorized the filing of such a petition. He also contends that there is no territorial jurisdiction of this Court, inasmuch as the only relief sought is against SECL, which is located in Bilaspur, Chhattisgarh and under the FSA, the jurisdiction clause states the contractual disputes would be subject to the jurisdiction of courts in Bilaspur. He further submits that if NCLAT has stayed the insolvency resolution proceedings vide the order dated 26th September, 2022, then the moratorium against actions such as invocation of bank guarantees against the Petitioner, would not be applicable.

9. On the other hand, Mr. Vikas Singh, ld. Sr. Counsel, along with Mr. Venkatesh, ld. counsel appearing for the Petitioner, submits that STPL’s Director can maintain the present petition in view of the order passed by the NCLAT on 26th September, 2022, which has clearly observed that the resolution professional would not take any steps with regard to the company. It is further submitted that owing to the moratorium which is operating in favour of the Petitioner, the subsequent invocation of the bank guarantees ought to be restrained inasmuch as the same would be contrary to the moratorium order under Section 14 of the IBC.

10. Heard. The moratorium order of the NCLT dated 19th September, 2022 reads as under:

11. The above order is in two parts - One is the appointment of the interim resolution professional and the other is the application of moratorium under Section 14 of the IBC. The NCLAT order extracted above primarily directs the RP not to take any steps, but the moratorium itself has not been stayed by the NCLAT. Therefore, the said order only concerns the first part of the NCLT decision extracted above. In view thereof, the moratorium would continue to apply even qua the forfeiture of the security deposit.

12. Accordingly, it is directed that invocation of the bank guarantees shall not be given effect to by the banks till 4th January, 2023. If an application before the NCLT is filed by the Petitioner by the said date i.e., 4th January, 2023, the protection granted qua encashment of the bank guarantees shall continue till the date of first listing before the NCLAT. It is reiterated that the banks shall not encash the bank guarantees and if the same have been encashed, the amounts shall not be disbursed to SECL. This shall be subject to any order that may be passed by NCLT in the application to be filed by the Petitioner.

13. With these observations, the present petition, along with all pending applications is disposed of.