Lanco Amarkantak Power Limited v. Union of India and Ors.

1. This hearing has been done through hybrid mode.

2. The present petition has been filed by the Petitioner- M/s Lanco Amarkantak Power Limited (hereinafter ‘LAPL’) against Respondent No.1- Ministry of Coal, Respondent No.2- South Eastern Coalfields Limited (hereinafter ‘SECL’) as also Respondent No.3- Ministry of Power seeking quashing of the impugned show cause notices dated 22nd November, 2022 issued by SECL.

3. The background of the matter is that a Coal Supply Agreement (hereinafter ‘CSA’) was signed between the Petitioner and SECL on 28th August, 2013. As per the said agreement the ‘Commitment Guarantees’ which were given by the Petitioner were converted into ‘Security Deposits’ which were lying with SECL as Bank Guarantees. As per the CSA, the Petitioner was to establish a power plant in Chhattisgarh. As a condition precedent, the Petitioner was also required to enter into long term Power Purchase Agreements (hereinafter ‘PPAs’) with distribution companies. The CSA also stipulated a period of 24 months within which the condition precedent had to be satisfied. Admittedly, till date, the plant has not been commissioned and as per the Petitioner about 70% of the plant has been constructed and set up.

4. In March 2019, a decision was taken by the Ministry of Power in respect of Stressed Thermal Power Projects that in respect of projects where there was delay in commissioning which were not attributable to the generator, the said PPAs would not be cancelled. Admittedly, in the present case there is no PPA which has been entered into. Thereafter, in October, 2019, a further meeting was held in the Ministry of Power to deal with the issues relating to stressed assets. In the said meeting, 34 stressed assets were identified and classified into the following three categories: “4.[6] Reclassification of 34 Stressed Assets: While reviewing classification of the stressed Projects as given in Para 3 above, Secretary (P) observed that all the 34 stressed projects can be categorized into the following three categories: i. Category I: Projects which are mostly commissioned and have been resolved/likely to be resolved and/or serving their debt and/or are not in NCLT. A total of 17 projects will come under this category i.e. Category A and B from Para 3 (i) and (ii). This list is attached as Annexure-II of these Minutes. ii. Category II: Projects which are only partly commissioned & have been referred to or admitted under NCLT waiting for resolution. A total of 11 projects come under this category. The list is at Annexure-III. iii. Category III: Projects which are at very initial stage of construction and are totally stalled. Such projects have either been ordered to be liquidated or are heading towards liquidation. A total of 6 projects will come under this category. The list is at Annexure-IV.” In the Minutes of the said meeting, the power plant of the Petitioner was categorized in Category II.

5. It is the case of the Petitioner that vide communication dated 22nd May, 2017, an extension was given by the Ministry of Coal for incomplete power projects till 31st March, 2022 to complete and commission the same failing which the Letter of Assurance would stand cancelled. In view of the fact that the said deadline has passed and the power plant has not been commissioned, the impugned show cause notices dated 22nd November, 2022 have been issued by SECL calling upon the Petitioner to respond to why the CSA ought not to be cancelled and Security Deposit be forfeited. The show cause notices gave 7 days’ time to the Petitioner to respond.

6. The submission of Mr. Nayar, ld. Senior Counsel appearing for the Petitioner is that on 5th September, 2019, NCLT, Hyderabad passed a moratorium order under section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter IBC) in an application under Section 7 of IBC. Thus the Corporate Insolvency Resolution Process (CIRP) has already been commenced. He submits that the issuance of show cause notices at this stage and the purported cancellation of the CSA would be violative of the said moratorium order and in any case, considering the extension which has been granted, the cancellation of the said agreement would result in irreparable prejudice to the Petitioner.

7. In response, Mr. Apoorv Kurup, ld. Counsel appearing for Respondent Nos.[1] and 3 submits that the main contesting party in the matter which has issued the show cause notice is Respondent No.2- SECL and not the two Ministries. He, however, points out that insofar as the decision for non-cancellation taken in March, 2019 was concerned, the same related to only PPAs and not Fuel Supply Agreements or Coal supply agreements. It is further submitted by him that the Minutes which are relied upon by the Petitioner dated September, 2019 do not give any further extension beyond 31st March, 2022 to the Petitioner.

8. Mr. Das, ld. Senior Counsel appearing for the SECL has made twofold submissions. His first submission is that the present writ petition has been filed by an employee of the corporate debtor undergoing CIRP upon being authorised by the Resolution Professional which is not permissible. As per the ld. Senior Counsel only the Resolution Professional was entitled to file the writ petition and it is irregular for the Resolution Professional to authorize any person from the earlier management to file the present writ petition. His second submission is that the present writ is not maintainable in view of Section 14 read with Section 60(5) of the IBC. Mr. Das, ld. Sr. Counsel submits that the NCLT would have the jurisdiction to even hear non-parties and members who are not even part of the CoC in such proceedings, if filed, before the NCLT.

9. The Court has heard ld. Counsels for the parties and has perused the record. The prayers in the writ petition are as under:

Hon’ble Court may deem fit & proper, in the facts and circumstances of the present case as also in the interest of justice.”

10. A perusal of the prayers in the writ would show that the relief being sought is in respect of two show cause notices dated 22nd November, 2022. It is further prayed that the Respondents ought to act in terms of the office memorandum dated 8th March, 2019 as also 1st October, 2019 and not cancel the CSA.

11. The admitted position on record is that the Petitioner is undergoing insolvency proceedings. It is also admitted that the project is yet to be commissioned. Under these circumstances, prima facie, there appears to be no extension beyond the date of 31st March, 2022, which has been given to the Petitioner. Moreover, a perusal of the show cause notices also shows that the Respondents have called upon the Petitioner to file a reply and to deal with the breach of various conditions in the CSA which required the Petitioner to commission the plant.

12. On a query from the Court, ld. Senior Counsel for the Petitioner submits that the reply to the show cause notice has already been filed. In this view of the matter, this Court is not inclined to go into the merits of the petition as to whether there is any justifiable cause for non-commissioning of the plant and as to what would be the effect of the said noncommissioning. The SECL has already issued the show cause notices to the Petitioner. The replies are stated to have been filed. Let a hearing be granted to the Petitioner and an order be passed by the SECL in accordance with law.

13. Upon the said order being passed, the Petitioner shall be given two weeks’ time to avail of its remedies in accordance with law before the NCLT which would be the appropriate forum in terms of Section 60(5) of the IBC. Section 60(5) vests jurisdiction in NCLT to entertain or dispose of an application, proceeding, claim made by or against the corporate debtor. In the aforementioned two weeks period, any order that may be passed shall not be given effect to. The SECL shall be made a party before the NCLT and shall be served with the appropriate papers in respect of such filings.