SMC Power Generation Limited vs Odisha Industrial Infrastructure Development Corporation; and Anr
W.P.(C) No.22033 of 2021
Facts:
1. The Petitioner-Company SMC Power Generation Limited is a Public Limited Company (hereinafter for short, ‘the SMCPGL’) was incorporated under the Companies Act, 1956.
2. Opposite Party No.1 (IDCO) had granted a leasehold right over the land measuring Ac.154.208 dec. at Industrial Growth Center, Jharsuguda to a Company named SPS Steel and Power Limited (hereinafter in short as ‘SPSS & PL’) in terms of the Memorandum of Understanding (MOU) entered with the State Government for setting up integrated Steel Plaint. Similarly, land of an area of Ac.41.98 dec. had been allotted in favour of the Pawansut Sponge (P) Limited (hereinafter referred to as ‘PSPL’) at Industrial Growth Center, Jharsuguda.
3. By virtue of an order dated 19.02.2010 passed by this Court in COPET No.35 of 2009 approving the scheme of amalgamation, PSPL was amalgamated with SPSS & PL whereby all the properties, rights and interest of PSPL stood transferred in the name of SPSS & PL. In the same year 2010, SPSS & PL entered into a share transfer agreement with Concast Steel and Power Limited (hereinafter referred to as ‘CS & PL). By virtue of that share transfer agreement, the entire shareholding of SPSS & PL was transferred in the name of CS & PL. In pursuance of the said transfer of shares, the name of SPSS & PL was changed to CS & PL with effect from 30.03.2021.
4. The change of the name in the shareholding was duly intimated to the IDCO pursuant to which the Land Officer of IDCO vide letters sought necessary orders from the Chairman-cum-Managing Director of IDCO for procurement of the land in favour of CS & PL the IDCO (Opposite Party No.1) vide its letters dated 14/16.03.2017 under Annexure-4 series, addressed to SPSS & PL cancelled the allotment of the land of an area of Ac.154.208 due to default in payment of the statutory dues concerning the allotted land in contravention of the allotment/agreement/undertaking, and for nonfunctioning of the unit.
5. On account of closure of the plant, the above referred letters had not been received by CS & PL. However, when the cancellation letters dated 14/16.03.2017 came to be received, the CS & PL gave a proposal to the IDCO that they would make payment towards the said outstanding dues of Rs.69,70,523/- in 12 (twelve) equal installments and, therefore, they made a request not to give effect to the order of cancellation of the allotted land.
6. The Corporate Insolvency Resolution Process (CIRP) came to be initiated against CS & PL with the invocation of the provisions of Insolvency and Bankruptcy Code, 2016 (hereinafter called as ‘the I & B Code’) by M/s. Shreeshyam Metaliks Limited. The CS & PL vide its letter dated 04.12.2017 under Annexure-9 informed the IDCO about the said developments and informed that all the dues of IDCO as had been demanded shall now be paid through NCLT route with further request to the IDCO to submit its claim in proper form (Form-B) by 05.12.2017 as per the public announcement
7. Although IDCO (Opposite Party No.1) was required to submit its claim (outstanding statutory dues and penal interest etc.) relating to CS & PL before the RP as provided under the provisions of I & B Code, they chose not to submit any such claim during the stipulated time period before the RP.
8. NCLT, Kolkata Bench passed the order under section 33 of the Code for Liquidation of CS & PL and appointed the Opposite Party No.2 as the Liquidator IDCO (Opposite Party No.1), however, submitted nothing in support of their claim before the Liquidator (Opposite Party No.2) even though it had the knowledge regarding ongoing CRP/liquidation proceeding as would be evident from the letter dated 06.03.2018 issued by the Chief General Manager, MSME to the Division Head, IDCO, Sambalpur Division directing him to provide certain particulars in detail and documents, such as copy of allotment, lease deed, possession etc., as early as possible for preparation and submission of the petition before the NCLT, Kolkata Bench.
9. The Assets Sale Process Memorandum inviting the bids for auction of assets of CS & PL was prepared by the Liquidator on 22.11.2019 in terms of the provisions of Liquidation Process Regulations. TThe IDCO (Opposite Party No.1) even after that initiation of the process for E-auction of assets of CS & PL by the Liquidator, did not lodge any claim.
10. The E-auction pursuant to the above invitation to the bidders was conducted on 23.12.2019 and this Petitioner-Company (SMCPGL) participated in the bidding process for purchase of assets of Lot No.4 of CS & PL and it was declared as the highest bidder for that lot of the assets of CS& PL relating to Jharsuguda Plant (the assets of Lot No.4). A Letter of Intent was thus issued in favour of the Petitioner-Company (SMC PGL) on 06.01.2020. Subsequent thereto vide sale deed dated 15.02.2020, the assets of CS & PL relating to Jharsuguda Plaint (assets of Lot No.4) were transferred in favour of the Petitioner-Company (SMCPGL) by the Liquidator on receipt of payment of full bid amount of Rs.288,09,00,797.00 (consideration money) and GST to the tune of Rs.42,19,46,426.00. The lease hold land over which the Jharsuguda Plant (assets of Lot No.4) of CS & PL very much formed part of the deed of sale (Annexure-15) was specifically shown in Schedule-II of the Schedules of asset.
11. The Petitioner-Company (SMCPGL) also vide letter dated 04.03.2020 under Annexure-17 requested the Government in the Department of Steel and Mines and Industrial Promotion and Investment Corporation of Odisha Limited (IPICOL) for change of the name of the CS & PL to SMCPGL. Divisional head of IDCO, Sambalpur vide letter dated 12.08.2020 (Annexure-21) for the first time intimated the Petitioner-Company (SMCPGL) that due to default in payment of statutory dues of the leasehold plots and non-working of plants, the allotment had been cancelled and it was then intimated that the said outstanding statutory dues of the SPSS & PL was Rs.1,68,55,329.00 and that of CS & PL was Rs.20,44,669.00, stating further that in addition to that damage @ Rs.500 per acre per day coming to Rs.9,57,63,168.00 for the period from 17.03.2017 to 12.08.2020 was also payable. The Divisional Head of IDCO, Sambalpur further stated that in this context, direction had been sought for from the Headquarter.
12. Basing on the application of the Petitioner-Company (SMCPGL) for transfer of the leasehold land of SPS/ CS& PL, the Petitioner-Company (SMCPGL) then was advised to apply Online as per the prevailing procedure of the IDCO (Opposite Party No.1) for said transfer in IDCO portal. After submission of said application for transfer of the land in IDCO (Opposite Party No.1) portal, the IDCO (Opposite Party No.1) tagged the land details of erstwhile SPS &CSPL into the application of the Petitioner-Company (SMCPGL) and simultaneously, the outstanding dues of those two Companies amounting to Rs.1.92 crores was shown as liability in the hands of the Petitioner-Company
13. Despite the same, the Petitioner-Company (SMCPGL) was informed by the IDCO (Opposite Party No.1) that its application for transfer of land could not be processed till the outstanding dues reflected in the application were fully paid. Under the circumstance, in order to avoid delay being compelled, the Petitioner-Company (SMCPGL) made the online payment of Rs.1,92,24,618.00 on 09.10.2020 vide Annexure-23 series for settlement of outstanding statutory dues of SPSS & PL and CSPL for processing its application for transfer of land even though it was not payable by the Petitioner-Company (SMCPGL).
14. Therefore, the demand of Rs.1.92 crores for processing the application of the Petitioner-Company (SMCPGL) for transfer of the land and subsequent payment of the same by the Petitioner-Company (SMCPGL) under the compelling circumstance is said to be illegal, arbitrary and contrary to law.
Issue: Petition is filed challenging the demand letter dated 28.06.2021 issued by the Opposite Party No.1 under Annexure-25 directing the Petitioner-Company to pay an amount of Rs.13.52 crores towards penalty (damage charge) and GST; and refund of amount paid.
Arguments:
Petitioner:
1. Counsel relied on provision of section 3(6), 3(10), 3(11), 3(12), 5(7) and 5(8) of I & B Code, particularly to clause (d) thereunder submitted that the IDCO (Opposite Party No.1) and its due were covered by the legislation, i.e., the I&B Code. It further submitted that Section 14, particularly Clause (d) of sub-section (1) of said section of the I&B Code protects the right of possession over any property of the Corporate Debtor and section 15 provides modalities of public announcement to be made in terms of section 13 of the I&B Code.
2. Counsel further submitted that Corporate Debtor (CS & PL) was in possession of the land of the IDCO (Opposite Party No.1) as the IDCO has never evicted the Corporate Debtor (CS & PL) or taken possession of the same and rather it was with their full knowledge. Therefore, as per section 14(1) (d) of the I&B Code, the right to possession being recognized as a right, was not to be disturbed, once the moratorium was declared.
3. Counsel submitted that Petitioner-Company (SMCPGL) was not a transfer of liabilities and the Petitioner-Company (SMCPGL) did not step into the shoes of the erstwhile CS & PL but as per section 64 of the Code, all liquidation of the assets of the Corporate Debtor (CS & PL), the Corporate Debtor (CS & PL) stood dissolved and that liquidation has resulted in the legal death of the entity after sale of all its assets and, therefore, there is no transfer of liabilities.
Respondent:
1. Counsel submitted that IDCO (Opposite Party No.1) is a Public Authority, Government of Odisha Undertaking and also Statutory Authority under the Odisha Industrial Infrastructure Development Corporation Act, 1980. It owes the responsibility to protect the public money. He further submitted that it may be under bona fide mistake and also impression that the dues as aforesaid under Annexure 23 series (Rs.1,92,24,618/-) and Annexure-25 (Rs.11,62,00,322/-) should be recovered from the subsequent purchaser from the earlier allottee (which in the present case is the Petitioner Company-SMCPGL); somehow did not submit its claim before the RP pursuant to the public notice or thereafter.
2. Counsel submitted that this Court, being a Court of equity, if holds that the Petitioner-Company SMCPGL is not liable to pay the dues, in that event the legal right of the IDCO (Opposite Party No.1) be kept alive and liberty may be given to move the Liquidator under section 39 read with section 40 of the I&B Code with a petition for condonation of delay in laying the claim for determination of the claim dues so as to be received as payment from out of the sale proceeds already obtained through the auction of the property.
Decision:
Rationale:
1. Orissa High Court noted that when the CIRP was undertaken, claims were invited; the IDCO (Opposite Party No.1) did not lodge any such claim and that having not been done, the IDCO (Opposite Party No.1) had also no occasion to update the claim during Liquidation Process. Thereafter, at the stage of liquidation also IDCO (Opposite Party No.1) did not come forward to lodge any such claim.
2. It relied on various provision of the IBC and held that is worth considering what precisely will happen if the demand of the IDCO (Opposite Party No.1) is accepted in the context of expression “sale of going concern”, as used in the I&B Code and connected Regulations in respect of liquidation, to construe and include transfer of pre-CIRP liabilities of the Corporate Debtor.
3. These dues which are presently demanded by the IDCO (Opposite Party No.1) to be paid by the Auction Purchaser (Petitioner-Company-SMCPGL), of the Corporate Debtor in the Liquidation Process do not operate a charge on the assets of the Corporate Debtor.
4. Hon’ble HC relying on the process document noted that , the transfer of right, title and interest which the Corporate Debtor represented by the liquidator had stood transferred on “As is where is” “As is what is” and “Whatever there is”. This is quite distinct then what those generally postulates that the purchaser would be acquiring the assets with all its existing rights, obligations and liabilities; that when a property is sold on an ‘as is where is basis’; the encumbrances on the property stand transferred to the purchaser upon the sale.
5. It held that there no such stipulation thereunder that the Purchaser, i.e., the Petitioner-Company (SMCPGL) will be liable to pay the prior statutory dues and the damage charge as now being levied upon the Petitioner-Company (SMCPGL) by the IDCO (Opposites Party No.1) running from the time before the initiation of the Corporate Insolvency Process.
Order:
