BPMEL Is Non-Operational & Undergoing Winding-Up Proceedings: SC Upholds Odisha Govt. Order Refusing To Renew 'Kolha-Roida' Mining Lease
|The Supreme Court upheld the order of the State of Odisha rejecting the request for renewal of Kolha-Roida mining lease after it noticed that the Bharat Process & Mechanical Engineers Limited (BPMEL) is non-functional and is undergoing winding up proceedings.
Considering that BPMEL had been non-operational for the last thirty years, the Bench noted that “entertaining any notion” of lease renewal would be devoid of any practical or tangible benefit owing to the liabilities of the company. The Court accordingly directed that the renewal of the lease would no longer be examined by the Company Court for which a High Powered Committee (Committee) was formed by the Calcutta High Court.
Justice Sanjiv Khanna and Justice Dipankar Datta observed, “BPMEL was directed to be wound up by the BIFR in 1996 as the rehabilitation scheme was not financially viable…At this distant point in time, when BPMEL has been non-operational and undergoing winding-up proceedings, we do not see any reason to even remotely consider the exercise of power under Section 457(1)(b) of the Companies Act, 1956 to sanction the Official Liquidator to carry on business of the company so far as necessary for winding up, or for that matter the Official Liquidator to appoint OMDC as agent to conduct business in the place of BPMEL”
Sr. Advocate Rakesh Dwivedi represented the appellant, while ASG K. M. Nataraj and Sr Advocates Rakesh Dwivedi; AOR Shibashish Misra and Dheeraj P. Deo appeared for the respondents.
The Government of Odisha challenged the decision of the High Court which mandated the formation of the Committee to decide on the renewal of the mining leases in consultation with the Central Government, the Government of Odisha, and the Odisha Mineral Development Company Ltd (OMDC) [a subsidiary of BPMEL].
BPMEL became a sick company during the course of its business and was referred to the Board of Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985. The Supreme Court noted that despite the order passed by the BIFR for winding up and liquidation of BPMEL in the year 1996, the liquidation proceedings remained pending.
In the context of the renewal of the lease, the key issue for consider before the Court was to determine whether the High Court was justified in directing the formation of the Committee.
“The sheer magnitude of the liabilities involved renders the prospect of renewal implausible. Besides, the proposition advanced doesn’t have any discernible plan or vision for the requisite financial, technical, and managerial support. BPMEL went into liquidation in 1996 and has been defunct for nearly three decades. OMDC is also barely operational,” the Court remarked.
The Court further pointed out that “OMDC has been operating the mining leases throughout. The undertakings with respect to the mining leases were vested with BPMEL, which had executed a power of attorney in favour of OMDC to continue the mining activities…Moreover, OMDC, a subsidiary of BPMEL, is a separate juristic entity. The plea that the juristic entity should be ignored has not been raised or argued.”
Consequently, the Court stated that since OMDC was barely operational, it would not be a viable option to undertake mining activities. “In light of these facts, it is imperative to bring this dispute to an end. Prolonging it any further, sans a feasible resolution in sight, would be otiose,” the Court added.
Accordingly, the Supreme Court allowed the appeal.
Cause Title: Chief Secretary Government of Odisha v. Bharat Process & Mechanical Engineers Limited (In Liquidation) & Ors. (Neutral Citation: 2024 INSC 440)
Appearance:
Appellant: Sr Advocates Rakesh Dwivedi; AOR Shibashish Misra and Dheeraj P. Deo; Advocates Preetika Dwivedi and Abhishek Gupta
Respondents: ASG K. M. Nataraj; Sr Advocates Gourab Banerji, Aryama Sundaram, Shailesh Mandiyal; AOR Vijay Kasana, Dheeraj P. Deo, Ashok Mathur and Raj Bahadur Yadav; Advocates Vijay Kasana, Poornima Singh, Chetna Singh, Chirag Verma, Subhro P. Mukherjee, Raka Chatterjee, Venkata Supreeth, Abhishek Gupta, Rohini Musa, Surekha Raman, Amarjit Singh Bedi, Abhishek Anand, Shreyash Kumar, Chinmayee Chandra, Rukhmini Bobde, B. K. Satija, Vatsal Joshi and Siddharth Venkatesh Singh