Calcutta High Court
Shyam Steel Manufacturing Ltd vs Jai Balaji Industries Ltd on 21 December, 2017
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
OD-7
AP 1113 of 2017
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
SHYAM STEEL MANUFACTURING LTD.
Versus
JAI BALAJI INDUSTRIES LTD.
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
Date : 21st December, 2017.
Appearance:
Mr. Ahin Chaudhury, Sr. Adv.
Mr. Dhruba Ghosh, Sr. Adv.
Ms. Manali Bose, Adv.
Mr. Shounak Mitra, Adv.
Mr. Goutam Banerjee, Adv.
Mr. Vaibhavi Pandey, Adv.
...for the petitioner.
Mr. A.K. Mitra, Sr. Adv.
Mr. Abhrajit Mitra, Sr. Adv.
Ms. Rajarshi Kajaria, Adv.
Mr. Jishnu Chowdhury, Adv.
Mr. Sarvapriya Mukherjee, Adv.
Mr. Satadeep Bhattacharya, Adv.
...for the respondent.
The Court : In this application under Section 9 of the Arbitration & Conciliation Act, 1996, as amended by Act 3 of 2016 (in short, "the Act of 1996") the petitioner has prayed for various 2 orders against the respondent, including an order of injunction restraining the latter, from transferring or alienating or disposing of its properties mentioned at paragraph 55 of the application and from operating its two bank accounts maintained with ICICI Bank and Allahabad Bank without keeping apart an amount of Rs.11,73,01,152.35 till the disposal of the application. Before November 17, 2016 the name of the petitioner was Sova Ispat Ltd.
The petitioner and the respondent applied before the competent authority of the Central Government for allocation of captive coal block situate at Ardhagram, Bankura, West Bengal for usage of the coal extracted therefrom at their end-use plants. By a letter of allotment dated December 6, 2007, the Government of India, Ministry of Coal, allocated Ardhagram block in Eastern Coalfields Ltd. (hereinafter referred to as "the said coal block") to the petitioner, as "the leader" and the respondent as "an associate". The said letter of allotment provided, inter alia, that the petitioner would carry out the mining operation under the mining lease and shall share the coal extracted at the said coal block between itself and the respondent at a price to be determined by the Government. On July 12, 2012 an agreement was entered into between the petitioner, the respondent and M/s. Eastern Coalfield Limited (hereinafter referred to as the said agreement dated July 12, 2012) providing, inter alia, that the mining of coal from the said coal block shall be carried out by the petitioner and the coal extracted by the petitioner from the coal block shall be shared between itself and the respondent at the ratio of 84.38% : 15.62% respectively. Clause A.11 of the said agreement specifically provided that the share of coal of the respondent shall be made available by the petitioner at a price to be determined by the Government (transfer price) from time to time, which shall be binding on all concerned. C.1 of the said agreement provided that the disputes between the petitioner and the respondent arising out of the agreement shall be resolved amicably by the parties and in the event of failure to reach an amicable settlement, the parties shall get the 3 said disputes settled under the provision of the Act of 1996 or any other enactment replacing the said Act. After the execution of the said agreement dated July 12, 2012 the said coal block was handed over to the petitioner and it started the mining operation and the respondent continued to obtain supply of coal as per its allocation at the interim price of Rs.500 per MT.
In a meeting held on December 07, 2012 by the committee set up by the Central Government for fixation of the transfer price, which was attended by both the petitioner as well as the respondent, it was decided that pending finalisation of the price, the petitioner was allowed to transfer coal to the respondent at Rs. 500/- per MT, as mutually agreed by them.
By a letter dated December 7, 2012 addressed to the Additional Secretary (Coal), Ministry of Coal, Government of India, the respondent confirmed that until fixation of the transfer price by the Ministry of Coal they would obtain supply of coal from the petitioner at the mutually agreed rate of Rs. 500/-, per M.T.. In the said letter, the respondent also categorically stated that after fixation of the transfer price by the Ministry of Coal, the same shall be made applicable retrospectively. The respondent obtained supply of coal, extracted from the said coal block from the petitioner at the said rate of Rs.500/- MT. By an order dated September 24, 2014 passed in a writ petition, the Supreme Court cancelled the allocation of 204 coal blocks by the Ministry of Coal, with effect from March 31, 2015. On December 15, 2014, the Committee under the Chairmanship of Additional Secretary (Coal), Union of India held a meeting which was attended by the petitioner and the respondent for ascertaining the transfer price of coal, under the said agreement dated July 12, 2012. In the said meeting, the said committee after considering the contentions of the respective parties fixed the transfer price of coal under the said agreement dated July 12, 2012 by the petitioner to the respondent from the said coal block at Rs.1050 per MT since the date of production of coal at the said coal block. By a letter dated December 29, 2014, the Additional Secretary (Coal), Ministry of 4 Coal, Government of India, forwarded the minutes of the said meeting held on December 15, 2014, regarding fixation of the transfer price of coal from the said coal block to the Managing Director of both the petitioner and the respondent, respectively. On January 14, 2015 a meeting was held between The Chief Manager of ECL and the representatives of the petitioner and the respondent, respectively and a copy of the minutes of the said meeting has been disclosed in the said application. In the said meeting both the parties herein confirmed to have attended the said meeting held under the chairmanship of the Additional Secretary (Coal) as their officials attended the same. After the fixation of the transfer price by the said committee on December 15, 2014, the petitioner continued to supply coal to the respondent and raised invoices on the respondent on account of price of the coal supplied at the rate of Rs.1050 /- per MT. By a letter dated January 28, 2015, the respondent forwarded three cheques for a sum of Rs.30,65,948/- towards payment of the proforma invoices raised by the petitioner for supply of coal at the rate of Rs. 1050/- per MT. In the said letter, the respondent however, mentioned that it paid the said amount of Rs. 30,65,948/- under protest and reserve their right to take appropriate steps to ascertain the fair transfer price for obtaining supply of the coal extracted from the said coal block. With the expiry of March 31, 2015 the allotment of the said coal block stood cancelled and naturally, there was no scope for the petitioner supplying any further coal to the respondent.
According to the petitioner, although the respondent paid the price of coal supplied to it after December 15, 2014, at the transfer price fixed by the said committee, that is, at Rs.1050/- per MT but it refused to pay the arrear amount of the difference between the price fixed by the said committee at Rs.1050/- per MT and the tentative price paid at Rs.500/- per MT. The respondent also failed to pay Rs. 5,33,587/-, towards the loading service, to the petitioner. The petitioner claims that 5 the respondent is liable to pay interest to it on account of the outstanding dues at the rate of 12%, per annum.
On June 2, 2015 the petitioner issued a notice under Section 434 of the Companies Act, 1956 to the respondent calling upon it to pay its dues of Rs.6,41,14,463/- together with interest @ Rs.12% amounting to Rs.7,40,56,837/-. The respondent by its letter dated June 23, 2015 replied to the said notice issued by the petitioner alleging that the transfer price fixed by the Union of India at the meeting held on December 15, 2014 at the rate of Rs.1050 per M.T. is illegal and not binding upon it and under compulsion it obtained supply of coal from the petitioner after paying the transfer price at the rate of Rs. 1050/- per MT. The respondent further alleged to have filed a suit being Title Suit No. 635 of 2014 against the petitioner and others, before a learned Judge of Barasat Court claiming a declaration that the transfer price fixed by the Central Government on December 15, 2014 is illegal, null and void. The petitioner filed an application, CP No. 777 of 2015 before this Court praying for an order of winding up of the respondent but the same was rejected on the ground that the respondent had, in the meantime, been referred to BIFR under the provision of Sick Industrial Companies (Special Provision) Act, 1985. In the suit filed by the respondent before the learned Civil Judge (Senior Division), 2nd Court, North 24 Parganas at Barasat the petitioner, as a defendant has filed an application under Section 5 and 8 of the Act of 1996 which is pending disposal. By a letter dated April 6, 2016 addressed to the respondent, the petitioner through its advocate invoked arbitration agreement between the parties and nominated an arbitrator for adjudicating the disputes between the parties and requested the respondent to agree to the appointment of the said arbitrator. The respondent, however, has not agreed to the appointment of the arbitrator nominated by the petitioner. In their letter dated May 5, 2016, the respondent alleged that in view of the fact it has been referred to BIFR, no arbitral proceeding can be initiated against 6 it. The petitioner has, however, filed an application, under Section 11 of the Arbitration and Conciliation Act, 1996, before this Court, which is pending disposal.
The petitioner submitted that with the repealing of the Sick Industrial Companies (Special Provision) Act, 1985 with effect from December 1, 2016 the reference of the petitioner before BIFR stood automatically lapsed and, as such, the disputes arisen between the parties can be proceeded with in the arbitral proceeding. According to the petitioner, on account of the failure on the part of the respondent to pay the differential amount of transfer price of coal at the rate Rs.1050/-, per M.T. fixed by the Central Government and the tentative transfer price of Rs.500/- per metric ton, an amount of Rs.6,41,14,463/- together with interest thereon @ Rs.12% per annum remains due and owing by respondent, but the latter has refused to pay the said amount or any part thereof. In addition to the said amount, the petitioner has raised a further claim of Rs. 60,79,500/- against the respondent on account of penalty, at the rate of 50% of the transfer price, on the un-lifted quantity of coal.
In the application, the petitioner has disclosed various news articles published in various newspapers to show that the respondent is in impecunious condition and various banks are about to initiate proceeding against them before the National Company Law Tribunal under the provision of the Insolvency and Bankruptcy Code, 2016. The petitioner strenuously urged that when the price of coal supplied by it to the respondent fixed by the Central Government at Rs.1050 and the same is binding upon the respondent, the present claim of the petitioner against the respondent is an unimpeachable claim. Relying upon a decision of a learned Single Judge of this Court in the case of Sourav Ganguly -Vs- Mahuaa Pvt. Ltd. reported in (2015) 4 CHN, 509 the petitioner strenuously urged that when it has made out an unimpeachable claim and the respondent is unable to pay its dues to its secured creditors and it is likely to be referred to the National Company Law Tribunal 7 and before that the respondent would transfer its immovable properties mentioned in paragraph 55 of this application. On these grounds, the petitioner has prayed for an orders of injunction restraining the respondent from transferring of any of its asset mentioned in paragraph 55 of the application and operating its bank accounts mentioned in Annexure-"X" to the petition without leaving a balance of Rs. 11,73,01,152.
On the other hand, it is the contention of the respondent was that the petitioner has not been able to substantiate that its purported claim in this application is an unimpeachable claim. According to the respondents, from the minutes of meeting dated December 15, 2014, it is evident that the Committee only recommended the price of the coal to be supplied by the petitioner to the respondent, at Rs. 1050/-, per M.T. and by no means it can be said that the said rate of Rs.1050/- is the transfer price fixed under the said agreement dated July 12, 2012 . In any event, in view of Article 53 of the Constitution of India any decision of the Central Government to fix the price should be in the name of the President of India but in the present case the said condition remains unfulfilled. The respondent asserted that it has already filed a suit before the learned Civil Judge (Senior Division), 2nd Court at Barasat for cancellation of the recommendation of the Central Government for fixation of the price of coal at Rs.1050/- and as such, once again the petitioner's claim in this application cannot be held to be an unimpeachable claim. Relying on the decision of the Supreme Court in the case of 'Raman Tech. & Process Engg. Co. and Another vs. Solanki Traders' reported in (2008) 2 SCC 302 and the Division Bench decision of this Court in the cases of 'Sunil Kakrania & Ors. vs. M/s. Saltee Infrastructure Ltd. & Anr. reported in AIR 2009 Cal 260, the respondent strongly contended that as per the well-settled law that the provisions of Order 38 Rule 5 of the Code of Civil Procedure cannot be invoked by an unsecured creditor to make its money claim secured, the petitioner is not entitled to obtain any order in this application, more so 8 when the petitioner has made vague allegations that the respondent is likely to transfer its assets and properties without any particular. It was suggested by the respondent that even if it is referred to National Company Law Tribunal under the provisions of the Insolvency and Bankruptcy Code, 2016, in view of the provisions contained in Sections 16 and 17 of the said code, once an Interim Resolution Professional is appointed, the latter shall take over the management of the affairs of the respondent and there cannot be any bona fide apprehension on the part of the petitioner that its claim in the arbitral proceeding will be frustrated. The respondent also contended that in the present case the reference of the respondent before the BIFR stood abated on December 1, 2016 and the present application has been filed by the petitioner only in the month of December, 2017 and as such, on the ground of delay alone, the petitioner is not entitled to obtain any interim order in this application. Urging these grounds the respondent submitted that the petitioner has not been able to make out any case for obtaining any ad-interim order as prayed for in this application.
The respondents' various properties are mortgaged with its banks and who are likely to restructure the credit facilities advanced to the respondent. The respondent asserted that the petitioner has filed this application with the sole object to frustrate the restructuring of the credit facilities by the banks and to create a pressure on it to succumb to the unlawful claims of the petitioner.
In reply, it was the contention of the petitioner that when the suit was filed before the learned Civil Judge (Senior Division), Second Court at Barasat, the respondent as the plaintiff had claimed a relief that the transfer price fixed by the defendant no.2, Union of India held on December 15, 2014 at Rs.1050/- per MT was illegal, null and void, it does not lie in the mouth of the respondent to contend that the said price of Rs.1050/- per MT has only been recommended by the Central Government. However, the respondent has not made any submission to dispute the amount 9 claimed by the petitioner on account of its outstanding dues but the respondent is only interested to drag this matter beyond December 31, 2017 when there is every livelihood that it would be referred to National Company Law Tribunal under the Insolvency Code, 2016 and its present management will be superceded by the Interim Resolution Professional and in the meantime the present management of the respondent will siphon off the funds from the bank accounts and transfer the immovable properties of the respondent.
I have considered the materials on record, as well as the submissions made by the respective parties. In the present case, the said agreement dated July 12, 2012 is binding upon the parties. The said agreement expressly provides that the petitioner shall supply the requisite quantity of coal to the respondent from the said coal block at a transfer price to be determined by the Government from time to time and such price shall be binding on all concerned. In the meeting of the Committee set up by the concerned department of the Central Government on December 7, 2012, the parties agreed for supply of coal by the petitioner to the respondent at Rs.500 per MT till the transfer price is fixed by the Government and the same was corroborated by the respondent in its letter dated December 7, 2012 addressed to the Additional Secretary (Coal), Ministry of Coal, a copy whereof was also forwarded to the petitioner. Thus, pending finalisation of the transfer of price by the Central Government, the respondent started to obtain supply of coal extracted from the said coal block by the petitioner at the said rate of 500 MT subject to the fixation of transfer price by the Central Government. By an order dated September 24, 2014 the Hon'ble Supreme Court cancelled allocation of various coal blocks by the Central Government, including the said coal block allotted to the petitioner and the respondent jointly. From the minutes of the meeting held by the Committee For Fixation Of Transfer Price under the Chairmanship of the Additional Secretary (Coal) 10 from the said coal block, it appears that both the petitioner and the respondent submitted their respective proposals for fixation of the transfer price and after consideration of the same, the said committee fixed the transfer price at Rs.1,050/- per MT. The finality of all the decisions of the said Committee in the said meeting held on December 15, 2014 was corroborated by the minutes of the meeting held on January 15/17, 2015 held between the parties herein and ECL. Thereafter, the respondent obtained supply of further coal from the said coal block. The petitioner raised invoices on the respondent on account of supply of the coal for a period of time after December 14, 2014, at the rate of Rs.1050/- per MT and the respondent paid the said bills with an observation that the same was paid under protest and without prejudice to its rights and contentions. Thereafter, the respondent stopped to obtain any supply of coal from the petitioner. The entire claim of the petitioner in this application is on account of arrear balance amount being the differential figure of the transfer price fixed by the Central Government and the ad hoc token price of Rs.500/- upto December 14, 2014 is for Rs.6,30,97,200/-. On the said amount the petitioner has claimed interest @12% per annum. The petitioner has also claimed various other claims on account of penalty for non-lifting the coal and other incidental charges against the respondent. The respondent contemporaneously, during the period when the allotment of the said coal block remained valid did not raise any objection before the Central Government or the said Committee with regard to the fixation of the transfer price of coal at the rate of Rs.1050/- per MT. After the allotment of the said coal block stood cancelled, the respondent filed the suit before the learned Civil Judge (Senior Division), 2nd Court, North 24 Parganas, challenging the fixation of the transfer price by the said committee.In is said suit the respondent, however, did not challenge the validity of the said agreement dated July 12, 2012 stipulating the condition that the transfer price fixed by the Central Government 11 shall be binding on itself and the petitioner. Even in the minutes of the meeting held on December 07, 2012, the parties herein agreed that Rs.500/- per MT has been fixed as the tentative transfer price, pending final decision of the Central Government to decide the transfer price. In the plaint filed in the suit before the learned Civil Judge (Sr. Divn.) 2nd Court at North 24 Parganas, the respondent has accepted that on December 15, 2014 the said Committee fixed Rs.1050/- per MT as the transfer price. Considering all these facts, I find that there is no merit in the contention raised by the respondent that on December 15, 2014 the said committee only recommended and did not fix the transfer price of coal to be supplied to itself by the petitioner of the said coal block.
In the facts of the present case, I am of the opinion that the petitioner has been able to make out a strong prima facie case in support of its claim at least for Rs.6,30,97,200/- on account of the differential amount between the tentative price of coal fixed at Rs.500/- per MT and the transfer price fixed by the said committee of Rs.1050/- per MT.
In support of its relief claimed in this application, it is the case of the petitioner that the respondent has huge outstanding dues to its bankers and other creditors. In this regard, the petitioner relied upon the various news articles published in different newspapers disclosed at pages 208 to 215 of this application and submitted that the respondent's accounts has been declared by its various bankers as NPA. In view of the said newspaper reportings, the petitioner has expressed an apprehension that after December 31, 2017, the respondent is likely to be referred to National Company Law Tribunal as per the provisions of the Insolvency and Bankruptcy Code, 2016 and in the meantime, its immovable properties will be transferred and the money lying in its bank accounts shall be siphoned off.
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As mentioned above, it is the case of the respondent that even if it is referred to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 with the appointment of interim resolution professional, the latter will take over its management and the petitioner's apprehension in this application is totally unfounded.
Although it was strongly urged by the respondent that steps have already been taken by its different bankers to restructure its credit facilities but the respondent has not produced a scrap of document to prove such contentions.
In the facts of the case, as discussed above, I find that the petitioner's apprehension in the instant case that there is every likelihood of the present management of the respondent shall siphon off the funds from the bank accounts of the respondent and intend to transfer the various assets and properties of the respondent is bone fide.
Accordingly, there shall be an interim order in terms of prayer (e) of the application restraining the respondent from operating any of the bank accounts bearing nos.00605002729 and 20014766232 maintained with ICICI Bank and Allahabad Bank, without keeping apart a sum of Rs. 6,30,97,200/-.
Let the respondent file his affidavit in opposition to this application showing cause as to why an order shall not be passed against it in terms of prayer (a) of this application within January 10, 2018. In the said affidavit, the respondent shall also disclose the particulars of its assets and properties and their present status. Reply thereto, if any, be filed within January 17, 2018.
Let the application appear under the heading 'Adjourned Motion' on January 18, 2018.
Urgent certified photocopies of this order, if applied for, be made over to the parties subject to the compliance with all requisite formalities.
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(ASHIS KUMAR CHAKRABORTY, J.) sp2/dg2/sp3/b.pal/sd/akg.