Gujarat High Court
Gail (India) Ltd Gas Authority Of India ... vs Essar Steel Ltd on 30 March, 2021
Equivalent citations: AIRONLINE 2021 GUJ 647
Author: Vineet Kothari
Bench: Vineet Kothari, Biren Vaishnav
C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2021
In
R/LETTERS PATENT APPEAL NO. 1618 of 2005
With
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2015
In
R/LETTERS PATENT APPEAL NO. 1618 of 2005
With
R/LETTERS PATENT APPEAL NO. 1618 of 2005
In
R/SPECIAL CIVIL APPLICATION NO. 3348 of 2001
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GAIL (INDIA) LTD & 2 other(s)
Versus
ESSAR STEEL LTD & 2 other(s)
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Appearance:
MR VISHWAS K SHAH(5364) for the Appellant(s) No. 1,2,3
M/S TRIVEDI & GUPTA(949) for the Respondent(s) No. 3
MR DEVANG VYAS(2794) for the Respondent(s) No. 2
MS KHYATI CHUG for MR. PARTH H BHATT(6381) for the Respondent No. 2
MR ASHIM SOOD AND MR RAHEEL PATEL, COUNSEL FOR NANAVATI
ASSOCIATES(1375) for the Respondent(s) No. 1
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CORAM: HONOURABLE DR. JUSTICE VINEET KOTHARI
and
HONOURABLE MR. JUSTICE BIREN VAISHNAV
Date : 30/03/2021
ORAL ORDER
(PER : HONOURABLE DR. JUSTICE VINEET KOTHARI)
1. The Applicant - Arcelor Mittal Nippon Steel India Limited (Formerly known as Essar Steel India Limited) has filed this Civil Application No.1 of 2021 in Letters Patent Appeal No.1618 of Page 1 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 2005 in Special Civil Application No.3348 of 2001 seeking dismissal of the Letters Patent Appeal filed by M/s. GAIL India Limited, in view of the subsequent developments which have taken place in the matter.
2. The Company - M/s. Essar Steel Limited had filed Special Civil Application No.3348 of 2001 against the Respondent - Union of India and GAIL (India) Limited for quashing and setting aside their Demand Notice dated 1.5.2001 and further seeking disconnection of supply of Gas, for nonpayment of Transportation charges by Essar Steel Limited which Special Civil Application came to be allowed by the learned Single Judge by quashing and setting aside their Demand Notice dated 1.5.2001 and it was held that the Petitioner - Essar Steel Limited is not liable to pay the Transportation charges for 0.35 MMSMDC supply of gas along the exHBJ pipeline for the supply from landfall point. It was further held that GAIL is required to follow the Pricing Orders dated 31.12.1991, 18.9.1997 and 30.9.1997.
3. The Petitioner - Essar Steel Limited (later on name changed to Arcelor Mittal Nippon Steel India Limited) was also held entitled to get all the consequential benefits in pursuance of the implementation of Pricing Orders of Government of India Page 2 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 including 15% rebate on fall back basis as per the agreement. It was further observed by the learned Single Judge that the metering charges should be proportionate to the expenses incurred by Respondent No.3 - GAIL India Limited and it should not be disproportionate.
4. Aggrieved by the said order of the learned Single Judge, GAIL India Limited filed the present Letters Patent Appeal No.1618 of 2005 which was pending consideration by the Division Bench for last 20 years.
5. During the pendency of this litigation, it appears that the proceedings under new and overriding law - the Insolvency and Bankruptcy Code, 2016 (IBC) were taken against the Petitioner Company - Essar Steel Limited and the NCLAT finally passed the following directions vide its final judgment dated 4.7.2019 which are quoted below for ready reference:
"6. By its final judgment dated 04.07.2019, the NCLAT held that:
(i) In a resolution plan there can be no difference between a financial creditor and an operational creditor in the matter of payment of dues, and that therefore, financial creditors and Page 3 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 operational creditors deserve equal treatment under a resolution plan. Accordingly, the NCLAT has redistributed the proceeds payable under the approved resolution plan as per the method of calculation adopted by it so that all financial creditors and operational creditors be paid 60.7% of their admitted claims;
(ii) Securities and security interest is irrelevant at the stage of resolution for the purposes of allocation of payments, thereby directing that each financial creditor (whether secured or unsecured) with a claim equal to or more than INR 10 lakhs be paid 60.7% of its admitted claim irrespective of their security interest;
(iii) Operational creditors by definition have separate classes within themselves and can be classified into subclasses for the purpose of distribution (while rejecting any classification amongst the financial creditors) on the basis of the admitted amounts thereby directing that operational creditors with a claim of equal to or more than INR 1 crore be paid 60.268% of their admitted claims.
(iv) Certain additional claims of operational creditors (some of which were highly belated and/or without sufficient proof) were admitted, such that the admitted operational debt of Page 4 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 approximately INR 5,058 crores at the time of the approval of the approved resolution plan became an operational debt of approximately INR 19,719.20 crores.
(v) The profits generated by the corporate debtor during the Corporate Insolvency Resolution Process (hereinafter referred to as the "CIRP") would be distributed equally amongst the financial creditors and operational creditors of the corporate debtor.
(vi) A subcommittee or core committee cannot be constituted under the Code, being a foreigner thereto. The Committee of Creditors alone are to take all decisions by themselves.
(vii) The Committee of Creditors has not been empowered to decide the manner in which the distribution is to be made between one or other creditors, as there would be a conflict of interest between financial and operational creditors, financial creditors favouring themselves to the detriment of operational creditors.
(viii) Section 53 of the Code cannot be applied during the corporate resolution process but will apply only at the stage of liquidation.
(ix) Claims that have been decided by the resolution professional and affirmed by the Adjudicating Page 5 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 Authority or the Appellate Tribunal are final and binding on all creditors. However, claims which have not been decided by the Adjudicating Authority or the Appellate Tribunal on merits may be decided by an appropriate forum in terms of Section 60(6) of the Code.
(x) Financial Creditors in whose favour guarantees were executed, as their total claim stands satisfied to the extent of the guarantee, cannot reagitate such claims as against the principal borrower."
6. Against the said order of the NCLAT dated 4.7.2019, the matter was taken up by the Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta before the Hon'ble Supreme Court where a ThreeJudges Bench of the Hon'ble Supreme Court disposed of the said Civil Appeal No.876667 of 2019 (2019 SCC OnLine SC 1478), setting aside the order of NCLAT dated 4.7.2019 and held as under:
"88. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority / Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Page 6 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, the NCLAT judgment must also be set aside on this count."
7. Learned counsel appearing for the Applicant - Arcelor Mittal Nippon Steel India Limited (Formerly known as Essar Steel India Limited) Mr. Ashim Sood submitted that as per the aforesaid para 88 of the order of the Hon'ble Supreme Court, the 'undecided' claims of the Appellant - GAIL India Limited of transportation charge was extinguished as per Section 30 of the IBC as the Resolution Applicant - Arcelor Mittal Nippon Steel India Limited was required to start on a fresh slate as permitted Page 7 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 in the Resolution Scheme duly approved by the Committee of Creditors, which received the imprimatur or the seal of approval of the Hon'ble Supreme Court by the aforesaid judgment dated 5.11.2019, therefore, the present Letters Patent Appeal filed by GAIL India Limited against the order of the learned Single Judge, by which the learned Single Judge held in favour of Essar Steel India Limited that GAIL India Limited was not entitled to get any such transportation charges, is not required to be adjudicated or heard on merits as the said 'undecided claim' stands extinguished.
8. He further submitted that before the Resolution Professional under provisions of the Insolvency and Bankruptcy Code, 2016, two claims were made by GAIL India Limited viz. one for supply of gas and another for payment of transportation charges. They also gave a Note in those pleadings that the since the matter was pending before the High Court by way of aforesaid Special Civil Application No.3348 of 2001, therefore, they were not pressing their claim for such transportation charge to be decided before the NCLT or NCLAT. By way of Civil Appeal No.6269 of 2019 filed by GAIL India Limited before the Hon'ble Supreme Court, they again sought to raise the issue with regard Page 8 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 to the claim of transportation charges and Mr. Ashim Sood, learned counsel appearing for the Applicant - Arcelor Mittal Nippon Steel India Limited drew attention to para 130 of the judgment of the Hon'ble Supreme Court dated 15.11.2019 which is quoted below for ready reference:
"130. So far as Civil Appeal No.6269 of 2019 is concerned, we have perused paragraphs 83, 84 and 196 of the impugned NCLAT judgment and find force in the contention of the Appellant that there has been an error in the impugned NCLAT judgment in as much as it notes the claim amount, as admitted, as being a sum of INR 124.88 crores, but later in the same judgment notes the said amount as INR 2.47 crores based on a chart submitted by the resolution professional. This chart submitted by the resolution professional specifies the amount of INR 2.47 crore (added after the NCLT judgment dated 08.03.2019), which is in addition to the amount of INR 124.88 crores already admitted by the resolution professional (For supply of Gas, not for Transportation charge). Therefore, the NCLAT has erred in noting INR 2.47 crore amount as the amount of the Appellant's claim, and this part of the judgment also deserves to be set aside. Thus, the claim of the appellant shall be the claim as admitted and registered by the resolution professional. This apart, we find no merit in the submission of the Appellant Page 9 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 with respect to the sum of INR 121.72 crores as the same has been rightly rejected by the NCLAT in view of the fact that the said claim was filed after the completion of the CIRP period. However, the NCLAT's judgment inasmuch as it left it open for the Appellant to pursue the matter in terms of Section 60(6) of the Code deserves to be aside in terms of this judgment. This Appeal is thus partly allowed."
9. Mr. Ashim Sood, learned counsel for Arcelor Mittal Nippon Steel India Limited, therefore, submitted that the issue with regard to the Transportation charges claimed by GAIL India Limited against Essar Steel India Limited achieved a finality and the same stood extinguished and the said claim cannot now be adjudicated or decided in this Letters Patent Appeal filed by GAIL India Limited, in view of the operation of law under provisions of the Insolvency and Bankruptcy Code, 2016.
10. Mr. Vishwas Shah, learned counsel for the Appellant - GAIL India Limited, however, urged before us with all vehemence at his command that since the learned Single Judge has decided (rejected) the claim of the Appellant - GAIL India Limited one way or the other, therefore, the present Letters Patent Appeal which is a continuation of the writ proceedings before the learned Single Judge, deserves to be decided on merits and the Page 10 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 claim which was never pressed before or adjudicated by any authority under provisions of the Insolvency and Bankruptcy Code, 2016 , viz. either the Resolution Professional or NCLT the same cannot be deemed to have been rejected or adjudicated by any of these authorities and therefore, it is open to the Appellant
- GAIL India Limited to press the present Letters Patent Appeal on merits.
11. Having heard learned counsel for the parties, we find considerable force in the submissions made by Mr. Ashish Sood, learned counsel appearing for the Applicant - Arcelor Mittal Nippon Steel India Limited (Formerly known as Essar Steel India Limited) who is the Respondent in the present Letters Patent Appeal which was filed by GAIL India Limited and we cannot agree with the submissions made by Mr. Vishwas Shah, learned counsel appearing for GAIL India Limited.
12. We find that the present Letters Patent Appeal is not required to be decided on merits by us. The Appellant - GAIL India Limited received the payment against the supply of Gas to Essar Steel Limited to the extent specified in the sanctioned scheme under provisions of the Insolvency and Bankruptcy Code, 2016 by NCLT/NCLAT which was finally approved by the Hon'ble Page 11 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022 C/LPA/1618/2005 GAIL (INDIA) LTD v. ESSAR STEEL LTD ORDER DT. 30.3.21 Supreme Court also, but so far as transportation charges is concerned, it depended only upon the claim made or adjudication sought by filing of the writ petition before the learned Single Judge. Halfheartedly or indirectly, it also sought to keep its said claim of Transportation charge alive before the Authorities under provisions of the new and overriding law viz. the Insolvency and Bankruptcy Code, 2016 also by putting a Note in its pleadings that though they have raised their claim with regard to Transportation charges also against Essar Steel Limited, but they are not pressing the said claim or seeking its adjudication before such Authority, viz. Resolution Professional or NCLT, because their matter (Special Civil Application No.3348 of 2001) is pending in the High Court.
13. While such claim of Transportation charges never came to be adjudicated claim by any authority under provisions of the Insolvency and Bankruptcy Code, 2016 and which acquired a finality at the hands of the Hon'ble Supreme Court by the aforesaid judgment dated 15.11.2019, the said claim was rejected by the learned Single Judge against which GAIL India Limited filed the present Letters Patent Appeal No.1618 of 2005 which is pending in this Court for last 15 years.
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14. We are of the considered opinion that much water has flown not only under the Bridge but over the Bridge also, and the claim made by the Appellant - GAIL India Limited with regard to the transportation charges against Essar Steel India Limited is not only infructuous claim but a rather dead claim now at this stage.
15. The proceeding under provisions of the Insolvency and Bankruptcy Code, 2016 has acquired finality with the aforesaid judgment of the Hon'ble Supreme Court dated 15.11.2019, a complete copy of which is placed on our record with the present Civil Application No.1 of 2021 filed by Arcelor Mittal Nippon Steel India Limited which clearly shows a detailed discussion of the entire scheme and the provisions of the Insolvency and Bankruptcy Code, 2016 also and vide the aforesaid quoted para hereinabove, it clearly shows that 'undecided claim' of the operational creditor (the Appellant - GAIL India Limited) stands extinguished by the said Scheme of Rehabilitation or Revival approved by the Committee of Creditors which received the imprimatur or seal of approval by the Hon'ble Supreme Court by setting aside the directions of the NCLAT in its final judgment dated 4.7.2019 quoted above.
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16. Thus, we are of the considered opinion that the present Civil Application No.1 of 2021 in Letters Patent Appeal No.1618 of 2005 filed by Arcelor Mittal Nippon Steel India Limited (Formerly known as Essar Steel India Limited) deserves to be allowed and Letters Patent Appeal No.1618 of 2005 filed by GAIL India Limited against erstwhile Essar Steel India Limited deserves to be dismissed.
17. The Letters Patent Appeal No.1618 of 2005 is accordingly dismissed and Civil Application No.1 of 2021 accordingly stands allowed. Civil Application No.1 of 2015 also stands disposed of. No costs.
(DR. VINEET KOTHARI,J) (BIREN VAISHNAV, J) Bharat Page 14 of 14 Downloaded on : Thu Jan 13 13:42:02 IST 2022