Gujarat High Court
Wind World India Limitedthrough Its ... vs Deputy Conservator Of Forest on 18 October, 2021
Author: Nikhil S. Kariel
Bench: Nikhil S. Kariel
C/SCA/10736/2021 ORDER DATED: 18/10/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10736 of 2021
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WIND WORLD INDIA LIMITEDTHROUGH ITS RESOLUTION
PROFESSIONAL SHAILEN SHAH
Versus
DEPUTY CONSERVATOR OF FOREST & 7 other(s)
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Appearance:
MR RAVI N PAHWA(11493) for the Petitioner(s) No. 1
for the Respondent(s) No. 7,8
MR ISHAN JOSHI ASSISTANT GOVERNMENT PLEADER(1) for the
Respondent(s) No. 1,2,3,4
MR KEYUR GANDHI FOR NANAVATI ASSOCIATES(1375) for the Respondent(s)
No. 5,6
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CORAM:HONOURABLE MR. JUSTICE NIKHIL S. KARIEL
Date : 18/10/2021
ORAL ORDER
1. Heard learned Senior Advocate Shri Navin Pahwa with learned Advocate Shri Ravi. N. Pahwa on behalf of the petitioner, learned Assistant Government Pleader Shri Ishan Joshi on behalf of respondents no. 1 to 4 and learned Advocate Shri Keyur Gandhi for M/s Nanavati Associates on behalf of respondents no. 5 and 6.
2. By way of this petition, the petitioner challenges an order dated 09.02.2021 by the respondent no.1 ordering to seal 98 wind mills of Wind World ( India) Limited of which the petitioner is the Resolution Professional. The Corporate Insolvency Resolution Process ('CIRP' for short) with regard to the company having commenced vide order dated 20.02.2018 by the learned Adjudicating Authority, National Company Law Tribunal Ahmedabad, ('NCLT' for short).
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3. Learned Senior Advocate Shri Navin Pahwa for the petitioner submits that along with the order dated 09.02.2021 a demand notice dated 19.07.2021 calling upon the petitioner to pay an amount of Rs. 1,86,21,034/- had been issued whereas both the orders as well as the demand notice are challenged by way of this petition.
3.1. Learned Senior Advocate Shri Navin Pahwa would submit that the petitioner is engaged in the business of manufacture and sale of wind turbine converters and in providing turn key solutions to its customers. The petitioner submits that in response to an application made by the petitioner to the various Department of State of Gujarat for diversion of about 120 hectares of forest land for development of ecofriendly wind farm project, the Central Government had vide its communication dated 20.12.2011 granted in principal approval subject to fulfillment of certain conditions which includes condition no. (6) which reads as under:
"(6) The State Government shall charge the cost of developing medicinal plants, garden wherever feasible in 65-70% lease out area and soil conservation work at the user agency's cost."
3.2 The State Government vide communication dated 18.02.2012 had furnished a compliance report in respect of conditions stipulated in the principal approval dated 20.12.2011 and based upon such compliance report, the Government of India granted final approval vide order dated 06.03.2012 and in view of the said final approval the State Government had entered into lease deed dated 26.03.2012 with the petitioner for lease of 120.7496 hectares of forest land for a period of 30 years. Pertinent here would be to mention that condition no. (6) of the lease deed mandated that the Government of Gujarat shall charge the cost of developing medicinal plants garden wherever feasible in 65-70% of the leased area and soil Page 2 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 conservation work at the user agency's cost as per condition no.(6) of lease deed which is reproduced hereinabove.
3.3 It appears that originally vide demand notice dated 15.06.2016 respondent no.1 called upon the petitioner company to pay an amount of Rs. 1,52,38,398/- towards cost of developing medicinal plants garden wherever feasible in 65-70% of the leased out land as per condition no.(6) of the lease deed.
3.4 The company had not responded to the same and in the meanwhile vide an order dated 20.02.2018 the petitioner company was admitted into 'Corporate Insolvency Resolution Process (CIRP)' and the Resolution Professional through whom the petition is preferred came to be appointed as Interim Resolution Professional of the company and later on he came to be appointed as Resolution Professional. It would be further pertinent to mention that the Adjudicating Authority vide order dated 20.02.2018 had also ordered moratorium under Section 13(1)(a) of the Insolvency and Bankruptcy Code, 2016 ( for short 'I.B.Code') prohibiting the aspects as mentioned in Section 14(1) of the I.B. Code. It appears that thereafter the public announcement to the Creditors of the company had been issued by the Interim Resolution Professional calling upon the Creditors of the company to submit proof of their claims on or before March 8, 2018 to the Interim Resolution Professional. It appears that the respondent State had not responded to such public announcement whereas no claim had been filed by the respondent no.1.
3.5 It further appears that the another demand notice had been issued by the respondent no.1 to the company seeking payment of amount of Page 3 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 Rs.1,66,50,577/- on 12.03.2019. Another demand notice had been issued by the respondent no.1 on 15.04.2019 and whereas finally vide order dated 09.02.2021, respondent no.1 had directed respondents no. 2 to 4 to seal 98 wind mills/turbines on the ground of breach of condition no. (6) of the lease deed. It appears that the Resolution Professional in response to the communication dated 09.02.2021 submitted a letter to the respondent no.1 on 18.07.2021 inter alia bringing to the notice of respondent no.1 the fact of the Resolution Professional having been appointed by the order of the NCLT and whereas moratorium under Section 14 of the I.B. Code is in force and whereas the CIRP of the petitioner company was sub judice as same was pending before National Company Appellate Tribunal, New- Delhi Bench (NCLAT). It further appears that again a demand notice dated 19.07.2021 for sum of Rs. 1,86,21,034/- had been issued by respondent no.1. The order dated 09.02.2021 and demand notice dated 19.07.2021 are under challenge in the present petition.
4.0 Learned Senior Advocate Shri Navin Pahwa for the petitioner would submit that having regard to the scheme of the Act, more particularly since the CIRP has commenced and moratorium having been issued the notice for sealing as well as the demand notice would fall under the ambit of the same and whereas respondent no.1 as per scheme of the Act is prohibited from either issuing demand notice or directing sealing of the wind mill turbine generators of the petitioner company. Learned Senior Advocate Shri Pahwa draws attention of this Court to Section 14 of the I.B. Code which reads as thus:
Section 14: Moratorium "14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:--Page 4 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021
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(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order till thecompletion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.
4.1 Learned Senior Advocate submits that moratorium prohibits the institution of suits or continuation of proceedings against the corporate debtor and furthermore the scheme of the Act also envisages that there shall not be any encumbrance of any assets of the corporate debtor. Learned Senior Advocate further draws attention of this Court to Section 2(iii) of the Forest ( Conversation ) Act, 1980 to show that the lease deed issued by the State Government is under the said section and whereas learned Senior Advocate draws attention of this Court to Section 238 of the I.B. Code to submit that the said section envisages that the provisions of the I.B. Code Page 5 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 shall have effect, notwithstanding anything inconsistent therewith contained in any other law i.e. to say that the provision of the Code would override other laws insofar as applicability of provisions contained therewith.
4.2 Learned Senior Advocate would also submit that the demand raised by respondent no.1 would fall under the term 'operational debt' as defined under Section 5(21) of the I.B Code and would submit that since the amount claimed by respondent no.1 is an 'operational debt' and since the Corporate Insolvency Resolution Process (CIRP) has commenced and moratorium is issued, respondent no.1 is prohibited from either continuing any proceedings or in any manner encumbering the assets of the corporate debtor.
4.3 Learned Senior Advocate has relied upon the judgement of the Hon'ble Supreme Court in case of P. Mohanraj and others vs. Shah Brothers Ispat Ltd- (2021) SCC Online 152 as well as the decision in case of Anand Rao Korada, Resolution Professional vs. Varsha Fabrics Private Limited and other- (2020) 14 SCC 198.
5.0 As against the same, learned Assistant Government Pleader Shri Ishan Joshi would submit that the entire argument of the petitioner is based on the presumption that the impugned order would be barred in view of Section 14 of the I.B. Code, which according to the learned Assistant Government Pleader is an erroneous argument. It is submitted that the claim of the respondent no.1 would not fall under the definition of 'operational debt' since the claim is not based upon any 'goods' or 'services' and whereas since the dues are arising out of lease agreement the same also would not be covered under the term "arising under any law for time being Page 6 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 in force", since the lease cannot be stretched to mean that the same is a law.
Learned Assistant Government Pleader would also submit that the authorities should also not fall under the definition of operational creditor therefore the dues could not be stated to be operational debt.
5.1 Learned Assistant Government Pleader has further submitted that while Section 5(20) states the term 'operational creditor' meaning any person to whom any operational debt is owed and includes any person to whom such debt has been assigned or transferred, whereas according to learned Assistant Government Pleader the word 'person' which is defined under Section 23 of Scheme (3) does not include the word 'authorities" and it would not be falling under the purview of the term 'operational creditor' therefore, the amount due to the government cannot be termed as 'operational debt'. Hence according to the learned Assistant Government Pleader the dues being outside the purview of the I.B. Code, the moratorium issued as per Section 14 of the I.B. Code would not be applicable upon the authorities and hence according to the learned Assistant Government Pleader the petition may be rejected.
6. Having heard learned Advocates for the parties, at this stage it would be relevant to consider whether the applicant has made out a prima facie case for interference more particularly with regard to the order dated 09.02.2021 and demand notice dated 19.07.2021. For arriving at such a conclusion a brief conspectus of the applicable law and their inter play requires to be discussed.
7. It appears that definition of 'operational debt' as defined at Section 5(21) of the I.B.Code which includes the dues arising under any law for the Page 7 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 time being in force which is payable to the Central Government, any State Government or any local authority. While it is true that the debt due to the respondent i.e due to the State Government is under a lease agreement between the State Government and the petitioner company but what cannot be ignored is that the lease had been entered into in exercise of powers available to the State Government under Section 2(iii) of the Forest (Conversation) Act which inter alia envisages assignment of forest land by way of lease to organization not owned, managed or controlled by Government. Furthermore Section (14)(d) of the I.B. Code inter alia envisages moratorium against recovery of any property by an owner of lessor where such property is occupied by or in the possession of the corporate debtor. Reading Section 5(21) with Section 14 of the Act would lead to prima facie conclusion that while the State Government is claiming payment of dues under a lease entered into in exercise of powers available to the State Government under the Forest ( Conversation) Act, 1980 therefore prima facie, the State Government as a lesser would be prohibited by the moratorium to take any action against the corporate debtor. Reference to the decision of the Hon'ble Supreme Court in case of P. Mohanraj and others vs. Shah Brothers Ispat Ltd (supra) would be profitable, where the Hon'ble Court had observed with regard to a proceeding under Section 138 of the Negotiable Instruments Act, as under:
"25. It can thus be seen that regard being had to the object sought to be achieved by the IBC in imposing this moratorium, a quasi-criminal proceeding which would result in the assets of the corporate debtor being depleted as a result of having to pay compensation which can amount to twice the amount of the cheque that has bounced would directly impact the corporate insolvency resolution process in the same manner as the institution, continuation, or execution of a decree in such suit in a civil court for the amount of debt or other liability. Judged from the point of view of this objective, it is impossible to discern any difference between the impact of a suit and a Section 138 proceeding, insofar as the corporate debtor is concerned, on its getting the necessary breathing space to get back on its feet during the corporate insolvency resolution process. Given this fact, it is difficult to accept that noscitur a sociis Page 8 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021 C/SCA/10736/2021 ORDER DATED: 18/10/2021 or ejusdem generis should be used to cut down the width of the expression "proceedings" so as to make such proceedings analogous to civil suits..
26. Viewed from another point of view, clause (b) of Section 14(1) also makes it clear that during the moratorium period, any transfer, encumbrance, alienation, or disposal by the corporate debtor of any of its assets or any legal right or beneficial interest therein being also interdicted, yet a liability in the form of compensation payable under Section 138 would somehow escape the dragnet of Section 14(1). While Section 14(1)(a) refers to monetary liabilities of the corporate debtor, Section 14(1)(b) refers to the corporate debtor's assets, and together, these two clauses form a scheme which shields the corporate debtor from pecuniary attacks against it in the moratorium period so that the corporate debtor gets breathing space to continue as a going concern in order to ultimately rehabilitate itself. Any crack in this shield is bound to have adverse consequences, given the object of Section 14, and cannot, by any process of interpretation, be allowed to occur."
7.1 Having regard to the observations of the Hon'ble Supreme Court and having regard to the fact that the I.B. Code inter alia envisages the resolution of insolvency of corporate process in a time bound manner for maximization of value of assets of the persons and whereas in view of the fact that the CIRP process has been commenced moratorium has been issued by the Adjudicating Authority, prima facie this Court is of the opinion that the respondent authorities and State Government could not have ignored the prohibition as envisaged under the moratorium.
8.0 Having regard to the discussion above this Court is of the opinion that prima facie case for interference is made out and hence the following order is passed.
9.0 Issue Rule returnable on 29.11.2021. Interim relief in terms of para 11(B) is granted.
Page 9 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021C/SCA/10736/2021 ORDER DATED: 18/10/2021 10.0 It is clarified that it would be open for the State Government /respondents no. 1 to 4 to take appropriate action in accordance with the provisions of I.B. Code for recovery of the dues to them as per lease deed dated 26.03.2012.
(NIKHIL S. KARIEL,J) niru Page 10 of 10 Downloaded on : Thu Oct 21 00:00:04 IST 2021