The NCLAT clarified the treatment of Annual Mine Closure Costs (AMCC) as corporate assets under the IBC, upholding the principle of equal treatment of creditors.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka reviewed an appeal and observed that the Annual Mine Closure Cost (AMCC) constitutes part of the Corporate Debtor's assets and is subject to the provisions of the Insolvency and Bankruptcy Code (IBC), overriding any claims that it is held in trust for public welfare. Furthermore, the court affirmed that all claims, including those from governmental authorities regarding AMCC dues, must be addressed within the Corporate Insolvency Resolution Process (CIRP), ensuring equitable treatment of creditors.
The present appeal arose under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), following an order dated 06.02.2024, passed by the Adjudicating Authority in I.A. No. 4460 of 2023, concerning CP (IB) No. 1807 of 2018. The Appellant, seeking intervention from the Ministry of Coal and the Coal Controller regarding the withdrawal of mine opening permission for the Marki Mangli – I Coal Block, challenged directives from the Adjudicating Authority that required the Appellant to set aside the Annual Mine Closure Cost (AMCC) and held them personally liable for the disposal of mined coal in accordance with the Mine Agreement. This appeal arose from the backdrop of the Corporate Debtor's failure to deposit the AMCC due to operational issues, including the impacts of the COVID-19 pandemic.
The proceedings commenced with the Ministry of Coal auctioning coal mines under the Coal Mines (Special Provisions) Act, 2015, leading to the Corporate Debtor being declared the Successful Bidder and subsequently entering into a Coal Mine Development and Production Agreement. However, non-compliance with the terms of this agreement, particularly the failure to deposit the AMCC for the financial year 2018-19, prompted the initiation of a Corporate Insolvency Resolution Process (CIRP) after a Section 7 application by the Bank of Baroda. The Adjudicating Authority's subsequent actions, including the termination of the Coal Mine Development and Production Agreement and the withdrawal of mine opening permission, were contested by the Appellant, leading to the appeal.
During the hearings, the NCLAT scrutinized the Adjudicating Authority's stance on the treatment of AMCC. The Adjudicating Authority had classified the AMCC as funds not belonging to the Corporate Debtor and mandated their segregation, citing their necessity for compliance with mining obligations and public welfare. The Appellant, however, argued that the AMCC constituted an operational debt related to mine-closure responsibilities, while the Respondents contended that it served as a trust fund aimed at rehabilitating coal mine land. The NCLAT observed the absence of evidence supporting the classification of AMCC as a trust fund, concluding that it should be considered part of the Corporate Debtor's assets and subject to the provisions of the IBC.
Moreover, the NCLAT addressed the argument from the Respondents regarding the powers of the Coal Controller’s Organisation (CCO) under the Colliery Control Rules, 2004, and the MMDR Act, asserting that these provisions could not override the IBC. The court clarified that, upon the imposition of a moratorium following the admission of the Corporate Debtor into CIRP, no claims could be pursued outside the resolution framework, emphasizing that all claims, including those from governmental authorities, should be presented within the CIRP. This reaffirmation of the IBC's overarching authority highlighted the need for equal treatment among creditors and reaffirmed that AMCC dues constituted a CIRP cost.
Ultimately, the NCLAT allowed the appeal, modifying the earlier order by nullifying the directives that excluded AMCC from the CIRP and expunging personal liability imposed on the Appellant. The court emphasized that these findings should be factored into the approval of the resolution plan, while the remaining portions of the Adjudicating Authority’s order were upheld. This ruling not only clarified the status of the AMCC in insolvency proceedings but also reinforced the legislative intent of the IBC to prioritize stakeholder interests and ensure equitable treatment in the insolvency resolution process.
Mr. Abhijeet Sinha, Sr. Advocate with Mr. J. Rajesh, Mr. Dhrupad Vaghani, Mr. Jaitegan Khurana and Md. Arsalan Ahmed, Advocates represented the Appellant.
Ms. Shiva Lakshmi, CGSC, Mr. T. Hari Hara Sudhan, Advocates appeared for UOI, Ministry of Coal.
Mr. Nitin Bindal, Advocate appeared for Respondent No. 2.
Mr. Arpan Behl, Mr. Aakash Sharma, Advocates represented Respondent No. 3/CoC.
Mr. Krishnendu Datta, Sr. Advocate with Mr. Madhav Kanoria, Ms. Srideepa Bhattacharyya, Advocates appeared for the intervener/ SRA.
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