The Delhi High Court emphasized that insisting on the clearance of past dues contradicts the rehabilitative intent of the Insolvency and Bankruptcy Code (IBC)
The ruling of the court went in favor of OCL Iron and Steel Ltd. striking down an earlier order made on May 22, 2024, which had barred the Petitioner from taking part in coal mine auction proceedings due to non-payment of debts owed.
Further stated that IBC is meant for corporate debtors who want their past debts erased so they can start over again. It also adhered to the principle that any claims not specifically authorized during the process of CIRP cannot be raised later once a resolution plan is approved by all parties involved in the case.
It concluded that Respondent had no powers to assess fines or demand money from new managers related to previous managers’ unpaid bills.
Therefore, it is now clear that Petitioner meets the eligibility criteria for participation in the coal mine auctioning process and the record should be expunged including all outstanding applications. This ruling strengthens IBC’s main aim which allows businesses to operate without hindrance by old unpaid dues.
FACTS
OCL Iron and Steel Ltd., established in 2006 as a coal-based direct reduced iron production unit in Orissa, underwent a Corporate Insolvency Resolution Process (CIRP).
During this process, certain outstanding dues attributed to the erstwhile management were identified. Subsequently, the Respondent issued a decision debarring the Petitioner from participating in coal mine auctions due to these unpaid dues.
The Resolution Professional challenged this debarment before the National Company Law Tribunal (NCLT), arguing that the Performance Bank Guarantee (PBG) could not be enforced due to the COVID-19 pandemic.
The auction for the Lalgarh South coal mine was concluded in favor of another bidder, rendering the Petitioner’s request for relief moot and leading to the withdrawal of the petition on July 10, 2023. A challenge to the Termination Order is pending before the National Company Law Appellate Tribunal (NCLAT). The Respondent contended that the NCLT had disallowed the Petitioner’s request for a waiver of claims, implying that the claims were still valid.
Case Details
OCL Iron and Steel ltd vs Union of India
Court: Delhi High Court
Case Number: 8316/2024 & CM APPLS. 34076/2024, 38159/2024
Judges: JUSTICE SANJEEV NARULA
Order Date: 26/07/2024
