IDL Explosives Private Limited vs M/s Bengal Emta Coal Mines Limited

ORDER

a)

Bengal Emta Coal Mines Limited ("BECML" or the "Corporate Debtor") is a Joint Venture Company incorporated with West Bengal Power Development Corporation Limited ("WBPDCL"), Durgapur Projects Limited ("DPL"), and Emta Coal Limited, for the specific purpose of developing and operating coal mines allotted to the WBPDCL

b)

The Corporate Debtor has been undergoing Corporate Insolvency Resolution Process ("CIRP") since 30th June, 2022, with the present Deponent acting as the Resolution Professional.

c)

The Hon'ble Bench, during the hearing on the pending resolution plan, has directed the Resolution Professional to file an affidavit setting out the factual position with respect to the receivable shown from WBPDCL and other debtors, amounting to approximately Rs. 197.90 Crore, as appearing in the books of the Corporate Debtor. This affidavit is filed in compliance with that direction.

d)

As per the financial statements of the Corporate Debtor for the year ended 31.03.2022, the total balance under the head of "Sundry Debtors" stands at approximately Rs. 197.90 Crore. The breakup of this amount is as follows:

i)

The single largest component of the above receivable of approximately Rs. 194.29 Crore pertains to WBPDCL. Rs. 3.48 Crore is receivable from DPL also. It is relevant to note that both WBPDCL and DPL are equity Shareholders of the CD holding 20.01% and 5.99% shareholding in BECML respectively, and are therefore related parties of BECML. WBPDL is a public sector undertaking of Government of West Bengal.

e)

Throughout its operational period, all coal extracted from the coal mines was supplied to WBPDCL at its various Thermal Power plants situated in the state of West Bengal. No coal was supplied/sold to any other private parties. The invoices were raised on WBPDCL against each such supply along with transportation charges, and the corresponding receivables have been carried in the books accordingly.

f)

The debtor balances with WBPDCL have remained unchanged since 2017. No payments have been received against these outstanding amounts during that period. This is directly attributable to the fact that the Corporate Debtor has had no operations whatsoever since 1st April 2015, following the Hon'ble Supreme Court's order cancelling the coal block allocations.

g)

A reconciliation statement was prepared between WBPDCL and BECML as on 31.01.2015. That remains the last reconciliation statement available on record.

h)

During the course of this CIRP, the Resolution Professional made efforts to obtain updated reconciliation statements from WBPDCL. However, WBPDCL was unable to furnish them. The reason communicated was that the relevant records pertain to transactions conducted at various thermal power stations spread across the state, and that these old records lying at respective plants have become extremely difficult to trace and retrieve.

i)

In light of the above, the Resolution Professional had filed an application under Section 19(2) of the Code against WBPDCL, seeking cooperation in carrying out a proper reconciliation of the outstanding balance. Unfortunately, the reconciliation could not be accomplished, and the application has since been disposed of.

j)

Based on whatever reconciliation records are available, there are two major discrepancies that account for a substantial portion of the outstanding balance:

i.

) Sales pertaining to the financial year 2014-15, amounting to approximately Rs. 399.30 Cr, have not been acknowledged or considered by WBPDCL in their records. The Corporate Debtor's books reflect these as supplied and invoiced, but WBPDCL does not appear to have accounted for them on their side.

ii) There is a separate, older dispute involving a sum of approximately Rs. 223.41 Crore. This appears to relate to earlier transactions and remains unresolved between the parties.

These can be corroborated from the copy of reconciliation statements along with a summary attached herewith as Annexure -A

k)

It is also worth placing on record that WBPDCL's position, as communicated to this Resolution Professional, is that it is actually the Corporate Debtor who owes money to WBPDCL and not the other way around. This position is in direct contradiction to what the books of BECML reflect, and the matter remains. unresolved in the absence of a complete and verified reconciliation.

l)

In view of the above, the true and recoverable quantum of the receivable from WBPDCL cannot be ascertained with certainty and since these pertains to very old records, it is difficult to calculate the actual figure. The Resolution Professional has made reasonable efforts in this regard, including seeking cooperation from WBPDCL and filing a formal application under Section 19(2) but no conclusive amount could be determined. The present affidavit is filed to place these facts fully and transparently before the Hon'ble Bench.

m)

In this regard a writ petition has been filed by the Corporate Debtor in the year 2015 along with its parent company against WBPDCL and others which is pending before the Hon'ble High Court of Calcutta. The copy of case status page from the website of Hon'ble High Court is attached herewith as Annexure- B.

Regarding Compensation Cess and Additional Levy :-

a)

By way of its Order dated 24th September 2014, the Hon'ble Supreme Court of India found that the allocation of coal blocks made by the Central Government was arbitrary and illegal, with the cancellation taking effect from 31st March 2015. All operations ceased accordingly on 1st April 2015, and the Corporate Debtor has had no mining activity since that date. A copy of Order of the Hon'ble Supreme Court is attached herewith as Annexure -C.

b)

By the same Order dated 24.09.2014, the Hon'ble Supreme Court has imposed Date additional levy on the allottees (40 Coal Blocks) as compensatory penalty @Rs. OF 1965/- per metric ton on the basis of a report of CAG. On the basis of this Judgement of Hon'ble Supreme Court, the Ministry of Coal demanded from the Corporate Debtor the payment of additional levy by virtue of its letter dated 12.05.2015 in respect of various coal blocks operated by the CD. Copy of the letters is attached as Annexure D.

c)

In reply to these demand notices the Corporate Debtor has replied to the of the Coal Controller and also to WBPDCL denying its liability towards additional levy as the coal blocks were allotted to WBPDCL only and adding the name of the CD by virtue of a deeming provision of Coal Mines (Special Provisions) Act, 2015) that too by an Ordinance (converted to Act later) after the Supreme Court judgement is totally arbitrary and unconstitutional. Copy of the letter given as above is attached as Annexure E.

d)

Bengal EMTA Coal Mines Limited (BECML) acted as the mine developer and operator for captive coal blocks allotted to West Bengal Power Development Corporation Limited (WBPDCL). The coal extracted from these blocks was entirely consumed by WBPDCL for power generation. BECML did not have any right over the coal nor did it commercially exploit or sell the same. Pursuant to the judgment dated 24.09.2014 of the Hon'ble Supreme Court, an Additional Levy of ₹295 per metric tonne of coal extracted was imposed. The levy, as per the judgment, was directed against the prior allottees of the coal blocks.

In the present case, WBPDCL was the prior allottee of the coal blocks. However, by virtue of a subsequent amendment introducing a deeming fiction under the Coal Mines (Special Provisions) legislation, BECML was treated as the "Prior Allottee" solely because the mining lease had been executed in its favour for operational purposes. Consequently, the financial burden of the levy was shifted to BECML, despite it neither being the original allottee nor the beneficiary of the mined coal.

The core grievance is that BECML was merely an operator facilitating mining for captive consumer and was not the entity that derived any economic benefit from the allocation.

e)

Pursuant to the enactment of the Coal Mines (Special Provisions) Act, 2015 ("the CMSP Act"), and specifically in accordance with Section 8(4) of that Act read with the Allotment Order issued by the Nominated Authority dated 31st March 2015, the Corporate Debtor's rights over the Land and Mine Infrastructure ceased to exist by operation of law.

f)

However, under Section 16 of the CMSP Act, the prior allottee, that is, the Corporate Debtor, is entitled to receive compensation for the Land and Mine Infrastructure that was so transferred, at a value as may be prescribed under the Act. Pending realisation of this compensation, the book value of the Land and Mine Infrastructure as on 1st April 2015 was converted into a receivable in the Corporate Debtor's accounts as an interim accounting arrangement. This is the amount that appears under the head "Compensation Receivable" in the financial statements, standing at approximately Rs. 151.80 Crore.

g)

However as stated above there exist a significant contingent liability that directly affects the recoverability of the above compensation. The Government of India has imposed an additional levy of Rs. 1,752 Crore on the Corporate Debtor as per the Order of Hon'ble Supreme Court (supra). This amount is currently reflected as a contingent liability in the books of the Corporate Debtor and is being actively disputed. The matter is pending before the Hon'ble Supreme Court of India, wherein due to non-payment of additional levy, the Government of India has filed a contempt petition against the Managing Director of the CD. (Case number: CONMT.PET.(Crl.) No. 000002/2015 Registered on 16-03-2015). The matter is yet to be disposed by the Hon'ble Supreme Court. The last hearing was on 17.12.2024.

h)

Section 16(4) of the CMSP Act provides that the prior allottee shall not be entitled to receive the compensation until such time as the additional levy has been paid in full. Since the additional levy of Rs. 1,752 Crore remains outstanding and is under dispute before the Supreme Court, no compensation can presently be RY released in favour of the Corporate Debtor under the law as it stands.