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Informist, Monday, Dec. 2, 2024

 

NEW DELHI – The Delhi High Court has issued notices to the Ministry of Coal and its nominated authority against an order by the latter to reduce the compensation payable to Tata Power Co. Ltd. and others on account of deallocation of the Mandakini coal block. Till the next hearing Wednesday, the court has asked the parties to maintain status quo.

 

Tata Power said the nominated authority, a statutory authority under the Coal Mines (Special Provisions) Act, 2015, had reduced the land compensation to be paid to the prior allottees from INR 1.83 billion to INR 1.15 billion. In November, the authority said the compensation pertaining to the geological report and consents cannot be disbursed to the prior allottees as there was lack of clarity in the definition of prior allottee.

 

Contesting the authority's order, Tata Power said that under entry 169 of Schedule 1 of the Act, the petitioner company, Jindal Photo Ltd., and Monnet Ispat & Energy Ltd., were mentioned as the prior allottees of the Mandakini coal block. Further, Tata Power said, the authority had wrongly considered IFCI Ltd. as a secured creditor of the prior allottees and erred in awarding INR 1.02 billion to it in its revised compensation order though IFCI had not challenged the final compensation order.

 

The case has its genesis in a 2007 communication by the Ministry of Coal to allocate the Mandakini Coal Block in Angul district of Odisha. For the allotment, the prior allottees--Tata Power, Jindal Photo, and Monnet Ispat & Energy--had to form a joint venture company. The three set up Mandakini Coal Co. Ltd. to operate and manage the block.

 

In 2014, Mandakini Coal took a term loan from IFCI of INR 1.4 billion. Against the loan, each of the three prior allottees provided a corporate guarantee to the extent of one-third of the loan amount. However, that same year, the Supreme Court quashed the allotment of coal blocks, including Mandakini.

 

Thereafter, IFCI called for mandatory prepayment of the outstanding loan by Mandakini Coal Co. Ltd. to prepay its loan before 2015. IFCI also filed a claim of INR 1.43 billion before the coal ministry's authority as a secured creditor of Mandakini Coal, for receiving compensation from the government in respect of cancellation.

 

The petitioner and Jindal Photo then discharged their liabilities under their corporate guarantees to IFCI. Accordingly, IFCI reduced its claim before the authority to INR 543.6 million, being the amount payable by Monnet Ispat, which later went into insolvency. The amount was later settled by IFCI with Monnet Ispat's resolution professional.

 

Through orders in 2020 and 2021, the authority awarded compensation of INR 1.82 billion for land and mine infrastructure and INR 402.76 million towards the cost of geological reports and consent to the prior allottees of the coal block. The orders did not provide any payment to IFCI towards its claim as a secured creditor. However, Tata Power said that till date the nominated authority has failed to disburse the compensation due to it. Mandakini Coal Co. Ltd. had filed an appeal for enhancement of compensation, which is also pending before the coal tribunal.

 

In 2022, IFCI wrote to the authority seeking remittance of outstanding dues of INR 1.41 billion from the compensation amount. Tata Power said IFCI was not its secured creditor. In the meantime, IFCI wrote to the authority and submitted a revised claim of INR 1.02 billion as a secured creditor of Mandakini Coal. Karnataka Power Corp. Ltd., to whom the Mandakini coal mine was allotted, wrote to the authority and sought a review of its compensation order. Accordingly, the authority passed an order in November to reduce the compensation amount and treat IFCL as a secured creditor.

 

On Monday, shares of Tata Power Co. Ltd. ended 0.6% higher at INR 416.50 on the National Stock Exchange, while the shares of IFCI Ltd. ended slightly lower at INR 63.79.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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