BHUBANESWAR: In a bid to bring more reforms in the Mines and Minerals (Development and Regulation) Act, 1957, the Ministry of Mines has proposed to allow transfer of letter of intent (LoI) for mining lease to a successful bidder on acquiring a company through insolvency route.
The Minerals (Other than Atomic and Hydro Carbons Energy Mineral) Concession Rules, 2016, provide a provision for transfer of mining lease or prospecting licence-cum-mining lease granted through auction route.However, the rule is silent on transfer of LoI. The Mines Ministry has now come out with a draft proposal to amend the relevant rule under the Act to address this issue.
“It has been noticed by the Ministry that the State governments are facing difficulty in cases where the successful bidder (that has received LoI from the State) got dissolved due to various reasons and after due proceedings as per Insolvency and Bankruptcy Code (IBC) of NCLT and the ownership of the company has been changed from the preferred bidder to the company which has acquired the company through IBC Code in transfer of LoI because of non-availability of such provision in the rule,” the draft proposal said.
Considering the problem faced by the states in such cases, amendment of the rule appropriately is necessary so that the decision taken by sub-judice bodies under IBC may be complied, the Mines Ministry said, justifying its proposal. Seeking suggestions on the draft proposal from public, State governments, mining industries and other stakeholders, the Ministry proposed to amend rule 23 of the MCR, 2016 by inserting a new sub-rule 23 A.
“The LoI issued upon auction for grant of mining lease or composite licence in accordance with the provisions of the Mineral (Auction) Rule, 2015 may be transferred in the manner specified in this rule in cases where the State government is satisfied that such transfer of letter of intent to the transferee is necessary consequent to conclusion of insolvency, liquidation, or bankruptcy proceedings, as the case may be, in respect of the original holder of the letter of intent (the transferor) by the competent tribunal or the court under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016),” read the new sub-rule.
In a similar case, the Orissa High Court gave relief to three companies - ArcelorMittal Nippon Steel Limited (formerly Essar Steel India Ltd.), Tata Steel BSL Limited (formerly Bhushan Steel Ltd) and Bhushan Power and Steel. Transfer of LoI to these companies were challenged after insolvency of Essar Steel and Bhusan Steel.