NCLAT Dismisses Government's Plea For Recovery From Videocon Industries During Moratorium

NCLAT Dismisses Government

The NCLAT agreed with the view taken by NCLT, Mumbai that during the period of 'Moratorium', the Government could neither recover any amount nor issue demand notice to the Videocon through its Resolution Professional.


The NCLAT has dismissed an appeal against Videocon Industries Limited, by the Ministry of Petroleum & Natural Gas, for recovery of over Rs. 2250 crores as unpaid share of 'profit petroleum'.

Insolvency proceedings were initiated against Videocon by a group of lenders led by the State Bank of India on a default in payment of outstanding dues of over Rs. 20,000 crores, after NCLT Mumbai admitted the petition on 6th June, 2018.

The issue in this case arose from a production sharing contracts (PSCs) signed between the Government and four companies viz. Videocon, Vedanta and Ravva Oil (Singapore) Pte. Ltd. ("ROS"), for the exploration and development of oil fields. The oil extracting companies recover their capital and operational expenditures, from produced oil, known as "cost oil" and the remaining oil forms part of the 'profit petroleum'.

During the pendency of Corporate Insolvency Resolution Process (CIRP), the petroleum ministry sent a demand notice to Videocon on 22nd October 2018 demanding allocation of sale proceeds from the PSC, towards the unpaid Government share of 'Profit Petroleum'.

The 'Resolution Professional' (RP) of Videocon filed an Application under Section 60(5) of the 'Insolvency and Bankruptcy Code, 2016 ('I&B Code') before the NCLT, Mumbai, on the ground that during the period of Moratorium, the 'Corporate Debtor' (Videocon) cannot be asked to part away with any amount including the share of profit.

The dispute between the Government and Videocon arose in August, 2002 which was referred to the 'International Arbitration Tribunal', and the pleas of Videocon were partially upheld. Thereafter, the Government filed an appeal before the High Court of Kuala Lumpur, Malaysia and the Federal Court of Malaysia, but the appeals were dismissed on the ground of jurisdiction.

NCLT, Mumbai after taking all the aforesaid facts into consideration, allowed the prayer of the RP and directed the Government authority not to press the Demand Notice. The Tribunal also restrained Mangalore Refinery and Petrochemicals, GAIL (India), and Bharat Petroleum Corporation from remitting any amount to the Centre, due to be given to Videocon. The Bench at Mumbai clarified said that the petroleum ministry could lodge its claim of any legally enforceable right or recovery with the RP.

It was against this order by NCLT, Mumbai that the petroleum ministry approached the NCLAT by way of an appeal.

It was the contention of the petroleum ministry that since the petroleum was the property of the Government and 'profit petroleum' of public property, the Government was entitled to claim its share of profit on the petroleum product.

The petroleum ministry also claimed that the Demand Notice dated 22nd October, 2018 cannot be categorised as 'recovery' as the 'profit petroleum' falls under the Government's share.

The NCLAT, after perusal of the facts, agreed with the view taken by NCLT, Mumbai that during the period of 'Moratorium' under section 14 of the I&B Code, the Government could neither recover any amount nor issue demand notice to the Videocon through its Resolution Professional.

In terms of the provisions of section 14 of the I&B Code, the Appellate Bench, dismissed the Government's appeal claiming share in the profit petroleum.

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