Coal India gets stay on insolvency order for subsidiary

State-owned company Coal India Ltd (CIL) has got a stay from the appellate authority the National Company Law Tribunal (NCLAT) on insolvency proceedings after NCLT had initiated proceedings against one of its subsidiaries for refusing to pay interest on disputed bills.

According to the National Company Law Tribunal, CIL's arm refused to acknowledge that it has to pay interest on outstanding bills, prompting the court to pull up the company.

Following this, Coal India approached the appellate body and got a stay on the NCLT order.

"Until further orders, the operation of the impugned order dated December 19, 2018, passed in CP (IB) No.228/KB/2018 by NCLT Kolkata Bench shall remain stayed," said National Company Appellate Tribunal chairman justice S J Mukhopadhaya.

The Kolkata bench of NCLT on Wednesday had ordered insolvency proceedings against Eastern Coalfields, a mining subsidiary of the Coal India, for refusing to pay interest on unpaid bills to Gulf Oil Lubricants India, an operational creditor.

The order was unprecedented as only companies that default on loans to banks, financial institutions or suppliers are forced into the extreme situation of being declared insolvent and the process is initiated against them to realise unpaid dues. In such a situation, orders are issued to take away control of the board of directors among other steps.

Staying the NCLT order, the appellate body head said: "Learned senior counsel referred to the impugned order and enclosures annexed thereto, to suggest that the principal amount had already been paid and as per the terms of Agreement/Contract, no interest is payable. This fact, though, noticed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench), Kolkata, in spite of that impugned order dated December 19 has been passed in an application under Section 9 of the I&B Code, 2016. It is also informed that parties have already settled the claim and nothing payable to the respondents (operational creditor).

While Eastern Coalfields had settled the principal sum of around Rs 84.71 lakh with Hinduja Group-controlled Gulf Oil Lubricants, it declined to pay interest amount of Rs 40.87 lakh arrived at the rate of 18% a year during the period.

"I hold that the corporate debtor is liable to pay interest to the operational creditor that has not been paid in spite of demand," NCLT judge Madan B Gosavi had said while ordering insolvency proceedings again Coal India subsidiary.

GETTING A BREATHER

• Rs 84.71 lakh – approx was the principal sum settled by Eastern Coalfields 
   
• Rs 40.87 lakh – of decline was seen in pay interest amount of Gulf Oil Luricants