By Bizodisha Bureau, Bhubaneswar, September 1, 2018: Odisha High Court has stalled mining activities at three iron ore blocks auctioned two years ago.

The Court’s interim order has put mining process of three deposits, won by Essar Steel Ltd, Bhushan Steel Ltd (BSL) and Bhushan Power and Steel Limited (BPSL) virtually on hold.

The order is in response to a public interest litigation (PIL) filed last month by Chitta Ranjan Sahu, who had sought a stay on the bid process and outcome, with respect to the three block. Sahu alleged that it contravened provisions of the Mines and Minerals — Development & Regulation (MMDR) Act, Mineral Auction Rules 2015, and Article 14 of the Constitution.

The PIL has sought cancellation of auctions and letter of intents granted to Essel Steel, BSL (now acquired by Tata Steel) and BPSL (for which JSW Steel recently emerged as the highest bidder). It has also questioned “the due diligence and conduct” of Naveen Patnaik’s government and its steel and mines department in granting mineral blocks to companies that went bankrupt in months after winning them.

The petitioner had further pleaded to the court to direct the three companies to produce all documents pertaining to the proceedings conducted by the Delhi bench of the National Company Law Tribunal (NCLT). Besides, the PIL had appealed for an interim order to carry out investigation and enquiry into financial statements and submissions, made on behalf of the bidders, by a committee of experts.

The deposits auctioned after mining laws were amended in 2015 are not yet operational. All three companies have plants in the state and are chasing the pre-requisite clearances that will then enable them to get a mining grant.

The three steel firms, before bidding for the iron ore blocks, had defaulted on bank credi. While BSL has overcome insolvency woes after the acquisition of 72.65 per cent stake by Bamnipal Steel, a wholly-owned subsidiary of Tata Steel, the other two firms are still in the process of resolution.

“The matter is sub judice and we will be submitting our counter very soon,” said a senior government official declining to comment.

The Ghoraburhani-Sagasahi iron ore block, with 99.54 million ton deposit, was the first to be put under electronic auctions by Odisha. Essar emerged as the preferred bidder and after the results of the online auction the state government issued a Letter of Intent (LoI) to the stressed steel company on March 28, 2016. The steel maker has an accumulated debt of Rs 45000 crore, while its wholly owned subsidiary Essar Steel Offshore had already failed to repay Standard Chartered Bank’s $413 million (as principal amount) and State Bank of India’s Rs 14860.82 crore loans, alleges the PIL.

The banks moved the National Company Law Tribunal in Ahmadabad which declared Essar Steel a defaulter in July of 2017, while holding that “there appears no scope for Essar Steel to be repaying its debt for another 25 years,” says the petition.

For the other two blocks — Kalamanga West and Netrabandha Pahad — LoIs had been awarded to BSL and BPSL, respectively, on June 24, 2017. The NCLT orders for inclusion of insolvency professional and moratorium were delivered on July 26, 2017.

The petitioner said there had been gross violation of the provisions of law on part of the state government and its agencies, while allocating iron ore to entities whose financial viability was put to question.