Draft proposal: Mining letter of intent to be transferred to acquirer via insolvency route

By: |
January 22, 2021 4:00 AM

However, the rule is silent on transfer of LOI. To address this issue, the mines ministry has now come out with a draft proposal to amend the relevant rule under the Act. Stakeholders have been asked to submit their suggestions by February 5.

Stakeholders have been asked to submit their suggestions by February 5.Stakeholders have been asked to submit their suggestions by February 5.

The ministry of mines has proposed to allow transfer of letter of intent (LoI) handed out to a bidder even before prospecting or mining leases are granted, to the firm which acquires it later through the 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 an auction route.

However, the rule is silent on transfer of LOI. To address this issue, the mines ministry has now come out with a draft proposal to amend the relevant rule under the Act. Stakeholders have been asked to submit their suggestions by February 5.

“It has been noticed by the ministry that the state governments are facing difficulty on the cases where the successful bidder (that 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 mines ministry 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.

“Accordingly, the draft amendment to rule 23 by inserting a new sub-rule 23A in the Minerals (Other than Atomic and Hydro Carbons Energy Mineral) Concession Rules, 2016, has been proposed,” it said.

All transfers under the new rule shall be subject to certain conditions. The transferee (acquirer of the insolvent successful bidder) is to be eligible to participate in the auction in accordance with the Act. The transferee has also to accept all the conditions and liabilities under any law for the time being in force which the transferor was subject to in respect of such LOI.

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