Resolution Applicant Not Bound To Pay Past Dues When No Claim Is Made, Even If Electricity Dues Are Statutory In Character: Meghalaya High Court

The  Meghalaya High Court has held that a State authority cannot compel a successful resolution applicant under Insolvency and Bankruptcy Code, 2016 (I&B Code) to pay past electricity dues, if the State authority has not made any claim in respect of its dues under approved resolution plan.

The Petitioner-Company, Reliance Infratel was admitted to insolvency and a resolution plan was approved by the National Company Law Tribunal. Reliance Projects and Property Management Solutions Ltd. (RPPMSL) took over the Petitioner-Company on 22.12.2022.

The Respondent-Corporation, Meghalaya Power Distribution Corporation Ltd., sought recovery of electricity dues from the Petitioner-Company and also its affiliates through a letter/demand notice. In this letter, the Respondent-Corporation stated it would disconnect the existing electricity connections for the mobile towers and refused to provide new electricity connections to the Petitioner-Company and its affiliates until the electricity dues are paid, even the dues prior to 22.12.2022.

The Petitioners are challenging the letter/demand notice issued by Corporation.

The Corporation claimed that owing to Section 56 of the Electricity Act, 2003, which empowers the generating company to disconnect the supply in case of default of payment, electricity dues cannot be waived.

A single-judge bench of Justice H. S. Thangkhiew observed that the Corporation did not submit any claims with respect to the recovery of its dues, even though the Petitioner-Company made public announcements inviting all the creditors to submit proof of claims. The Court held that in the present case, Section 56 of Electricity Act is not attracted due to Section 238 of I&B Code which provides that the provisions of I&B Code shall override other laws and Section 31(1) of the I&B Code which provides than an approved resolution plan is binding on all creditors.

The Court observed that the Corporation was bound to participate in the resolution process as per Section 31 of I&B Code. Since it did not participate in the resolution process and did not make any claims, the dues claimed by the Respondent-Corporation prior to 22.12.2022 i.e. prior to the take-over of the Petitioner-Company, stands extinguished. Further, as Section 238 has an overriding effect on other laws, it cannot be said that that electricity dues being statutory in character under the Electricity Act, cannot be waived off.

“As such, the dues not attributable to the petitioner No. 1 after the effective date, and no claim having been made against the Corporate Debtor, and further Section 238 having an overriding effect on all other laws, the stand of the respondent No. 1 that the petitioners are liable to pay in terms of Section 56 of the Electricity Act is therefore, unsustainable.”

Thus, the Respondents are not entitled to collect the dues prior to 22.12.2022 from the Petitioner-Company.

Case title: M/s Reliance Infratel Limited & Anr. vs. State of Meghalaya & Ors., 2024:MLHC:504

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