Adjudicating Authority Is Empowered To Decide Whether Successful Resolution Applicant Is Liable To Pay Pre-CIRP Electricity Dues U/S 60(5) Of IBC: NCLAT

Brief Facts:

The Corporate Insolvency Resolution Process (CIRP) was initiated against Akums Lifesciences (Corporate Debtor) by an order dated 23.08.2018. The resolution plan was approved on 12.01.2021. The management and control of the company was transferred to Successful Resolution Applicant ( “SRA”).

The SRA approached Punjab State Power Corporation Limited (PSPCL/“Appellant) to restore the electricity connection.However, the Appellant stated that an amount of Rs. 3,87,96,889/- is outstanding on account of non-payment of electricity dues by the Corporate Debtor. The SRA subsequent to approval of the resolution plan had already made payment to the Operational Creditors whose claims were admitted by the Resolution Professional.

An Interlocutory Application (IA) was filed by the SRA seeking restoration of the electricity which was allowed. The NCLT held that post approval of the resolution plan no claim of the respondent Electricity Company pertaining to the pre-CIRP period subsists. Against this order, the present appeal has been filed.

Contentions:

The Appellant submitted that the NCLT has no jurisdiction over disputes involved in supply of electricity by PSPCL, which is governed by the provisions of Electricity Act, 2013.

It was also argued that the NCLT has no authority to grant waiver of outstanding statutory dues and to issue direction to provide electricity connection to an entity and interfere in the right of PSPCL to refuse connection to a premises where amounts were due and not paid in the past.

Per contra, the respondent submitted that once the plan has been approved, all pre-CIRP expenses/debt got extinguished. The Respondent has already made payment to stakeholders in accordance with the resolution plan. As per Sub-section (1) of Section 31 of the IBC, 2016, an approved resolution plan is binding on all the stakeholders.

It was also argued that as per Section 238 of the code, the provisions of the code prevail over any other law and the provisions of IBC shall prevail over Electricity Act, 2003 as held by the Hon'ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Private Limited (2023).

Lastly, it was submitted that the NCLT had jurisdiction to look into matter of Corporate Debtor relating to CIRP even after approval of the resolution plan.

Observations:

The Tribunal noted that section 60(5) of the code states that the NCLT is empowered to adjudicate any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution of the Corporate Debtor.

The Supreme Court in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta & Company & Ors., (2021) held that “considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor.”

In the above case, the court also said that there should be a clear nexus with the insolvency of the Corporate Debtor for NCLT and NCLAT to exercise jurisdiction under Section 60(5)(c) of the code.

The Tribunal observed that the issue whether the SRA is liable to pay pre-CIRP electricity dues after the approval of the resolution plan and taking over of the corporate debtor, is an issue directly arising out of the approval of resolution plan and its effective implementation.

It further added that the NCLT is empowered to dispose of any application or proceeding against the corporate debtor arising out of or in relation to insolvency resolution. This position was also affirmed by the NCLAT in Damodar Valley Corporation Vs. Mackeil Ispat & Forging Ltd. & Anr.

The NCLAT in Madhya Gujarat Vij Company Ltd. v. Kalptaru Alloys Pvt. Ltd., (2018) held that in view of Section 238 of the code, the provisions of Gujarat Electricity Regulatory Commission (Electricity Supply Code and related matters) Regulations, 2015 cannot override the provisions of the code.

The Tribunal after referring to the Supreme Court judgment in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Private Limited & Ors. and the Meghalaya High Court judgment in Reliance Infratel Ltd. and Anr. v. State of Meghalaya and Ors, held that the provisions of the code override those of the Electricity Act. The issue of whether the SRA is liable to pay pre-CIRP electricity dues falls under the jurisdiction of the NCLT under section 60(5)(c) of the code.

The Tribunal also noted that the SRA has taken over the corporate debtor and the resolution plan approved by the Adjudicating Authority does not obligate the SRA to pay pre-CIRP electricity dues of the corporate debtor. Under the scheme of the code, the creditors must file their claims before the Resolution Professional for the debts owed by them to the corporate debtor. In the present case, no such claim was filed by the Appellant and the resolution plan did not also contain any provision of such payments.

The Tribunal concluded that since the claims were not filed by the Appellant before the Resolution Professional, the Appellant cannot take advantage of its omission by demanding pre-CIRP electricity dues before restoring the electricity connection. The payment was made by the corporate debtor under protest and compulsion to get the electricity restored and resume the business operations.The Appellant is barred from seeking arrears of the amount that stands extinguished by operation of law as pre-condition to restoring the electricity connection.

Accordingly, the present appeal was dismissed.

Case Title: Punjab State Power Corporation Limited Versus Akums Lifesciences Limited

Case Number: Company Appeal (AT) (Insolvency) No. 1258 of 2023

Judgment Date: 25/02/2025

For Appellant : Ms. Shivani Verma, Advocate.

For Respondents: Mr. Dilip Kumar Niranjan, Mr. Karmveer, Mr. Nikhil Kumar Singh, Advocates.

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