Successful Auction Purchaser Cannot Be Compelled To Pay Pre-CIRP Electricity Dues Before Restoring Electricity Connection: NCLAT

Brief Facts

On an Application filed under Section 7 by the UCO Bank against the Corporate Debtor M/s. Shree Shyam Pulp and Board Mills, Corporate Insolvency Resolution Process (CIRP) commenced by Order dated 27.03.2019. No Resolution Plan having been approved in the CIRP of the Corporate Debtor, the Adjudicating Authority directed for liquidation vide Order dated 16.12.2020.

In the list of stakeholders issued by Liquidator dated 18.04.2022, the claim of the Appellant to the extent of ₹7,66,95,203/- was reflected as admitted claim.

In the seventh auction sale, the land and building of the corporate debtor were sold to the successful auction purchase(SAP) and a letter of possession was also given to the SAP. Later the SAP filed an application seeking direction against the appellant to restore the electricity connection which was opposed by the appellant. After hearing both the parties, the Adjudicating Authority allowed the application and directed the restoration of the electricity connection. Against this order, the present appeal has been filed.

Contentions:

The appellant submitted that the eAuction in which the Respondent No. 1 declared Successful Auction Purchaser was “as where is, as is what is and whatever there is basis”. When the Auction is on the above conditions which was reflected in the e-Auction notice, Successful Auction Purchaser is liable to clear all liabilities and electricity dues. Successful Auction Purchaser was required to make independent enquiries regarding dues of local taxes, electricity and water charges. Successful Auction Purchaser cannot disown the liability to pay electricity dues, which remained unpaid by the Corporate Debtor.

Refuting the submissions, the respondent submitted that the Appellant had filed claim in the liquidation proceeding which was admitted by the Liquidator. Appellant is entitled for treatment of its dues as per Section 53 of the IBC. Appellant's dues having been dealt in the liquidation process as per the IBC, Appellant cannot insist pre-CIRP dues to be paid by the R-1 before electricity connection is energised/restored.

Observations:

The NCLAT in Chinar Steel Segments Centre Pvt. Ltd.' Vs. `Samir Kumar Agarwal, Liquidator of Bhaskar Shrachi Alloys Limited (in Liquidation) and Anr.', 2023 while noting the Supreme Court judgment in Tata Power Western Odisha Distribution Limited (TPWODL) & Anr. vs. Jagannath Sponge Private Limited, 2023 held that “the Respondent cannot insist that unless the arrears of the electricity dues which dues were payable by the Corporate Debtor prior to disconnection are paid by the Appellant only then communication can be issued. The stand taken by the Respondent is contrary to the law laid down by this Tribunal as well as the Hon'ble Supreme Court as noted above.”

In Tata Power Western Odisha Distribution Limited(supra), the Supreme Court while noting its previous judgment in Southern Power Distribution Company of Andhra Pradesh Limited vs. Gavi Siddeswara Steels (India) Pvt. Ltd. and Another held that “the appellant – Tata Power Western Odisha Distribution Limited cannot insist on payment of arrears, which have to be paid in terms of the waterfall mechanism, for grant of an electricity connection. However, the successful resolution applicant will have to comply with the other requirements for grant of electricity connection. The clean slate principle would stand negated if the successful resolution applicant is asked to pay the arrears payable by the corporate debtor for the grant of an electricity connection in her/his name.”

Accordingly, the present appeal was dismissed.

Case Title: M/s Uttarakhand Power Corporation Limited (UPCL), Versus M/s. Shyam Baba Developers & Builders Pvt. Ltd. and Anr.

Case Number: Company Appeal (AT) (Insolvency) No. 346 of 2023

Judgment Date: 6/01/2025

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