“No Concept Of Automatic Restoration Of Any Water Connection”: NCLAT Delhi

Background Facts

Ambey iron Private Limited (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”). The Resolution Plan submitted by Bhadrashree Steel & Power Limited (“Successful Resolution Applicant/SRA”) was approved by the Committee of Creditors and the Adjudicating Authority. The SRA requested Maharashtra Industrial Development Corporation (“MIDC/Appellant”) for a new water connection to revive operations at the plant of Corporate Debtor.

MIDC informed the SRA that water connection could only be revived upon payment of pending water and service charge of Rs. 47,06,751/- and differential premium and transfer charges of Rs. 38,09,600/-. The SRA filed an application seeking directions to MIDC for restoration of water supply.

The Adjudicating Authority vide an order dated 01.10.2021 held that pending water and service charge of Rs. 47,06,751/- stood extinguished as the same was with respect to pre-CIRP period. Further, the SRA was required to pay the differential premium and transfer charges of Rs. 38,09,600/- to MIDC in view of approval of its Plan and 100% change in shareholding of the Corporate Debtor. MIDC was is directed to reconnect the water connection to the SRA upon payment of Rs. 38,09,600/-.

MIDC filed an appeal before NCLAT against the order dated 01.10.2021.

Contentions Of Appellant

MIDC submitted that the SRA did not make an Application in accordance with the policy circular for restoration of water connection, which was required to be done as per regulation. Subsequent to passing of Order dated 01.10.2021, appropriate procedures were followed and water connection was restored to the SRA.

NCLAT Verdict

The Bench observed that the Adjudicating Authority had rightly rejected the claim of 47,06,751/-.

“We only observe that there is no concept of automatic restoration of any water connection and a proper application is required to be made following the procedure and only benefit Successful Resolution Applicant can claim is extinguishment of the dues which are not part of the Resolution Plan.”

The Bench held that water connection cannot be automatically restored to a Successful Resolution Applicant and an application must be made for restoration. The order of the Adjudicating Authority was upheld and the appeal was dismissed.

Case Title: Maharashtra Industrial Development Corporation v Bhadrashree Steel & Power Ltd. & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 1497 of 2022

Counsel For Appellants: Mr. Rohan Agrawal, Ms. Shraddha Dube Patil, Mr. Anandh, Advocates

Click Here To Read/Download Order