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2018 (4) TMI 584 - Tri - Insolvency and BankruptcyCorporate insolvency process - Power supply was disconnected while moratorium in force - Held that - Disconnection of the electricity by the DVC, while the moratorium is in force, is quite, illegal and against the provisos of the Code. None of the contentions taken by the DVC are found sustainable under law. Considering the peculiar nature and circumstances of the case in hand and considering that the disconnection is illegal and despite personal effort made by the Ld. IRP the DVC was reluctant to restore the Power supply, this CA deserve to be allowed upon the following directions (i) DVC is directed to restore the electricity supply with immediate effect and provide continuous electricity supply at the Barjora Plant of the Corporate Debtor; (ii) DVC is further directed to issue bills on month to month basis upon restoring the electricity supply by granting 60 days time to pay the billed amount; (iii) In case the Corporate Debtor fails in paying the bill amount, as directed above, it is left open to DVC to issue appropriate disconnection notice in accordance with the rules and law applicable but DVC, cannot disconnect without issuing prior notice to the Corporate Debtor.
Issues Involved:
1. Maintainability of the application under Section 14(2) of the Insolvency and Bankruptcy Code, 2016. 2. Obligation of Damodar Valley Corporation (DVC) to restore electricity supply during the moratorium period. 3. Jurisdiction of the National Company Law Tribunal (NCLT) versus the Electricity Act, 2003 and the West Bengal Electricity Regulatory Commission. 4. Legal implications of disconnection of electricity supply during the moratorium period. 5. Directions for payment of current electricity charges post-restoration. Issue-Wise Detailed Analysis: 1. Maintainability of the Application: The DVC raised a preliminary objection regarding the maintainability of the application, alleging it was misconceived and suffered from suppression and distortion of material facts. The Tribunal, however, proceeded to hear the application, indicating implicit rejection of DVC’s objection on maintainability grounds. 2. Obligation of DVC to Restore Electricity Supply During the Moratorium Period: The Tribunal emphasized that under Section 14(2) of the Insolvency and Bankruptcy Code (I&B Code), the supply of essential goods or services to the corporate debtor shall not be terminated, suspended, or interrupted during the moratorium period. Electricity is classified as an essential service under Regulation 32 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Therefore, the disconnection of electricity by DVC was deemed illegal and against the provisions of the I&B Code. 3. Jurisdiction of NCLT Versus the Electricity Act, 2003 and the West Bengal Electricity Regulatory Commission: DVC contended that the Electricity Act, 2003 and the West Bengal Electricity Regulatory Commission were the competent authorities to adjudicate disputes like the one raised by the applicant. The Tribunal refuted this argument by citing Section 238 of the I&B Code, which states that the provisions of the Code shall have effect notwithstanding anything inconsistent contained in any other law. Thus, the I&B Code overrides the Electricity Act, 2003, and the jurisdiction of the NCLT was upheld. 4. Legal Implications of Disconnection of Electricity Supply During the Moratorium Period: The Tribunal held that the demand made by DVC for clearing outstanding dues before the date of declaration of the moratorium was invalid and illegal. Any pending legal proceedings or actions in respect of any debt due from a corporate debtor to an operational creditor like DVC shall be deemed to have been stayed till the Corporate Insolvency Resolution process ends. The Tribunal directed DVC to restore the electricity supply immediately, highlighting that the disconnection during the moratorium was contrary to the I&B Code. 5. Directions for Payment of Current Electricity Charges Post-Restoration: The Tribunal referenced the NCLAT judgment in Uttarakhand Power Corpn. Ltd. v. ANG Industries Ltd., which mandated that the operational creditor could not recover any amount due for the period prior to the moratorium but could submit a claim before the Resolution Professional. The Tribunal directed DVC to issue bills on a month-to-month basis upon restoring the electricity supply, granting 60 days’ time to pay the billed amount. If the corporate debtor fails to pay, DVC can issue a disconnection notice in accordance with applicable rules and laws, but cannot disconnect without prior notice. Conclusion: The application was disposed of with directions for DVC to restore electricity supply immediately, issue monthly bills with a 60-day payment period, and follow proper procedures for any future disconnection. The Tribunal’s decision reinforced the precedence of the I&B Code over other laws during the moratorium period and upheld the statutory obligations of the Interim Resolution Professional to maintain the corporate debtor as a going concern.
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