2019 (11) TMI 400 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Restoration of supply of electricity disconnected - electricity to all the three units, which were disconnected owing to non-payment of dues during the Corporate Insolvency Resolution Process - HELD THAT - If any amount due for the period of the Corporate Insolvency Resolution Process was not paid, in such case, Electricity Board should have moved before the Adjudicating Authority for payment of current dues of Corporate Insolvency Resolution Process , but it had no jurisdiction to disconnect the electricity in violation of Section 14(2) of the I B Code - The Electricity Board provides services by supplying electricity and thereby comes within the meaning of Operational Creditor as defined under Section 5(20) read with Section 5(21) of the I B Code . Similar matter fell for consideration before this Appellant Tribunal in Uttrakhand Power Corporation Ltd. v. M/s. ANG Industries Ltd. 2018 (1) TMI 1445 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI wherein this Appellate Tribunal taking into consideration the fact that the order of Moratorium had been passed held that Uttarakhand Power Corporation Limited cannot recover any amount as was due for the earlier period prior to the date of initiation of Corporate Insolvency Resolution Process , though it was entitled to submit the claim before the Resolution Professional . This Appellate Tribunal further observed that the amount payable towards the current charges during the Corporate Insolvency Resolution Process was payable to the Uttarakhand Power Corporation Limited . Thus, it is not open to the Electricity Board to disconnect the electric supply of the Corporate Debtor during the Corporate Insolvency Resolution Process , the Resolution Professional should not have paid any dues of the earlier period for restoration of electricity. The Resolution Professional should have brought the fact to the notice of the Adjudicating Authority, who should have ordered for restoration of electricity with clear direction to pay the dues of the current charges of the Corporate Insolvency Resolution Process . The Resolution Plan having been approved by the Adjudicating Authority on 24th July, 2018 under Section 31, it was not open to the Adjudicating Authority to pass order subsequently on 25th February, 2019 to release the amount of ₹ 3.25 Crores in favour of Electricity Board Appeal allowed.

Issues Involved:
1. Disconnection of electricity supply during the Corporate Insolvency Resolution Process (CIRP)
2. Payment of dues for the period prior to CIRP
3. Adjustment of pre-CIRP dues against current charges
4. Compliance with the moratorium under Section 14 of the I&B Code
5. Approval and implementation of the Resolution Plan

Issue-wise Detailed Analysis:

1. Disconnection of electricity supply during the Corporate Insolvency Resolution Process (CIRP):
The Kerala State Electricity Board disconnected electricity supply to the units of M/s. Paragon Steels (P) Ltd. and M/s. SMM Steel Re-rolling Mills Private Limited due to non-payment of dues during the CIRP. The Adjudicating Authority directed the Resolution Professional to deposit ?3.25 Crores in an Escrow Account to cover the dues and ordered the restoration of power. The Tribunal held that the disconnection of electricity by the Electricity Board was in violation of Section 14(2) of the I&B Code, which mandates the continuation of essential services during the moratorium period.

2. Payment of dues for the period prior to CIRP:
The Resolution Professional had made payments towards electricity dues for the period before the initiation of CIRP to avoid disconnection and keep the Corporate Debtors as a going concern. The Tribunal noted that such payments should not have been made without the approval of the Adjudicating Authority and should have been adjusted against the current charges during the CIRP.

3. Adjustment of pre-CIRP dues against current charges:
The Resolution Plan approved by the Committee of Creditors and the Adjudicating Authority provided for the adjustment of dues paid by the Resolution Professional to the Electricity Board for the pre-CIRP period against the current charges. The Tribunal held that any amount wrongly paid for the earlier period should be adjusted from the current charges, and if any excess amount was found, it should be returned by the Electricity Board.

4. Compliance with the moratorium under Section 14 of the I&B Code:
The Tribunal emphasized that the moratorium under Section 14 of the I&B Code prohibits the termination or suspension of essential services, including electricity, during the CIRP. The Electricity Board should have approached the Adjudicating Authority for the payment of current dues instead of disconnecting the electricity supply.

5. Approval and implementation of the Resolution Plan:
The Resolution Plan, which included provisions for the adjustment of pre-CIRP dues, was approved by the Adjudicating Authority on 24th July 2018. The Tribunal held that the Adjudicating Authority's subsequent order on 25th February 2019 to release ?3.25 Crores to the Electricity Board was not in accordance with the approved Resolution Plan. The Tribunal set aside the impugned order and allowed the appeals.

Conclusion:
The Tribunal concluded that the disconnection of electricity by the Kerala State Electricity Board during the CIRP was in violation of the I&B Code. It emphasized the importance of adhering to the moratorium and the provisions of the approved Resolution Plan. The Tribunal ordered the adjustment of any pre-CIRP dues paid against current charges and set aside the order to release ?3.25 Crores to the Electricity Board, thereby allowing the appeals.

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