2022 (9) TMI 143 - AT - Insolvency and Bankruptcy

Recovery of electricity dues - Time Limitation - whether the Adjudicating Authority was right in issuing direction to the Appellant to make payment of outstanding electricity dues during CIRP period within 90 days? - HELD THAT - The CIRP against Corporate Debtor has commenced on 30.08.2018 by order of the Adjudicating Authority and during the moratorium period the Respondent has continued to supply the electricity to the Corporate Debtor even though DFA came to an end on 24.10.2019, when Respondent issued notice to take over the Distribution Franchisee Agreement. Thereafter, the Resolution Professional filed the IA No.1661 of 2021 seeking the directions as noticed above. In the Application, which was filed by Resolution Professional, it was categorically pleaded that continuance of Franchisee Infrastructure is essential to maintain the value of the Corporate Debtor for the incoming Resolution Applicant. The scheme delineated by Section 14(1) explanation as well as Section 14(2-A) is same, that is, all benefits, which were enjoyed by the Corporate Debtor given by Government or authority should be continued, but subject to condition that there is no default of payment of current dues. Sub-section (2-A) also envisage continuation of the essential supply and provides for such termination, suspension or extension when payment has not been made for the such supply during the moratorium - Sub-section (2) of Section 14 has to be read with the legislative intent, which is now reflected by Explanation to Section 14(1) and 14(2-A). In the facts of the present case, when Corporate Debtor took a decision that supply of electricity is necessary to make the value of Corporate Debtor as has been specifically pleaded, the Corporate Debtor is obliged to make payment. When the Corporate Debtor has opined that supply of electricity is essential and is to be continued by the Respondent, it is also under obligation to make payment of electricity dues of the CIRP period and direction issued by the Adjudicating Authority to make the payment of outstanding dues, cannot be faulted. The direction of Adjudicating Authority to continue the DFA, that is, to continue to supply the electricity was subject to payment of outstanding dues within 90 days as directed by the Adjudicating Authority. The Appellant cannot enjoy the benefit of direction of one part, that is, to continue the DFA and deny the payment of electricity dues of the CIRP period. Thus, no exception can be taken to direction of the Adjudicating Authority to make the payment of outstanding dues to the Respondent during the CIRP period within 90 days - appeal dismissed.

Summary

Issues Involved:
1. Whether the Adjudicating Authority was right in directing the Resolution Professional to pay the outstanding electricity dues during the CIRP period within 90 days.
2. Whether the Respondent is obliged to continue supplying electricity without payment during the CIRP period.
3. Interpretation of Section 14(2) and Section 14(2-A) of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Payment of Outstanding Electricity Dues During CIRP Period:
The Adjudicating Authority directed the Resolution Professional to pay the outstanding dues during the CIRP period within 90 days while ensuring uninterrupted electricity supply to the Corporate Debtor. The Resolution Professional challenged this direction, arguing that the Corporate Debtor lacks necessary funds and that the dues should be paid as per the Resolution Plan after its approval. The Tribunal upheld the Adjudicating Authority's direction, emphasizing that the continuation of essential services like electricity is critical for maintaining the value of the Corporate Debtor. The Tribunal noted that Section 14(2-A) of the Insolvency and Bankruptcy Code mandates the payment of dues for essential supplies during the moratorium period.

2. Obligation of Respondent to Continue Supplying Electricity:
The Respondent argued that they are not obliged to continue supplying electricity without payment during the CIRP period. They highlighted that the Adjudicating Authority compelled them to supply electricity and continue the DFA during the moratorium period, thus necessitating the payment of dues by the Corporate Debtor. The Tribunal agreed with the Respondent, stating that while essential services must continue during the moratorium, the Corporate Debtor is also obligated to make payments for such services. The Tribunal clarified that the legislative intent behind Section 14(2) and Section 14(2-A) is to ensure the continuation of essential services subject to payment of dues.

3. Interpretation of Section 14(2) and Section 14(2-A):
The Tribunal examined the legislative framework and intent behind Section 14(2) and Section 14(2-A) of the Insolvency and Bankruptcy Code. Section 14(2) provides for the uninterrupted supply of essential goods or services during the moratorium period. Section 14(2-A), inserted by Act 1 of 2020, further clarifies that such supplies shall not be terminated, suspended, or interrupted if the Corporate Debtor has not paid dues arising from such supply during the moratorium period. The Tribunal emphasized that the continuation of essential services is conditional upon the payment of current dues, aligning with the legislative intent to fill critical gaps in the corporate insolvency framework. The Tribunal concluded that the Adjudicating Authority's direction for payment of outstanding dues within 90 days is consistent with the legislative scheme.

Conclusion:
The Tribunal dismissed the Appeal, affirming the Adjudicating Authority's direction to pay the outstanding electricity dues during the CIRP period within 90 days. The Tribunal clarified that the continuation of essential services like electricity is subject to payment of dues, and the Corporate Debtor cannot enjoy the benefits of such services without fulfilling its payment obligations. The Tribunal emphasized that the legislative intent behind Section 14(2) and Section 14(2-A) is to ensure the continuation of essential services while safeguarding the interests of service providers.