2023 (1) TMI 691 - HC - Insolvency and Bankruptcy

Recovery of outstanding Electricity dues - non- payment of electricity dues - disconnection of electricity supply of the borrower sometime in the month of September, 2018 - HELD THAT - In the present case, the writ petitioner purchased the property in an auction sale on as is where is basis. At the juncture when the sale took place and/or prior thereto, when the default was committed by the borrower, the writ petitioner/auction purchaser has had no possible nexus whatsoever with the defaulting consumer, that is, the borrower-company. Thus, the basic pre-requisite of Regulation 3.4.2, applicable to new and subsequent consumers or intending consumers, that is, nexus, is not established at all. In any event, Regulation 3.4.2 clearly casts the onus of proof of nexus on the licensee. The outstanding dues can be claimed from the new consumer only if a nexus between the previous defaulting consumer and a new consumer in respect of the same premises is proved. In the present case, however, neither the auction purchaser had any nexus with the defaulting consumer nor did the writ petitioner enjoy any benefit of the electricity connection, in respect of which default was committed, at any point of time. It has been held time and again that upon a CIRP proceeding having concluded, no liability remains apart from the sale price. The provisions of Regulations 3.4.2 and 4.6.4 have to be tested on the anvil of the parent right conferred under Section 56(1) of the 2003 Act and cannot be divorced from the scheme of the parent Act itself. Since there was no subsisting due from the auction purchaser, particularly since the contract had already terminated by operation of Regulation 4.6.1, the right to discontinue, which is inextricably linked with such due, did not survive. Along with the dues, the right of discontinuance had ceased at the juncture when the auction purchase and the application for new connection took place - the licensee, that is, the DVC acted de hors the law in insisting upon clearance of the outstanding dues left by the erstwhile consumer as a pre-condition for giving a new connection to the petitioner. The proceeding before the Tribunal falls within the scope of the IBC and only in respect of liabilities arising out of the CIRP. Even when the NCLT held that the claim did not arise out of the CIRP, the same issue was under consideration. The challenge before the NCLAT also revolves around the question as to whether the claims are related to the CIRP - the subject-matter of challenge in the present writ petition is confined to availability and enforcement of remedies provided by a different statute, that is, the Electricity Act, 2003 and the Regulations framed thereunder. Hence, the outcome of either of the proceedings would not operate as res judicata in respect of the other, nor does the decision of either of the forums directly affect or debar the remedy before the other. The writ petitioner cannot be said to pursue the same remedy before two parallel forums and there does not arise any question of the writ petition being stayed on the principle of Section 10 of the Code of Civil Procedure. The IBC is not applicable to the electricity dues, as the NCLT has held that the dues do not arise from the CIRP. Even then, nothing hinges on the Telengana State ratio in the facts of the present case. The question which has arisen for adjudication here is whether the writ petitioner can be held liable to pay the outstanding dues left by the erstwhile consumer for the purpose of getting a new electricity connection from the DVC - there is a specific provision in the Supply Code (Regulation 3.4.2) to entitle the licensee to claim the outstanding dues from a new or subsequent consumer if a nexus is established by the licensee between the new consumer and the erstwhile defaulter-consumer. Since no such nexus has been proved by the licensee in the present case, mere subsistence of the licensee s right to claim outstanding dues from the erring consumer cannot justify shifting of such burden on the auction-purchaser and, for all practical purposes, there is no statutory provision to claim the amount from the writ petitioner. The impugned claim of the DVC is not tenable in the eye of law and cannot survive the scrutiny of judicial review under Article 226 of the Constitution of India - Application allowed.

Summary

Issues Involved:
1. Disconnection of electricity supply by DVC due to non-payment.
2. Initiation of Corporate Insolvency Resolution Process (CIRP) against the borrower.
3. Sale of the borrower's property through e-auction and the subsequent purchase by the petitioner.
4. Application for a new electricity connection by the petitioner and DVC's demand for outstanding dues.
5. NCLT and NCLAT proceedings regarding the maintainability and jurisdiction over the electricity dues.
6. Challenge to the vires of Regulation 4.6.4 of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013.
7. Applicability of the Electricity Act, 2003, and the IBC to the outstanding electricity dues.
8. Allegations of discrimination and violation of constitutional rights under Article 14.

Detailed Analysis:

1. Disconnection of Electricity Supply:
The borrower was enjoying electricity from DVC, which issued a disconnection notice on August 28, 2018, due to non-payment and disconnected the supply in September 2018.

2. Initiation of CIRP:
On December 5, 2018, CIRP was initiated against the borrower. The NCLT recorded the failure of the resolution process and appointed a liquidator under Section 33(4) of the IBC on September 6, 2019. An application by the resolution professional for reconnection of electricity was turned down by the NCLT.

3. Sale of Borrower's Property:
On December 10, 2020, an order was passed to sell the borrower's property. The liquidator published an e-auction notice, excluding the liability of the auction purchaser for electricity dues through a corrigendum. The petitioner purchased the property in the e-auction, and a sale certificate was issued on July 8, 2021.

4. Application for New Electricity Connection:
The petitioner applied for a new electricity connection on June 29, 2021. DVC demanded outstanding dues left by the erstwhile owner as a pre-condition for providing the new connection.

5. NCLT and NCLAT Proceedings:
The petitioner's application under Section 60(5) of the IBC was dismissed by the NCLT on February 16, 2022, stating that the disconnection was not related to insolvency. The petitioner filed an appeal before the NCLAT, which is pending. The writ petition was filed challenging DVC's decision dated July 19, 2021.

6. Challenge to Vires of Regulation 4.6.4:
The petitioner challenged the vires of Regulation 4.6.4 of the Supply Code, arguing it was arbitrary and unreasonable. The petitioner contended that the IBC, being a self-contained code, should govern the recovery of dues, including electricity dues.

7. Applicability of Electricity Act and IBC:
The court examined the interplay between the Electricity Act, 2003, and the IBC. It was held that the auction purchaser, having no nexus with the defaulting consumer, could not be held liable for the outstanding dues under Regulation 3.4.2. The court emphasized that electricity dues do not pass with the property as a charge thereon.

8. Allegations of Discrimination and Violation of Constitutional Rights:
The petitioner argued that DVC's reliance on Regulation 4.6.4 was discriminatory and violated Article 14 of the Constitution. The court held that the regulation, if read harmoniously with Regulation 3.4.2 and the scheme of the Supply Code, was not violative of the Constitution.

Conclusion:
The court allowed the writ petition, setting aside DVC's claim for outstanding dues from the petitioner and directing DVC to provide a new electricity connection without insisting on payment of the alleged dues. The court also held that the vires of Regulation 4.6.4 were not unconstitutional when read in the context of the Supply Code and the Electricity Act. The court emphasized the distinct fields of operation of Regulations 3.4.2 and 4.6.4 and the necessity of proving a nexus for claiming outstanding dues from a new consumer.