2022 (9) TMI 1609 - HC - Indian Laws

MSEDCL s role and standing within the framework of the Resolution Plan - Is it a statutory creditor? - Have its claims for past dues been written off or reduced upon the sanction of the Resolution Plan? - Can these past dues be said to have been extinguished upon approval of the Resolution Plan? - Is it permissible for MSEDCL, whatever its description as a creditor to whom amounts are owed, to stand outside the Resolution Plan and raise its demands? HELD THAT - The company in question, Rainbow Papers, was drawn into the CIRP process by a petition filed by an operational creditor. An IRP was appointed. Claims were invited by newspaper advertisements. A CoC was constituted. Then a RP was appointed. The STO filed a claim before the RP claiming an amount of Rs. 46.37 crores that was due. That claim was filed beyond time. The Resolution Applicant submitted a Resolution Plan. Many creditors objected to it. There were further proceedings. On 22nd October 2018, the RP informed the STO that its entire claim was waived or extinguished. The STO challenged the Resolution Plan and made an application in the form of an IA contending that its dues could not be waived or extinguished. It sought payment of the entire amount. The NCLT rejected this application as not maintainable. The last date for filing proof of claims was 17th December 2018. The extended date was 5th March 2019. The CoC approved the Resolution Plan on 3rd July 2019. MSEDCL s application for payment of dues post the moratorium was filed only in August 2019. It was not until 14th October 2019 that MSEDCL first forwarded a claim to the RP, that is to say, about three months after the CoC had approved the Resolution Plan was on 3rd July 2019. Its demand under Section 56(1) did not come until 21st January 2021.

Issues Involved:
1. MSEDCL's role and standing within the framework of the Resolution Plan.
2. Whether MSEDCL's past dues were extinguished upon approval of the Resolution Plan.
3. The implications of Regulation 12.5 under the MERC Regulations 2021.
4. The balance of competing equities between NRC Ltd and MSEDCL.

Detailed Analysis:

1. MSEDCL's Role and Standing within the Framework of the Resolution Plan:

The court examined whether MSEDCL is a statutory creditor and if its claims for past dues were written off or reduced upon the sanction of the Resolution Plan. The court noted that MSEDCL did not submit its claim within the stipulated time frame, which extended to 5th March 2019. The court highlighted that MSEDCL had the opportunity to present its claims before the IRP but failed to do so. Consequently, in law, MSEDCL's claim for past dues is extinguished. The court referenced the Supreme Court's decision in *Ghanashyam Mishra & Sons Pvt Ltd v Edelweiss Assets Reconstruction Company* to emphasize that once a Resolution Plan is approved, it becomes binding on all stakeholders, including statutory creditors like MSEDCL.

2. Whether MSEDCL's Past Dues Were Extinguished upon Approval of the Resolution Plan:

The court referred to the Supreme Court's ruling in *Ghanashyam Mishra* which clarified that upon approval of the Resolution Plan under Section 31 of the IBC, all claims and dues owed to any government or local authority that were not part of the resolution shall stand extinguished. The court concluded that MSEDCL's claim for past dues, which was not submitted within the required timeframe, stands extinguished. This decision was further supported by the Supreme Court's interpretation that the legislative intent is to freeze all claims to ensure the Resolution Applicant starts on a clean slate.

3. The Implications of Regulation 12.5 under the MERC Regulations 2021:

The court examined Regulation 12.5, which states that any unpaid charges for electricity due to the Distribution Licensee shall be a charge on the premises and recoverable from the new owner or occupier. The court concluded that this regulation does not create a statutory charge in the nature of security but merely allows MSEDCL to recover dues from whoever occupies the premises. Therefore, MSEDCL cannot stand outside an approved Resolution Plan based on this regulation.

4. The Balance of Competing Equities between NRC Ltd and MSEDCL:

The court emphasized the need to balance competing equities and noted that MSEDCL's interests should be safeguarded while also considering the viability of the Resolution Plan. The court directed MSEDCL to process NRC Ltd's application for a new electricity connection without insisting on payment of past arrears, but clarified that this does not create any equities in favor of NRC Ltd regarding MSEDCL's demand. The court allowed MSEDCL to continue showing the amount of arrears in its bills for internal record-keeping and to safeguard against future arguments of limitation.

Interim Order:

The court ordered MSEDCL to process NRC Ltd's application for the new connection without insisting on payment of past arrears, subject to the outcome of the petition. The court also permitted MSEDCL to continue showing the arrears in its bills for record-keeping purposes but prohibited MSEDCL from refusing or disconnecting the new connection based on unpaid past dues until further orders.

Conclusion:

The court concluded that MSEDCL's claim for past dues is extinguished due to its failure to submit the claim within the stipulated time. The court directed MSEDCL to process NRC Ltd's application for a new connection without insisting on past arrears and allowed MSEDCL to maintain records of the arrears for internal purposes. The final hearing of the petition was scheduled for 30th November 2022, with further affidavits to be filed by the parties as directed.

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