2024 (6) TMI 308 - HC - Insolvency and Bankruptcy

Maintainability of the writ petition due to the presence of an alternative remedy - Recovery of electricity dues from the petitioner - effective date when as per the resolution plan, the petitioner No. 1 was taken over. Recovery of electricity dues - HELD THAT - After the petitioner No. 1 was admitted to insolvency, a resolution plan which had been submitted was approved by the National Company Law Tribunal and by the Supreme Court, and Reliance Projects and Property Management Solutions Ltd. (RPPMSL) took over the petitioner No. 1 on 22.12.2022. Section 31 (1) of the Insolvency and Bankruptcy Code, 2016 (I B Code) which is relevant in this respect, provides that an approved resolution plan is binding on all creditors. Even in cases where the creditors include Central Government and such other authorities to whom statutory dues are owed, they shall be bound by the said resolution. It is seen in the instant case that in accordance with the provisions of the I B Code, public announcements had been made inviting all creditors of the petitioner No. 1, to submit proof of claims on or before 01.06.2016, and the same was also published by the Interim Resolution Professional as evidenced by Annexures 3 to 5 of the writ petition - The approval order then on the resolution coming to a close, was passed on 03.12.2020 by the NCLT, wherein as per the approved Resolution Plan the claims, demands and liabilities as the case may be were to stand fulfilled on the deposit of the resolution amount. Though against the approval order, appeals were filed by various persons, the NCLT on an application by the petitioner No. 1 allowed the deposit of the total value of the Restoration Plan into an Escrow account, which would go towards distribution of the said amount to the creditors, which enabled the acquisition and control of the petitioner No. 1 on a clean slate, as also on all the claims which were lying before the effective date i.e. 22.12.2022. Maintainability of petition - availability of alternative efficacious remedy - HELD THAT - Due to the availability of alternative efficacious remedy, by virtue of Section 60 (5) (c) of the I B Code, 2016, the argument of non-maintainability of petition is not accepted, as the writ petitioner is clearly seeking a mandamus in view of the actions of the respondents Nos. 1 2, where in spite of the binding nature of Section 31 of the I B Code, are denying the writ petitioners electricity connections by making the same contingent upon the recovery of pending dues not attributable to it. The petition is allowed.

Summary

Issues Involved:
1. Recovery of electricity dues prior to the takeover date.
2. Validity of the resolution plan ignoring statutory dues.
3. Maintainability of the writ petition due to the presence of an alternative remedy.

Summary:

Issue 1: Recovery of electricity dues prior to the takeover date
The petitioner, Reliance Infratel Limited, was admitted to insolvency on 07.05.2019, and a resolution plan was approved by the NCLT and the Supreme Court, with Reliance Projects and Property Management Solutions Ltd. (RPPMSL) taking over on 22.12.2022. The respondent, Meghalaya Power Distribution Corporation Ltd., sought recovery of electricity dues for periods prior to the takeover, threatening to disconnect existing connections and refusing new ones. The petitioner challenged this demand, citing the Supreme Court's judgment in Tata Power Western Odisha Distribution Ltd. vs. Jagannath Sponge Pvt. Ltd., which held that a power distribution company cannot insist on payment of arrears negating the clean slate principle. The court noted that the respondent did not file claims during the insolvency process, making the demand notice untenable. Section 238 of the Insolvency Code overrides other laws, including the Electricity Act, thus the respondent's claim under Section 56 of the Electricity Act is unsustainable.

Issue 2: Validity of the resolution plan ignoring statutory dues
The respondent argued that a resolution plan ignoring statutory dues is invalid, citing State Tax Officer vs. Rainbow Papers Limited. However, the court found that the resolution plan, approved by the NCLT, extinguished all claims, demands, and liabilities prior to the effective date. The court emphasized that Section 31(1) of the Insolvency and Bankruptcy Code, 2016, binds all creditors, including statutory authorities, to the approved resolution plan. The court also referred to the Supreme Court's decision in Ghanshyam Mishra vs. Edelweiss Asset Reconstruction Co. Ltd., which supports the clean slate principle, preventing surprise claims against the successful resolution applicant.

Issue 3: Maintainability of the writ petition due to the presence of an alternative remedy
The respondent contended that the writ petition is not maintainable due to the availability of an alternative remedy u/s 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. The court rejected this argument, noting that the petitioner sought a writ of mandamus due to the respondents' arbitrary actions in denying electricity connections. The court held that the judgments cited by the respondent were not applicable to the present case.

Conclusion:
The court allowed the writ petition, ruling that the respondent's actions were arbitrary and unreasonable, and that the petitioner is not liable for dues prior to the effective date of the resolution plan. The court emphasized the binding nature of the resolution plan u/s 31 of the Insolvency and Bankruptcy Code, 2016, and the overriding effect of Section 238 of the Code. No order as to costs.