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2022 (3) TMI 604 - AT - Insolvency and BankruptcyRestoration of power connection to the Corporate Debtor for getting a better resolution plan - seeking reconnection of power supply of the Durgapur factory of Corporate Debtor within 15 days on deposit of current electricity dues from the date of initiation of CIRP without payment of past dues and any security deposit from the Corporate Debtor - HELD THAT - From the provision in Section 14(2) of IBC, it is found that supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. The essential goods and supplies have been defined and explained through an illustration in Regulation 32 of the CIRP Regulations wherein it is clarified that essential goods and services referred to in Section 14(2) shall be considered essential supplies only to the extent they are not a direct input to the output produced or supplied by the Corporate Debtor. Moreover, under Section 14(2-A) the IRP/RP can ask for continuation of the supply of such goods and services which are critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern. Admittedly the disconnection of the electricity supply to the Durgapur unit took place on 14.9.2019. According to clause 4.6.1 of the Power Supply Agreement, deemed termination of the agreement could happen only after 180 days from the date of disconnection. Thus deemed termination could have taken place on or after 12.3.2020 i.e. 180 days after the date of disconnection. The order for initiation of CIRP was passed on 17.12.2019 and moratorium was imposed under section 14 from the same date. Thus the deemed termination of the Power Supply Agreement to the Durgapur unit of the corporate debtor which could not take place by 17.12.2019, could not happen during the moratorium period, by virtue of protection provided under Section 14(2) - It is also noted that the IRP has asked for reconnection of the electricity supply so that a better resolution plan can be obtained in the resolution of the CD which is the intent of the IBC. In passing the Impugned order by which directions have been given to DVC for reconnection of the electricity supply to the corporate debtor during the moratorium period and also allowing waiver of security deposit, the Adjudicating Authority has not exceed its jurisdiction under the IBC - impugned order upheld. Appeal dismissed.
Issues Involved:
1. Restoration of power supply to the Corporate Debtor. 2. Applicability of Section 14(2) of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Jurisdiction of the National Company Law Tribunal (NCLT) in directing reconnection of electricity. 4. Payment of past dues and security deposit. Issue-Wise Detailed Analysis: 1. Restoration of Power Supply to the Corporate Debtor: The appeal was filed against an order directing the restoration of power connection to the Corporate Debtor's Durgapur factory. The power was disconnected due to non-payment of dues. The Interim Resolution Professional (IRP) requested reconnection, citing electricity as an essential service under regulation 32 of the CIRP Regulations, 2016. The Appellant argued that reconnection is not covered under Section 14(2) of IBC since the disconnection occurred before the initiation of the Corporate Insolvency Resolution Process (CIRP). 2. Applicability of Section 14(2) of IBC: Section 14(2) prohibits the termination of essential services during the moratorium period. The Appellant contended that this provision does not apply as the disconnection happened before CIRP initiation. The Tribunal noted that the essential services should not be interrupted during the moratorium, and reconnection was necessary for a better resolution plan. The Tribunal also highlighted that the deemed termination of the Power Supply Agreement could not occur during the moratorium. 3. Jurisdiction of NCLT in Directing Reconnection of Electricity: The Appellant argued that the matter falls under the jurisdiction of the Electricity Act and the West Bengal Electricity Regulatory Commission (WBERC) Regulations, not NCLT. The Tribunal distinguished this case from the Embassy Property Developments case, where NCLT lacked jurisdiction over a mining lease dispute. The Tribunal held that NCLT has the jurisdiction to direct reconnection as it pertains to maintaining the Corporate Debtor as a going concern during CIRP. 4. Payment of Past Dues and Security Deposit: The impugned order directed reconnection without requiring the Corporate Debtor to pay past dues or additional security deposits. The Tribunal upheld this, stating that past dues should be settled through the resolution plan. The Appellant's claim for past dues was to be considered by the Committee of Creditors, and payment would be made as per the approved resolution plan. The Tribunal referenced the Uttarakhand Power Corporation case, supporting the restoration of electricity on payment of current dues. Conclusion: The Tribunal concluded that the NCLT did not exceed its jurisdiction in ordering the reconnection of electricity. The essential services provision under Section 14(2) of IBC was applicable, and the reconnection was necessary to preserve the Corporate Debtor as a going concern. The Tribunal affirmed that past dues would be settled through the resolution process, and current dues during CIRP would be paid by the Corporate Debtor. The appeal was dismissed, and the impugned order was upheld.
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