2022 (5) TMI 208 - HC - Insolvency and Bankruptcy

Prayer for immediate restoration of the petitioner s electricity supply - Section 238 of the IBC - dues of electricity supply to be cleared - HELD THAT - In the present case, there does not arise any question of the power purchase agreement itself being terminated. Section 238 of the IBC clearly provides that the provisions of the said Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law - In the present case, admittedly, the disconnection of the electricity supply of the petitioner no. 1 took place prior to the commencement of the CIRP. Section 56 further provides that the electricity supply may be discontinued until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid but no longer. The expression such charge refers to the first part of the section which relates the charge to the time of disconnection. Insofar as the electricity charges and disconnection charges are concerned, those obviously refer to the juncture of disconnection. However, only the reconnection charges, by definition, are incurred at the time of restoration of connection. This is not a case of ouster of the powers of the licensee conferred by the 2003 Act. Even if such powers under Section 56 of the 2003 Act remain intact, those become illusory in view of the dues themselves having been extinguished on the approval of the Resolution Plan, by independent operation of the IBC. Thus, even if the DVC retains its powers to recover debts and/or withhold electricity supply till the dues are cleared, there remain no dues to be cleared, since all pre- CIRP debts of the petitioner no.1-company, that is, the successful resolution applicant stand extinguished - the DVC acted without jurisdiction and de hors the law in further withholding the electricity supply of the petitioner no.1. The Damodar Valley Corporation (Respondent no. 1) are directed to restore the electricity supply of the writ petitioner no. 1-company at the earliest, positively within four weeks from date, subject to payment of the reconnection charges by the petitioner no. 1 - application allowed.

Summary

Issues:
Immediate restoration of electricity supply, Effect of Resolution Plan approval on pre-existing debts, Primacy of IBC over other laws, Estoppel by acceptance of payment, Impact of pending appeal on NCLAT, Interpretation of Electricity Act provisions.

Analysis:
1. Immediate restoration of electricity supply: The writ petitioner sought the immediate restoration of electricity supply by the Damodar Valley Corporation (DVC) after disconnection on June 7, 2019. The Resolution Professional tendered payment as per the approved Resolution Plan, but the DVC demanded outstanding dues of Rs. 31,77,33,915, leading to the dispute.

2. Effect of Resolution Plan approval on pre-existing debts: The petitioners argued that upon approval of the Resolution Plan by NCLT, all pre-existing debts of the creditor stand extinguished. Citing relevant judgments, they contended that the DVC's claims should be nullified post-approval of the Resolution Plan.

3. Primacy of IBC over other laws: The petitioners contended that Clause 4.6.4 of the West Bengal Regulatory Commission Regulation is contrary to IBC provisions, with IBC having primacy over other laws. They relied on legal precedents to support their argument.

4. Estoppel by acceptance of payment: The petitioners argued that the DVC, by accepting a partial payment, was estopped from demanding pre-CIRP dues as a condition for restoring electricity supply, emphasizing the principle of estoppel in this context.

5. Impact of pending appeal on NCLAT: The petitioners highlighted that the appeal pending before NCLAT did not automatically stay the operation of the order approving the Resolution Plan. They asserted that the pendency of the appeal should not prevent the court from issuing necessary orders.

6. Interpretation of Electricity Act provisions: The petitioners argued that Section 43 of the Electricity Act mandates the DVC to restore power supply post-Resolution Plan approval, as the claims of the DVC stand extinguished by law. They contended that the DVC's actions were without jurisdiction and contrary to the law.

7. Court Decision: The court allowed the writ petition, directing the DVC to restore electricity supply to the petitioner within four weeks, subject to payment of reconnection charges. The restoration was subject to the final outcome of the appeal before NCLAT, affecting the Resolution Plan's approval status. The court emphasized the need to balance convenience and inconvenience, ensuring the continuity of business operations for the petitioner.