2024 (7) TMI 385 - AT - Insolvency and Bankruptcy

CIRP - Liability of appellant, being the purchaser of the asset, for past dues of the electricity of the Corporate Debtor (CD) - obtaining a new electricity connection on payment of statutory dues except for the past dues - HELD THAT - In the case of Paschimanchal Vidyut Vitram Nigam Ltd. 2023 (12) TMI 256 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI , this Court has reiterated its view that the past dues cannot be claimed for the purpose of grant of new electricity connection. It is pertinent to mention that this Court in the case of Paschimanchal has also made a reference to the same clause of due diligence which is there in the sale certificate issued to the Appellant because in that also the property was sold on as is where is, as is what is, whatever there is and without recourse basis and framed the question that electricity dues of the CD who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/Successful Auction Purchaser is not res integra? . The decision in the case of Telangana State Southern Power Distribution Company Ltd. Anr. Vs. Srigdhaa Beverages 2020 (6) TMI 37 - SUPREME COURT , has also been distinguished in this case and also observed that ' This Tribunal took view that when the Corporate Debtor is sold in the liquidation proceeding, Corporate Debtor cannot be burdened by any past or remaining unpaid outstanding liabilities.' There is a patent error in the approach of the Adjudicating Authority in dismissing the application of the Appellant, therefore, the present appeal succeeds and the impugned order is hereby set aside though without any order as to costs - Petition allowed.

Summary

Issues Involved:
1. Liability for past electricity dues upon auction purchaser.
2. Applicability of "as is where is" clause in sale certificate.
3. Overriding effect of Insolvency and Bankruptcy Code (IBC) over other statutes.

Detailed Analysis:

1. Liability for Past Electricity Dues Upon Auction Purchaser:
The core issue revolves around whether the appellant, as the purchaser of the asset in liquidation, is liable to pay the past electricity dues of the Corporate Debtor (CD) for obtaining a new electricity connection. The appellant argued that pre-CIRP dues cannot be imposed on the auction purchaser, citing the principle of a clean slate purchase recognized in the IBC. The appellant relied on the judgment in "Chinar Steel Segments Centre Pvt. Ltd. Vs. Samir Kumar Agarwal," asserting that once a claim is dealt with under the liquidation process, it gets extinguished. The respondent countered by asserting their right to recover electricity dues from the auction purchaser under the Electricity Act, 2003, and cited the Supreme Court decision in "K.C Ninan Vs. Kerala State Electricity Board & Ors."

2. Applicability of "As is Where is" Clause in Sale Certificate:
The sale certificate issued to the appellant stated that the property was sold on an "as is where is basis," implying that all past, present, and future statutory liabilities, including electricity dues, would be borne by the successful bidder. The adjudicating authority dismissed the appellant's application based on this clause, emphasizing that the liabilities towards outstanding electricity dues were not waived due to liquidation.

3. Overriding Effect of Insolvency and Bankruptcy Code (IBC) Over Other Statutes:
The appellant argued that the IBC overrides the provisions of the Electricity Act, 2003, as per Section 238 of the Code. This was supported by the court's decisions in "Paschimanchal Vidyut Vitran Nigam Ltd. Vs. HSA Traders through Sole Proprietor & Ors." and "Tata Power Western Odisha Distribution Limited (TPWODL) & Anr. vs. Jagannath Sponge Private Limited," which held that electricity arrears cannot be insisted upon for issuing a new connection. The respondent's reliance on the "K.C Ninan" case was rebutted by the appellant, stating that it pertained to a sale under the SARFAESI Act and did not consider the overriding provisions of the IBC.

Judgment Analysis:
The tribunal referred to the Supreme Court's judgment in "Tata Power Western Odisha Distribution Limited" and reiterated that the auction purchaser cannot be burdened with the past electricity dues of the CD. The tribunal emphasized that the clean slate principle would be negated if the auction purchaser is required to pay the arrears for obtaining a new electricity connection. The tribunal also noted that the IBC's provisions override those of the Electricity Act, 2003, as per Section 238 of the Code.

The tribunal concluded that the adjudicating authority erred in dismissing the appellant's application and held that the appellant is entitled to a new electricity connection without being liable for the past dues of the CD. The impugned order was set aside, and the appeal was allowed without any order as to costs.