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TMI Blog2019 (2) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumed on commencement of CIRP shall be paid as per the prescribed charges as cost of CIRP. The commencement of CIRP in this case is from the date of the Order i.e. 09.08.2018. For the old outstanding payment due as on the date of commencement of CIRP, DGVCL has an option to lodge its claim of electricity charges to the Resolution Professional as prescribed under Insolvency & Bankruptcy Code. A requisite form is required to be submitted to Resolution Professional for lodgement of claim which ought to be admitted for due consideration, either at the time of finalization of Resolution Plan or even at the time of Liquidation of Assets of the Debtor Company. The Application filed by the Electricity Company is therefore allowed in terms of the above directions. Miscellaneous Application as submitted by an employee of Oracle Home Textile Limited (Corporate Debtor) and contesting that this Application is on behalf of all the Employees and Workmen of the Corporate Debtor - Prayer of the Applicant is to give direction to Resolution Professional to consider the salary payment to all Employees and Workmen - Held that:- The Employees and the Workmen of the Debtor Company are hereby directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on terms of payment of electricity dues. The Executive Engineer of Wapi Industrial Division, DGVCL had contacted the Officer of the Electricity Department for payment of ₹ 26,07,848/-. However, no amount was paid. The Applicant states that in view of Section 14 and Regulation 31 32 of Insolvency Resolution Process for Corporate Person, Regulation 2016 services provided by the Applicant falls under the ambit of essential services. However, regulation 32 makes it clear that essential services consumed as inputs to the output produced or supplied are not protected under Section 14 of the IBC. It is vehemently pleaded that Regulation 32 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 has, on one hand, defined essential goods as referred in Section 14(2), viz. electricity, water, telecommunication services and information technology services. However, a rider is that only to the extent these are not a direct input to the output produced or supplied by the Corporate Debtor. An illustration is also given that water supplied to a corporate debtor will be essential supplies for drinking and sanitation purposes, and not for generation of hydro-ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'output produced' or supplied by the Corporate Debtor. While dealing this question Respected NCLAT in the case of Dakshin Gujarat VIJ Co. Ltd. v. ABG Shipyard Ltd. (NCL-AT) has held as under :- 13. However, from the provisions of 'I B Code' and Regulations, we find that no prohibition has been made or bar imposed towards payment of current charges of essential services. Such payment is not covered by the order of 'Moratorium'. Regulation 31 cannot override the substantive provision of Section 14; therefore, if any cost is incurred towards supply of the essential services during the period of 'Moratorium', it may be accounted towards 'Insolvency Regulation Process Costs', but law does not stipulate that the suppliers of essential goods including, the electricity or water to be supplied free of cost, till completion of the period of 'Moratorium'. Payment if made towards essential goods to ensure that the Company remains on-going as made in the present case for the month of December, 2017, such amount can be accounted towards 'Insolvency Resolution Process Costs', but it does not mean that supply of essential goods such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to give notice and disconnect the electricity supply of the Corporate Debtor. 5.2 The objective of introduction of this Code is to reorganize the business of a Debtor Company and in a time bound manner make effort for maximisation of value of the assets of Debtor Company. To achieve this target, electricity connection is required to run the Debtor Company so that the maximum value of the assets can be realized. As far as the interpretation of Regulation 32 is concerned, the exception is that the electricity supply cannot be treated as an input due to which producing an output. So the rider is that if on usage of essential goods, such as electricity, there should not be any output produced or supplied by the Corporate Debtor. In my opinion, the condition as prescribed under Regulation 32 is not in the benefit of a Corporate Debtor who is undergoing Insolvency proceeding. A Corporate Debtor is concerned about its revival. In the present case, undisputedly input is raw-material i.e. yarn and the output is towels. For a manufacturing unit input is always a raw-material which is consumed for the production of finished goods. In the illustration, generation of hydro-electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e borne by the Committee of Creditors. 5.4 Learned Resolution Professional has explained the financial problem since the Corporate Debtor is already under heavy Debt. It is also informed that the members of the Committee of Creditors have not agreed to induct Funds for the purpose of running of the business. At this juncture, it is worth to mention that the CIRP cost has to be borne by the Committee of Creditors as prescribed under Regulation 33 of IBBI (Insolvency Resolution Process for Corporate Persons (Regulations) 2016 which reads as under :- 33. Costs of interim resolution professional: (1) The applicant shall fix the expenses to be incurred on or by the interim resolution professional. (2) The Adjudicating Authority shall fix expenses where the applicant has not fixed expenses under sub regulation (1) (3) The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ratifies. (4) The amount of expenses ratified by the committee shall be treated as insolvency resolution process costs. [Explanation. - For the purposes of this regulation, expenses include the fee to be paid to the interim resolution professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate debtor as a going concern. (2) For the purposes of sub-section (1), the interim resolution professional shall have the authority- (a) to appoint accountants, legal or other professionals as may be necessary; (b) to enter into contracts on behalf of the corporate debtor or to amend or modify the contracts or transactions which were entered into before the commencement of corporate insolvency resolution process; (c) to raise interim finance provided that no security interest shall be created over any encumbered property of the corporate debtor without the prior consent of the creditors whose debt is secured over such encumbered property: Provided that no prior consent of the creditor shall be required where the value of such property is not less than the amount equivalent to twice the amount of the debt. (d) to issue instructions to personnel of the corporate debtor as may be necessary for keeping the corporate debt as a going concern; and (e) to take all such actions as are necessary to keep the corporate debtor as a going concern. ........ 40 .. 41 . 42 w.e.f. 1-12-2016, vide Notification SO 3594 (E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee of Oracle Home Textile Limited (Corporate Debtor) and contesting that this Application is on behalf of all the Employees and Workmen of the Corporate Debtor. Prayer of the Applicant is to give direction to Resolution Professional to consider the salary payment to all Employees and Workmen. It is proposed that the Funds can be generated by disposing of the machinery of the Corporate Debtor. 6.1 The Employees and the Workmen of the Debtor Company are hereby directed to fully cooperate with the Resolution Professional so that the manufacturing activity as well as other business activity of the Debtor Company should not get hampered in any manner by the conduct of the Workmen/ Employees. An Order dated 21.12.2018 in respect of this Miscellaneous Application filed by the Workmen has already been passed by this Bench connected to this problem to ensure the smooth functioning of the Debtor Company, relevant portion for ready reference, reproduced below:- 3. The Resolution Professional has informed that for running of the Debtor Company, interim finances are required. There should not be any obstacles in running of the company Because the intention of the insolvency pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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