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TMI Blog2022 (3) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the IBC, upon approval by the Adjudicating Authority, the resolution plan becomes binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan - Section 238 of the IBC stipulates that the provisions of the Code 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. There cannot be any doubt that the WBSEDCL, discharging the function of the State, comes within the purview of State under Article 12 of the Constitution of India. The State Government is the executive authority through which the State primarily discharges its functions under the law. Hence, dues payable to the WBSEDCL squarely fall within the ambit of operational debt as defined under the IBC. Hence, the provisions of the IBC are attracted to dues payable to the WBSEDCL - Admittedly, in the present case, the electric supply of the petitioner no. 1-company was cut off by the WBSEDCL on November 29, 2014, for non-payment of electricity charges. For restoring such connection, the licensee, under Section 56 (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that by operation of Section 31(1) of the IBC, the petitioner no.1 has no dues whatsoever upon the approval of the said Resolution Plan. 4. The learned Senior Advocate submits that claims which were not filed before the approval of the Resolution Plan and were not a part of the said Plan, stand extinguished. The learned Senior Advocate places reliance on the provisions of Section 31(1) and Section 238 of the IBC on such score and cites Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited, reported at (2021) 9 SCC 657, where the Supreme Court held that claims which were not filed before the approval of the Resolution Plan by the NCLT and which are not a part of the Resolution Plan, stand extinguished. 5. The petitioner also places reliance on the judgment dated February 25, 2021 passed by the National Company Law Appellate Tribunal (NCLAT), Delhi, in M/s. Shiv Sakti Inter Globe Exports Pvt. Ltd. Vs. M/s. KTC Foods Private Limited in Company Appeal (AT) (Insolvency) No.650 of 2020, wherein it was held that subsequent to the sale of the Corporate Debtor Company as a going concern , claims of the distribution licensee, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be exercised. However, once the Resolution Plan is passed, it is submitted, the Company which is taken over (in the present case, the petitioner no.1) starts on a clean slate theory , meaning that there is no debt in existence, all of which are extinguished after the passing of the Resolution Plan. 9. The learned Senior Advocate next cites Isha Marbles Vs. Bihar State Electricity Board, reported at (1995) 2 SCC 648, wherein the Supreme Court held that an Auction Purchaser cannot be fastened with the liability of the erstwhile consumer. In the said case, Section 24 of the 2003 Act was held to have been construed correctly by the High Court and that there is no charge over the property. Hence, it was held, where the premises comes to be owned or occupied by the auction purchaser, when such purchaser seeks supply of electrical energy, he cannot be called upon to clear past arrears as a condition precedent to supply. 10. Learned counsel for the distribution licensee contends that, as per Clause 28 of the agreement between the petitioner no.1-Company and the WBSEB dated November 15, 1997, all provisions of the then Indian Electricity Act, 1910 and Electricity Supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity to the petitioner no.1 was not curtailed or taken away. 15. The petitioners liability, as contended in the writ petition, is limited to what is provided for in the Resolution Plan sanctioned by the NCLT on November 10, 2021 in CP (IB) No. 325/7/HDB/2018 , from which it appears that the Operational Creditors were getting paid 0.25 per cent of their respective admitted dues. Had the respondent-WBSEDCL lodged its claim on the basis of the decree, the pro-rata payment to the Operational Creditors would have accordingly stood reduced from 0.25 per cent to approximately 0.19 per cent. If the amount recoverable is determined at 0.25 per cent of the decretal sum, the respondent would have received ₹ 6,26,165.70p and, if determined on the basis of 0.19per cent, ₹ 4,75,885.93p. 16. There is no provision in the IBC, it is argued by the WBSEDCL, which expressly provides for expropriation of pre-existing assets of a creditor (in this case, money recoverable from the company and rights flowing from the 2003 Act and the Electricity Supply Code, 2013 as well as the agreement dated November 15, 1997), retrospectively by way of the Resolution Plan being approved by the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lash Lal and others, reported at (2020) 13 SCC 234. In this connection, the WBSEDCL also relies on two judgments of the NCLT in IMICL Dighi Maritime Limited Vs. Dighi Port Limited, reported at (2019) SCC OnLine NCLT 8142 and Phonenix Arc Pvt. Ltd. Vs. Anush Finlease and Construction Pvt. Ltd., reported at Manu/NC/8740/2020. 20. Section 238 of the IBC comes into operation, it is argued, only in cases of clear conflict between any of the IBC provisions and those of any other statute. For this proposition, the learned Senior Advocate appearing for the WBSEDCL places reliance on Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd., reported at (2018) 2 SCC 674. 21. Lastly, it is argued by the WBSEDCL that a similar contention, as the one raised by the writ petitioner, is pending consideration before the NCLAT, where no orders have been passed restoring the electricity connection in favour the Resolution Applicant. The said matter is Company Appeal (AT) (Ins.) No. 413 of 2021 [Damodar Valley Corporation Vs. Shriram Rathi Steels Pvt. Ltd.]. 22. It is, thus, submitted that the vital issue of alternative remedy available to the writ petitioners under Section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any such law. 29. The Supreme Court, in Essar Steel (supra) and Ghanashyam Mishra s Case (supra), has propounded the Clean Slate theory. According to the theory, a successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted, as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully takes over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. 30. All such claims, which are not a part of the resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect of a claim, which is not part of the resolution plan. 31. The proposition was reiterated by the Supreme Court as recently as on February 17, 2022 in M/s Ruchi Soya Industries (supra), where it was held that on the date of approval of the Resolution Plan by the NCLT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Both of the purported dual rights emanate from such nucleus. It is the debt/dues of the consumer to the licensee which forms the core of both the rights of recovery and disconnection. 37. It is the claim for the dues of the consumer to the licensee in respect of electricity charge or other sums which provides the bulwark of the rights of the licensee. 38. If the debt due to the licensee (under the 2003 Act), in its avatar as an operational creditor (under the IBC), is extinguished by operation of Section 31 (1) of the IBC, read in the context of the landmark judgments of Essar Steel (supra) and Ghanashyam Mishra (supra), the common nucleus of both the rights of the licensee under the 2003 Act, that is, the rights of recovery and non-restoration of connection, is also extinguished co-equally. 39. The argument of the distribution licensee as regards the absurdity of one legal fiction (extinguishment of liability) being extended to another (extinguishment of the other separate statutory right to continue disconnection of electricity) becomes irrelevant. It is not that the statutory right, to go on discontinuing electricity, is extinguished, but such right is rendered il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent perspective, the civil court s decree per se did not create an independent right of the WBSEDCL but merely endorsed its right to recover dues, as a precondition of reconnection, conferred on the licensee under Section 56 (1) of the 2003 Act. With the said right itself becoming delusional by extinguishment of the dues, the consequential decree is automatically denuded of sanction. 46. From yet another point of view, the civil court s decree derives its sanction from Section 2 (2) of the Code of Civil Procedure, which also falls within the expression any other law by virtue of which the decree, an instrument under Section 238 of the IBC, has effect. Such inconsistency between the decretal entitlement and the extinguishment of the dues, thus, entails that the former yields to the latter in terms of Section 238 of the IBC. 47. In such view of the matter, W.P.A. No. 1936 of 2022 is allowed, thereby directing the WBSEDCL to restore electric supply to the petitioner no. 1, subject to the petitioner no. 1 paying only the reconnection charges, as expeditiously as possible, preferably within a fortnight from after the deposit of such charges. It is made clear that the WBSE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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