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TMI Blog2022 (7) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... ous claims or past dues of electricity and other charges which had resulted into disconnection. 2. The respondents, herein, had filed the writ petition with the plea that the respondent no. 1 is an ISO 9001 certified company engaged in the manufacturing of iron, steel and ferro alloy products. The matter relates to the electricity connection of the plant at Bishnupur, West Bengal which was shut down in 2014. The respondent no. 1 was placed under Corporate Insolvency Resolution Process (for short, 'CIRP') under the Insolvency and Bankruptcy Code, 2016 (for short, 'the IBC') pursuance to which, the respondent no. 1 was taken over by the new management through respondent no. 2 who was a successful resolution applicant. For putting back the respondent no. 1 in operation by the new management, new electricity connection was required. Further case in the writ petition was that the electricity charges of the Damodar Valley Corporation (for short, 'DVC') were on the lower side and recently, the respondents had come to know that the Government of West Bengal had decided that all industrial parks in the State will be supplied power by the appellant by the matching tariff of DVC. The respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues. He has further placed reliance upon Section 56 of the Electricity Act, 2003. He has also submitted that in terms of Section 30(2)(e) of the IBC, resolution plan cannot be contrary to the Regulation of 2003 and the Electricity Act, 2003. He has also referred to Regulation 37 (c) of the Insolvency and Bankruptcy Board (IRPCP) Regulation, 2016 and has submitted that approval of the prayer for power connection was necessary while sanctioning the resolution plan. In support of his submissions, he has placed reliance upon the judgment of the Hon'ble Supreme Court in the matter of Municipal Corporation of Greater Mumbai (MCGM) vs. Abhilash Lal and Others reported in (2020) 13 SCC 234, in the matter of DBM Geotechnics and Constructions Private Limited vs. Dighi Port Limited reported in 2019 SCC OnLine NCLT 8142 and order of the National Company Law Tribunal: New Delhi, Principal Bench in the matter of Phoenix ARC Pvt. Ltd. Vs. Anush Finleash & Construction Pvt. Ltd. in (IB) - 1705(PB)/2018. He has further submitted that the appellant has claim of Rs. 25 crores and if he had submitted the claim, then in the resolution plan, he would have got only Rs. 4 lakhs, therefore, appellant did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shiv Shakti Inter Globe Exports Pvt. Ltd vs. M/s KTC Foods Private Limited and Another in Company Appeal (AT) (Insolvency) No. 650 of 2020 order dated 25th of February, 2022. He has further submitted that the appellant being an operational creditor is covered under Section 53(f) of the IBC. He has also submitted that the extinguishment of the claim of the appellant is not inequitable because earlier also, under Section 529(A) of the Companies Act, 1956, appellant had last priority and in the case of winding up, it would not have got anything. He has also placed reliance upon the judgment of the Hon'ble Supreme Court dated 17th of February, 2022 in Civil Appeal Nos. 447-448 of 2013 in the matter of M/s. Ruchi Soya Industries Ltd. Vs. Union of India and Ors. in support of his submission that when no claim was lodged by the appellant, the resolution plan is final and rights are frozen. He has further submitted that the provisions of the IBC will prevail over the Electricity Act, 2003 and in this regard has relied upon/distinguished judgments of Surana Power Limited and Gimpex Private Limited (Operational Creditor) vs. Surana Power Limited (Corporate Debtor) reported in 2019 SCC OnLin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIRP was initiated in respect of respondent no. 1 under the provisions of Insolvency and Bankruptcy Code, 2016 by the order of the NCLT dated 28th of October, 2019. The resolution professionals had invited claims on 31st of October, 2019. The appellant had not submitted any claim before the resolution professionals. The resolution plan was approved by the NCLAT on 10th of November, 2021. Hence, it is not in dispute that the claim of dues to the extent of Rs. 25 crores by the appellant as against the respondent, is for a period prior to date of announcement of CIRP. 7. Section 31 of the IBC relates to approval of the resolution plan and in terms of Section 31(1) of the IBC on approval, the resolution plan becomes binding on corporate debtor and its employees, members, creditors including the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force. It has not been disputed before this Court that under Section 31(1) of the IBC, the resolution plan is binding on the appellant. Section 53 of the Code which relates to distribution of assets and it has also not been disputed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , leading to the uncertainty of amounts payable by a prospective resolution applicant. In this judgment, Hon'ble Supreme Court had held that: "106. Following this judgment in V. Ramakrishnan case, it is difficult to accept Shri Rohatgi's argument that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile Directors of the corporate debtor. So far as the present case is concerned, we hasten to add that we are saying nothing which may affect the pending litigation on account of invocation of these guarantees. However, NCLAT judgment being contrary to Section 31(1) of the Code and this Court's judgment in V. Ramakrishnan case, is set aside. 107. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on full payment but after the approval of the resolution plan, the said clause of the earlier agreement has no effect as the resolution plan and provisions of IBC will prevail over the instrument also in terms of Section 238 of the IBC. 14. Learned counsel for the appellant has also placed reliance upon Clause 4.6.1 and 4.6.4 of the West Bengal Electricity Regulation Commission (Electricity Supply Code) Regulation, 2013 relating to termination of the agreement on continuous disconnection of power supply and new service connection only on payment of outstanding dues against the deemed terminated consumer. This regulation cannot be pressed into service by the appellant as it runs counter to the scheme of the IBC as also the judgment of the Hon'ble Supreme Court in the matter of Ghanashyam Mishra (Supra), Committee of Creditors of Essar Steel India Limited (supra) and also in view of the overriding effect of the IBC in terms of Section 238 of the IBC. He has placed reliance upon Section 56 of the Electricity Act, 2003 relating to disconnection of supply in default of payment. The said provision has no relevance as the disconnection was already done in the year 2014 and now it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the licensee to pay to him such price as determined by the Appropriate Commission. (3) If a distribution licensee fails to supply the electricity within the period specified in sub-section (1), he shall be liable to a penalty which may extend to one thousand rupees for each day of default." 17. Having due regard to the aforesaid provision, it is not open to the appellant to contend that though the earlier dues are not recoverable from the respondent no. 1, yet, the appellant will not supply electricity to the respondent. The counsel for respondent no. 1 has made it clear before this Court that it is ready to pay the fresh connection/reconnection charges to the appellant. 18. The counsel for the respondent has pointed out the recent view of the Tribunal in similar matters by placing reliance upon the order of the National Company Law Appellant Tribunal: Principal Bench, New Delhi dated 25th of February, 2022 in Company Appeal (AT)(Insolvency) No. 650 of 2020 in the matter of M/s Shiv Shakti Inter Globe Exports Pvt. Ltd. vs. M/s KTC Foods Private Limited and Another, wherein NCLAT has held that: "21. Adverting to the contention of the Learned Counsel for the Appellant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Respondent as a 'going concern' is upheld and the direction sought for in prayer (c) & (e) in CA No. 1189 of 2019 seeking extinguishment of past/remaining unpaid outstanding liabilities including contingent liabilities, prior to the sale as a 'going concern', after payment of sale proceeds distributed in accordance with Section 53 of the Code, is allowed. This Appeal is allowed to the extent indicated above." 19. Learned counsel for the respondent has also referred to the order of the National Company Law Appellate Tribunal, Principal Bench, New Delhi dated 23rd of May, 2022 in the matter of Damodar Valley Corporation vs. Dimension Steel and Alloys Private Limited and Others, wherein, considering somewhat similar issues, the NCLAT, taking note of the judgment of the Hon'ble Supreme Court in the matter of Ghanashyam Mishra (Supra) and considering Regulations 4.6.1 and 4.6.4 of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 has held that the regulations cannot be pressed into service when resolution plan is approved in the CIRP under the IBC. 20. In the matter of Innoventive Industries Limited (supra), Hon'ble Supreme Court has cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the later non obstante clause of the Parliamentary enactment will also prevail over the limited non obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." 21. Thus, in case of conflict with the State legislation, the provision of IBC will prevail. Hence, it is clear that the provisions of the IBC will prevail over the State Electricity Regulation. 22. Learned counsel for the appellant has placed reliance upon the judgment of the Hon'ble Supreme Court in the matter of Jaypee Kensington Boulevard Apartments Welfare Association and Others vs. NBCC (India) Limited and Others reported in (2022) 1 SCC 401, but the issue involved therein was different relating to approval of the statutory authority wherein Regulation 37 of CIRP Regulations itself provides for various measures including necessary approval from the Government and other authorities. In that background, the Hon'ble Supreme Court has held that YEDA established under the Act and its approval remains sine qua non for validity of resolution plan. Hence, that judg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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