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TMI Blog2022 (8) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... ness(es) of the corporate debtor as a going concern, as envisaged in Regulation 32, Clauses (e) and (f) respectively, do not contemplate automatic transfer of all pre-CIRP liabilities of the corporate debtor to the auction purchaser - the Regulations framed under the authority conferred by the IBC cannot be construed to override the provisions of the Code itself. Hence, no interpretation contrary to Section 53 of the IBC which, again, is preceded by a non obstante clause, can be attributed to the expression going concern sale , as contemplated in Rule 32 of the Liquidation Process Regulations, 2016. In the present case, the claim of the WBSEDCL of outstanding dues from the petitioners as a pre-condition for grant of electricity cannot be sustained. The WBSEDCL shall give new electricity connection without insisting upon payment of such dues by the petitioners, subject to compliance of all other formalities by the petitioners in connection with their application for new electricity connection at the earliest, latest within a month from compliance of such formalities by the petitioners. Later Judgement: At this juncture after delivery of judgment learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the petitioners had to clear the outstanding dues prior to getting a new electricity connection. 5. The learned Senior Advocate for the petitioners cites Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta, reported at 2019 SCC OnLine SC 1478 for the proposition that a successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him was accepted as this would amount to a hydra-head popping up which would throw into uncertainty the amount payable by a prospective resolution applicant who successfully takes over the business of the corporate debtor. Unless the claims were submitted and decided by the resolution professional, the successful resolution applicant starts all over on a fresh slate . 6. Only upon failure of the corporate insolvency resolution process, the IBC provides for liquidation, which is governed by Chapter III of the IBC. The learned Senior Advocate places reliance on the said Chapter, in particular referring to Sections 36 to 42 of the IBC, to elucidate the scheme of liquidation under the IBC. 7. It is submitted that only if claims are admitted by the liquidator under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slump transaction of assets. 14. Under the terms and conditions of sale, it is submitted, the petitioners acknowledged that the assets of the company were being transferred by way of slump sale. However, there is no other reference to slump sale in the relevant documents. 15. The National Company Law Tribunal (NCLT), in connection with the corporate resolution proceedings, specified vide order dated September 14, 2018 that the petitioner would have to make application in the prescribed format for reconnection. Since a precondition of such restoration of connection was payment of the outstanding dues against electricity, the petitioners could not avoid the liability to pay the same. 16. Since the business was sold as a whole, as a going concern , it is the liability of the petitioner-company to pay the outstanding electricity charges to get electricity line at the factory premises. 17. Learned counsel for the respondent no.1 submits that the respondent no.1 is entitled to Rs.3.5 crore as outstanding dues from M/s. Barjora Steel and Re-Rolling Mills Private Limited, which was purchased by the petitioner through a slump sale. It is submitted that repeated assurances were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he distribution licensee cannot make a claim all over again, despite such refusal by the Adjudicating Authority to admit its claim. Mere pendency of an appeal against such refusal and/or the order of sale does not, it is well-settled, ipso facto, operate as a stay or cancellation of such refusal of claim. 27. The IBC is a self-sufficient Code and provides a complete mechanism in respect of Corporate Insolvency Resolution and Liquidation. 28. Liquidation, as envisaged in the IBC, is not a mere isolated offshoot of Insolvency Resolution proceeding but is one of the logical conclusions of a resolution proceeding. The procedure as contemplated in the IBC is an integrated continuum. 29. In order to examine the scheme of liquidation under the IBC in such context, Section 5(18) of IBC is required to be considered first. The said sub-section provides that liquidator means of an insolvency professional appointed as a Liquidator in accordance with the provisions of Chapter III or Chapter V of Part-II, as the case may be. Section 5(20) stipulates that operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution of assets in liquidation and sets out the order of priority of distribution of proceeds from the sale of the liquidation assets. The sixth category in such pecking order is Section 53(1)(f), any remaining debts and dues . Clause (f) is the only provision in Section 53 which confers rights on the operational creditors to recover their dues. 35. As such, Section 53 is the culmination of the entire endeavour of the Liquidator and the order of priority given therein cannot be overridden by any of the operational creditors of the corporate debtor by jumping the queue in contravention of the priorities enumerated in Section 53. 36. What is next relevant is Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The different types of sale of asset have been enumerated therein. Up to Clause (d) of Regulation 32, sale of assets is dealt with. Clause (e) provides for sale of the corporate debtor as a going concern. Again, Clause (f) contemplates the business of the corporate debtor being sold as a going concern. 37. Regulation 32-A of the said Regulations provides for sale as a going concern. Sub-regulation (2) of Rule 32- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the period of two years preceding the liquidation commencement date; (ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; (f) any remaining debts and dues; (g) preference shareholders, if any; and (h) equity shareholders or partners, as the case may be. (2) Any contractual arrangements between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction. Explanation .- For the purpose of this section- (i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and class of recipients, if the proceeds are insuff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the provisions of the Code and the ancillary Regulations, as discussed above. 48. Hence, in the present case, the claim of the WBSEDCL of outstanding dues from the petitioners as a pre-condition for grant of electricity cannot be sustained. 49. Thus, WPA 7364 of 2019 is allowed, thereby setting aside the order of rejection dated March 16, 2019, by which the respondent no.3, that is, the Chief Engineer, Central Commercial Department, West Bengal State Distribution Company Limited (WBSEDCL) refused to grant new electricity connection to the petitioners in respect of the factory of the petitioner no.1-Company unless the alleged outstanding dues left by the erstwhile owner, to the tune of above Rs.3.5 crore, was deposited by the petitioner. 50. The WBSEDCL shall give new electricity connection without insisting upon payment of such dues by the petitioners, subject to compliance of all other formalities by the petitioners in connection with their application for new electricity connection at the earliest, latest within a month from compliance of such formalities by the petitioners. 51. There will be no order as to costs. 52. Urgent certified server copies of this ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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