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TMI Blog2023 (1) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... ing consumer nor did the writ petitioner enjoy any benefit of the electricity connection, in respect of which default was committed, at any point of time. It has been held time and again that upon a CIRP proceeding having concluded, no liability remains apart from the sale price. The provisions of Regulations 3.4.2 and 4.6.4 have to be tested on the anvil of the parent right conferred under Section 56(1) of the 2003 Act and cannot be divorced from the scheme of the parent Act itself. Since there was no subsisting due from the auction purchaser, particularly since the contract had already terminated by operation of Regulation 4.6.1, the right to discontinue, which is inextricably linked with such due, did not survive. Along with the dues, the right of discontinuance had ceased at the juncture when the auction purchase and the application for new connection took place - the licensee, that is, the DVC acted de hors the law in insisting upon clearance of the outstanding dues left by the erstwhile consumer as a pre-condition for giving a new connection to the petitioner. The proceeding before the Tribunal falls within the scope of the IBC and only in respect of liabilities aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the WBERC : Mr. Pratik Dhar, Ms. Sharmistha Ghosh, Mr. Amit Ghosh For the WBSEDCL: Mr.Saurav Chaudhuri JUDGMENT SABYASACHI BHATTACHARYYA, J:- 1. One Shri Badrinarayan Alloys Steels Limited (hereinafter referred to as the borrower ) was enjoying electricity at its premises from the respondent no. 1, the Damodar Valley Corporation (for short, the DVC ). The DVC issued a disconnection notice on August 28, 2018 on the allegation of non- payment of electricity and disconnected the electricity supply of the borrower sometime in the month of September, 2018. 2. On December 5, 2018 a Corporate Insolvency Resolution Proceeding (CIRP) was initiated against the borrower at the behest of the Bank of Baroda. The National Company Law Tribunal (NCLT), by its order dated September 6, 2019, recorded that the resolution process had failed and appointed a liquidator under Section 33 (4) of the Insolvency and Bankruptcy Code, 2016 (in brief, the IBC ). On November 21, 2019 the resolution professional moved an application for a direction on the DVC to reconnect electricity supply for the corporate debtor, which was turned down by the NCLT. 3. On December 10, 2020 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supply Code ), for which the appeal is not an alternative efficacious remedy. The NCLT, while rejecting the petitioners application, had stressed on the point that the company is not a going concern and disconnection of electricity does not make any difference in its status in order to fetch more sale price. 9. The learned Senior Advocate for the petitioner further argues that the DVC s reliance on Regulation 4.6.4 of the Supply Code is arbitrary and unreasonable in the facts of the case, where the petitioner has acquired the premises and the factory as a going concern through a liquidation sale under the IBC. 10. It is argued that the IBC is a self-contained code enacted after the enactment of the Supply Code of 2013. The IBC contemplates a mechanism for recovery of dues, including electricity dues of the respondent no. 1 as a claim made from the liquidation estate, from which there can be no deviation. 11. Even in cases of deemed termination of supply, it is contended, recovery of outstanding dues is under Regulation 3.4.2. 12. Regulation 4.6.4 of the Supply Code ought not to be exercised as a blanket provision but where it is necessary to do so. Regulations 3.4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Shree Balasaria Construction (P) Ltd. vs. CESC Ltd. [1995 SCC OnLine Cal 106] and Ahmedabad Electricity Co. Ltd. vs. Gujarat Inns (P) Ltd. [(2004) 3 SCC 587], in which the Supreme Court held that in case of a fresh connection though the premises are the same, the auction- purchasers cannot be held liable to clear the arrears incurred by the previous owners in respect of power supply to the premises in the absence of there being a statutory provision in that regard. 19. The petitioner no. 1, it is alleged, purchased the premises primarily for taking over the functioning of the factory situated on it, which has been shut down for long, causing serious industrial unrest due to unemployment of large workforce in the backward districts of Howrah. The petitioner no. 1 had, for such purpose, obtained necessary licenses, permits, environmental clearances, consent to establish and to operate and GST documentation for operating the plant. 20. The learned Senior Advocate argues that the actions of the respondents are without authority of law and have deprived the petitioners from utilizing its immovable property and have thus breached the Constitutional right to property of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all else in the pleadings and prayers of the two proceedings are substantially the same. Thus, the second proceeding, that is, the present writ petition ought to be stayed under Section 10 of the Code of Civil Procedure. 26. The learned Senior Advocate for the DVC, by placing reliance on the language of Section 60(5)(c) of the IBC and the judgments of Gujarat Urja Vikas Nigam Limited vs. Amit Gupta [(2021) 7 SCC 209] and Tata Consultancy Services Limited vs. SK Wheels (P) Limited [Resolution Professional], reported at (2022) 2 SCC 583, submits that when termination of a contract takes place solely on the ground of insolvency, the NCLT will have jurisdiction but the said Tribunal would not have jurisdiction if the termination is on a ground independent of insolvency. This is the ground on which the DVC succeeded before the NCLT and the petitioner s application was dismissed. 27. However, the writ petitioner, despite having preferred a challenge before the NCLAT against the order of the NCLT, thus proceeding on the premise that it has jurisdiction, has invoked the jurisdiction of this court under Article 226 of the Constitution of India and seeks to initiate parallel proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case, the right of the DVC to claim outstanding dues, protected under Regulation 4.6.4 of the concerned Regulations, does not get waived. 33. The sale notice, it is argued, clearly stipulated that the petitioner shall be fully responsible for satisfying the requirements of the IBC and related Regulations as well as all the laws in force that are or may be applicable to the applicant or the sale process . 34. With regard to the petitioners challenge to the vires of Regulation 4.6.4, the DVC contends that the vires of a delegated legislation can be challenged only on the grounds of legislative competence and/or violation of Article 14 of the Constitution of India. The Regulator s legislative competence has not been challenged by the petitioners. Hence, the only issue is whether the Regulation is violative of Articles 14, 19 (1) (g), 21 and 300A of the Constitution of India. 35. The Regulation, it is submitted, has been made in public interest and as part of public policy, which is mainly to ensure that the licensees realize their dues. Failure to do so impacts society as the operating loss of the licensees has a cascading effect on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. LLP (Limited Liability) Vs. Dakshin Haryana Bijli Vitran Nigam Limited and others]. 39. The learned Senior Advocate for the DVC submits that the sale being a slump sale and not one as a going concern, the question of any benefit being extended to the petitioner as regards electricity dues did not and could not arise. This can happen only when the company and its assets are sold as a going concern. Regulations 32 and 32A of the 2016 Liquidation Process Regulations are cited in this context. 40. Since the sale proceeds could not have included the dues of DVC, the contract not having been part of the liquidation estate, the dues of the licensee could not have been waived by the liquidator, who had no such jurisdiction in law as Section 53 of the IBC did not apply to the facts of the case. 41. In the judgment of Nanu Tradecom, the sale was as a going concern where assets and liabilities were both transferred. The said case is fully covered by Regulation 32A and 32 (e) and (f) of the 2016 Regulations and thus, it is argued, has no manner of application in the facts of the instant case. Moreover, the Division Bench judgment in Ramdoot Rollers (supra) was not brought to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on as is where is, whatever there is and without recourse basis, there can be no doubt that the liability to pay electricity dues exists on the purchaser. 50. The learned Senior Advocate for the WBERC contends that Regulation 4.6.4 is reasonable, which can also be found from the fact that there also exists another regulation, being Regulation 3.4.2 under the heading Recovery of Outstanding Dues , which is not under challenge. If the said regulation is read together with Regulation 4.6.4, which carries the heading deemed termination of agreement , it can be clearly found that proper checks and balances have been made within the permitted sphere of reasonableness. The criteria as specified in Regulation 3.4.2 being relatable to recovery of outstanding dues, it is required to be read together with the impugned Regulation 4.6.4. 51. Hence, the WBERC submits that there is also no requirement of reading down Regulation 4.6.4 since, as far as recovery of outstanding dues is concerned, the licensee has got no other alternative but to take into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumer(s) and the new consumer(s) in respect of the same premises is proved. The onus of proving a nexus, if claimed by a licensee, shall lie on the licensee. 4.6.4 Notwithstanding anything contained contrary elsewhere in these Regulations were deemed termination of agreement has taken place, then on the basis of application for any consumer new service connection can only be provided in the same premises if the outstanding dues against the deemed terminated consumer is cleared along with the late payment surcharge. 59. Section 56(1) of the Electricity Act, 2003 (for the sake of brevity, the 2003 Act ), provides that upon a consumer neglecting to pay electricity charges and without prejudice to his rights to recover such charge or other sum by suit , the licensee may cut off the supply of electricity upon notice as contemplated therein. The second limb of the said sub-section stipulates that the licensee may discontinue the supply until such charge or other sum, together with expenses incurred in cutting off and reconnecting supply are paid, but no longer. 60. The principle implicit in the said provision is that the discontinuance shall continue only until such ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reon. 70. A comparison between Regulations 3.4.2 and 4.6.4 of the Supply Code clearly reveals the respective fields of operation of the two provisions, a part of which, though, may be arguably overlap each other. 71. Clause 3.4.2 provides for recovery of outstanding dues from a new and subsequent consumer in respect of the same premises and restricts such right specifically to situations where a nexus between the previous and defaulting consumer and the new consumer in respect of the same premises is proved. Not only that, the said Regulation provides in no uncertain terms that the onus of proving a nexus, if claimed by a licensee, shall lie on the licensee. 72. A perusal of Regulation 4.6.4, on the other hand, shows that the same operates in cases where deemed termination of agreement has taken place in terms of Regulation 4.6.1, after 180 days from disconnection. In such cases, on the basis of application of any consumer new service connection can only be provided if the outstanding dues are cleared along with late payment surcharge. 73. It can very well be seen even on a cursory perusal that the expressions used in Regulations 3.4.2 and 4.6.4 are, respectively, ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icensee (DVC), there is no scope of the DVC insisting upon prior clearance of the outstanding dues and/or late payment surcharge as a pre-condition of giving a new electricity connection to the petitioner, who is entitled in law to start afresh on a clean slate. 79. It has been held time and again that upon a CIRP proceeding having concluded, no liability remains apart from the sale price. 80. The argument of the DVC, that the contract had terminated with the borrower and the liquidator had no jurisdiction, does not help the DVC in any manner. When the assets were sold, there was no electricity connection existing at the premises, nor was there any subsisting contract with the DVC. Hence, by the same logic that the liquidator is argued to have had no jurisdiction, the auction purchaser also did not have any liability within the contemplation of the expression as is where is . The principle of caveat emptor cannot be applied in the case of the auction purchaser in an asset sale, because it is not possible for an auction purchaser to have a prior idea of any existing liability which, in any event, was not there. Even the sale notice admittedly did not include electricity dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said premises: 89. First, there may be no further application for fresh connection at the same premises, in which case the only remedy available to the licensee for such non-payment is, as indicated in Section 56 (1) of the 2003 Act, to institute a money suit against the erstwhile consumer. 90. Secondly, the erstwhile defaulting consumer himself may apply for a fresh connection at the same premises, in which case both Section 56 (1) of the 2003 Act and Regulation 4.6.4 of the Supply Code apply. As contemplated in Section 56(1), the licensee is entitled to continue disconnection (in other words, withhold new connection) till payment of the dues. Again, the applicant is the erstwhile consumer who has been enjoying electricity as a consumer and the connection sought is a new connection in view of the previous contract having ceased after 180 days. 91. Thirdly, some third party set up by the defaulting consumer or knowing fully well about the default and becoming a party to the evasion, applies for a fresh connection in the said third party s name at the same premises. In such case, Section 56(1) does not apply strictly, since the licensee s act no longer remains the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g filed subsequent to the NCLT and NCLAT proceeding, ought to be stayed. Such issue has to be negated as the principle of Section 10 of the Code of Civil Procedure cannot be applied here, since the matters in issue in the two proceedings are not directly and substantially the same. 96. The proceeding before the Tribunal falls within the scope of the IBC and only in respect of liabilities arising out of the CIRP. Even when the NCLT held that the claim did not arise out of the CIRP, the same issue was under consideration. The challenge before the NCLAT also revolves around the question as to whether the claims are related to the CIRP. 97. As opposed thereto, the subject-matter of challenge in the present writ petition is confined to availability and enforcement of remedies provided by a different statute, that is, the Electricity Act, 2003 and the Regulations framed thereunder. Hence, the outcome of either of the proceedings would not operate as res judicata in respect of the other, nor does the decision of either of the forums directly affect or debar the remedy before the other. 98. Hence, the writ petitioner cannot be said to pursue the same remedy before two parallel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly contractual in character. 104. However, in the said judgment, the Supreme Court was not called upon to scrutinize the interplay between the Electricity Act, 2003 and the IBC of 2016. If the IBC were to be applicable in the present case, statutory dues would have also extinguished with the CIRP and subsequent liquidation and would not be payable by the auction-purchaser in any event. 105. Alternatively, the IBC is not applicable to the electricity dues, as the NCLT has held that the dues do not arise from the CIRP. Even then, nothing hinges on the Telengana State ratio in the facts of the present case. The question which has arisen for adjudication here is whether the writ petitioner can be held liable to pay the outstanding dues left by the erstwhile consumer for the purpose of getting a new electricity connection from the DVC. As discussed earlier, there is a specific provision in the Supply Code (Regulation 3.4.2) to entitle the licensee to claim the outstanding dues from a new or subsequent consumer if a nexus is established by the licensee between the new consumer and the erstwhile defaulter-consumer. Since no such nexus has been proved by the licensee in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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