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TMI Blog2024 (8) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors by the IBC, nor about the differential criterion which IBC has employed to define the character of both these categories of creditors, whose alleged inequality of status the Supreme Court has rejected on its way to uphold the constitutionality of the IBC in the Swiss Ribbons Case [ 2019 (1) TMI 1508 - SUPREME COURT] . It is about the protection and the assurance the IBC offers to the operational creditors and the role of the Adjudicating Authority. This exercise is both inevitable and mandatory since this Court has to ensure that the petitioner, with or without the collaboration of its financial creditor, has not been converted the IBC into mechanism to deny the respondent of their dues by a shrewd manipulation of the process it provides. Operational Creditors Right to Property - HELD THAT:- The object of the IBC evidently is to minimize the loss of various categories of creditors even as it attempts to salvage the corporate debtor from its commercial extinction. Appreciable it is, but it may not be let to gloss over the fact that every claim of the operational creditors involves a right to their property under Article 300 A of the Constitution, which the Supreme Court no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the Adjudicating Authority may not sit in appeal over the commercial wisdom of the CoC, still it is required to exercise a jurisdiction, akin to a revisional jurisdiction, to ascertain the correctness of what has been done before and by the CoC. Finality of the Resolution Plan the CST - HELD THAT:- In the case of disclosed creditors, CST will definitely apply, if any of the aggrieved creditors did not opt to challenge the resolution plan as approved under Sec.31 before the Appellate Authority, the NCLAT. So far as the undisclosed creditors are concerned if CST is applied, they become instant victims of the callousness of the IRP and the RP as well as the deliberate silence of the suspended board in not revealing them - the corporate debtors themselves must be classified into two: The MSME corporate debtor who had the opportunity to participate in the resolution process effectively to the extent of presenting a resolution plan; and (b) non MSME corporate debtor. What the Petitioner may anticipate? - HELD THAT:- Fraud has to be unearthed through inferences from attending circumstances. It is hence, mandatory not to eschew the attending circumstances from judicial purview while ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution plan, only the financial creditor of the petitioner was partially benefited, since the value of the assets of the petitioner was far short of the value of the liability it faced. So far as Operational Creditors are concerned, the resolution plan directed that they would be paid pro rata at 1% of the value of their claim. The petitioner accordingly redeemed itself from the debt-trap it faced. d) While so, TANGEDCO, to which the petitioner owed arrears of unpaid electricity charges from June, 2019 to a tune of Rs.32,86,061/- issued a demand notice dated 19.01.2022 for the said sum. The petitioner had replied stating that it had already gone through CIRP and as per the Resolution Plan approved by the NCLT, all the outstanding dues of the company not falling within the purview of the Resolution Plan stood extinguished. And, since the demand of the TANGEDCO was not met, it promptly disconnected the electricity service connection of the petitioner. e) Thereafter, on 24.2.2022, the petitioner applied for a temporary connection of the LT Energy. TANGEDCO, however, declined to provide the electricity service connection on the ground that the petitioner needs to pay the arrears of ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Supply Code, it cannot forego its claim. Reliance was placed on the ratio in State Tax Officer Vs Rainbow Papers Ltd., [2022 SCC OnLine SC 1162] ; K.C.Ninan Vs Kerala State Electricity Board and Others, [2023 SCC OnLine SC 663 (para 117, 341)], and M/s.Empee Distilleries Limited Vs The Superintending Engineer, Pudukottai, Electricity Distribution Circle, Pudukottai [WP(MD) No.14198 of 2022 dated 10.11.2022]. 5.2 On the strength of the ratio in K.C.Ninan Vs Kerala State Electricity Board and Others, [2023 SCC OnLine SC 663], the Additional Advocate General submitted, an owner or an occupier of the premises to which the electricity was provided is liable to pay the entire arrears, and it was not affected by any proceedings initiated under the IBC, nor by any approval to a resolution plan. He also submitted that the ratio in the Ghanashyam Mishra case has been considered in State Tax Officer Vs Rainbow Papers Ltd., [2022 SCC OnLine SC 1162], where the Supreme Court has declared that where the resolution plan presented before the Adjudicating Authority (the NCLT) has ignored certain dues to the instrumentality of the State, then the same is bad. This judgment in the Rainbow Papers c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y enough, the petitioner also did not disclose its dues to TANGEDCO in its Resolution Plan. 8. TANGEDCO, very innocently demanded its dues, but the petitioner has a prompt response to it: We had one great holy dip in the IBC, and all our sins are washed away. Today, we are a new born, with a clean-slate balance sheet, with all assets and no liability. Hence, we owe TANGEDCO nothing. And if there are any doubts, read Ghanashyam Mishra case. And, it does not stop there. It now insists the TANGEDCO to provide it with a new electricity service connection but without payment of arrears of electricity charges. TANGEDCO is plainly uninterested and its response is candid: We are governed by the Electricity Act and the Supply Code, and we are not bound to provide you, the petitioner, with a fresh electricity connection unless our dues are paid. And, we have our powers intact to realise the arrears as per our governing statute. (b) A Preludial Statement 9. Prima facie, the contentions of the petitioner sound absolutely unconscionable. The petitioner appears to have literally negotiated with its only financial creditor to deny its operational creditors of their dues. This possibility disturbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind appreciation in a School of Mathematics. The existential relevance of Courts as an institution to the citizenry of this country depends on its strength to identify those rights in crisis within the structure of the Rule of Law which the Constitution of this country advocates with pride, and its ability to evolve a solution. The terrain may be plain or may be treacherous. But the Courts should not plea helplessness and shy away from its responsibility to the citizens of this country in evolving a just solution within the contours of our legal system and within the rules of discipline which the Courts follow. This Court therefore, chooses to follow the command of its conscience and to delve deep into this issue. 12. In this endeavour, this Court is conscious that the process of evaluating the sustainability of the defence offered by the TANGEDCO to the plea of the petitioner, in effect invites this Court to judicially review the effect of the resolution plan as approved by the CoC first, and by the Adjudicating Authority next, without disturbing the finality it had attained in the IBC turf. Much of this Order which would unfold shortly is to ascertain the space available to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takeholders more particularly the Operation creditors. How secured are the operation creditors under the IBC regime? This requires a dispassionate understanding of the scheme of the IBC and the judicial pronouncements on its working. They are provided below. 15. It commences with a situation where the corporate debtor (which by definition under Sec.3(8) read with 3(7) means a company or a limited liability partnership firm or any other incorporated entity with limited liability but not including any financial service providers) faces an imminent possibility of involving in an insolvency resolution process. The process which IBC provides unfolds as below : a) Where a corporate debtor commits a default in making payments to its creditors, the stage will be set for invoking the IBC. Here the creditors are classified into two broad categories: (i) Financial Creditors; and (ii) Operational creditors. A combined reading of Sec.5(7) and 5(8) enables a broad understanding of the term 'financial creditors' as those to whom money is owed by a corporate debtor. Given the context of the case a specific discussion on the term is unnecessary. An Operational creditor, on the other hand ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the IRP. f) The next significant responsibility of the IRP is to constitute a Committee of Creditors (CoC) once he completes the preparation of the asset and claims statement of the creditors of the corporate debtor. As per Sec.21 of the IBC, only financial creditors will have the right to be part of the CoC, and the only circumstance when the financial creditor or its representative may be excluded is when they are related to the corporate debtor. The object behind this is obvious as it intends to exclude conflict of interest and possibilities of bias, since the CoC is vested with the exclusive authority to decide on the resolution process as would be seen later. g) The operational creditor will not be in the loop, and the Parliament has taken a very conscious decision even to limit the voting right of a financial creditor who/which may also figure as an operational creditor only to the extent of its financial debt. [Sec.21(4)] h) With the constitution of the CoC, the role of the IRP comes to an end. Now the CoC will take over, and it will now appoint the Resolution Professional (RP). He or she may be the IRP or could be a different person and who would be appointed by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it satisfies itself that the resolution plan has provisions for its effective implementation. This is provided in the Proviso to Sec.31(1). Necessarily it has the power to refuse approval if it is not so satisfied. 16. The legislative intent as conveyed through the body of the IBC highlights three aspects on the right of the operational creditors: (i) The operational creditors has the right to initiate an insolvency proceedings; (ii) it can participate in the meeting of the CoC; and (iii) it is required to take whatever the CoC grants it with the minimum assurance that it would not be less than the minimum that they would obtain in the eventuality of the corporate debtor going into liquidation. But their inherent right to defend its interest is significantly denied to them as the Parliament embarked on a hitherto unheard of legislative invention of requiring one set of creditors, the financial creditors, to decide on the right of another set of creditors. In that sense IBC has been truly path-breaking. But has not the Parliament unwittingly reduced the operational creditors with lesser insurance against economic uncertainties, to a sacrificial goat to feed the financial creditors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategories of creditors the financial creditors and the operational creditors by the IBC, nor about the differential criterion which IBC has employed to define the character of both these categories of creditors, whose alleged inequality of status the Supreme Court has rejected on its way to uphold the constitutionality of the IBC in the Swiss Ribbons Case [(2019) 4 SCC 17]. It is about the protection and the assurance the IBC offers to the operational creditors and the role of the Adjudicating Authority. This exercise is both inevitable and mandatory since this Court has to ensure that the petitioner, with or without the collaboration of its financial creditor, has not been converted the IBC into mechanism to deny the respondent of their dues by a shrewd manipulation of the process it provides. (e) Operational Creditors Right to Property 21. In a free country where every individual citizen is endowed with the fundamental right to do any lawful business under Article 19(1)(g) of the Constitution, all those who engage in different businesses are free to make their commercial decisions. Some succeed and some fail, and hence loss in business is an inevitable consequence attached to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and for adjudication of the disputes and complaints of the citizens, is a necessary concomitant of the rule of law. The rule of law has several facets, one of which is that disputes of citizens will be decided by Judges who are independent and impartial; and that disputes as to legality of acts of the Government will be decided by Judges who are independent of the executive. Another facet of the rule of law is equality before law. The essence of the equality is that it must be capable of being enforced and adjudicated by an independent judicial forum. Judicial independence and separation of judicial power from the executive are part of the common law traditions implicit in a Constitution like ours which is based on the Westminster model. 102. The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution, clearly includes a right to have the person's rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognised principles of adjudication. Therefore wherever access to courts to enforce such rights is sought to be abridged, altered, modified or substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay? This issue, it must be said, is caught in the storm of court room debates, and there is a perception that it has left the role of the Adjudicating Authority on a plane of ambivalence, and it may have to be steered to clarity. And, it may not be discussed in isolation, as its understanding was influenced by the doctrine of commercial wisdom which the Supreme Court has developed in the Sashidar Case [(2019) 12 SCC 150] and subsequently reinforced vide ratio in the Essar Steel case [(2020)8 SCC 531] and the Ghanashyam Mishra case. An understanding about them will be useful to understand the contours of the CST - the Clean Slate Theory. The discussion of these authorities now opens. 25.1 In Sashidhar case, the Supreme Court was faced with a situation where it was required to decide on the validity of the resolution plan as approved by the majority of the financial creditors of the CoC but with their combined vote-percentage falling short of the percentage which the IBC had fixed for approving a resolution plan and the authority of the Adjudicating Authority to interfere with it, since the latter had rejected the resolution plan. It is in the course of its judgment, the two Judges b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors. This resolution plan found favour with the Adjudicating Authority but not with the Appellate Authority. The Appellate Authority rejected the resolution plan on two scores: (i) that the Code does not provide for delegation of responsibility by the CoC to a sub-committee; and (ii) that there is no equitable treatment given to the operational creditors. 25.2(b) When this matter reached the Supreme Court, it inter alia entertained three significant questions of contextual relevance for discussion. They are, (i) whether the Code enables the constitution of a sub-committee by the CoC; (ii) whether the Code envisages identical treatment to different classes of creditors; and (iii) whether the commercial decision of the CoC can be subjected to judicial review. In its decision, the Supreme Court approved the constitution of the core committee and held that inasmuch IBC has employed differential criteria for defining both the financial creditors and the operating creditors they cannot be equated for identical treatment, and these findings led the Supreme Court to emphasis that the commercial wisdom of the CoC cannot be interfered with by the Adjudicating Authority. It states: 67. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provision for the payment of their salary and statutory dues. The NCLT rejected both these applications. In appeal, the NCLAT upheld the rejection of Edelweiss s application, but allowed it to enforce the bank guarantee issued by the corporate debtor in an independent proceeding after the expiry of moratorium. It also allowed the workmen to realize their salary and statutory dues through independent proceedings in the civil courts. In effect the appellate authority had kept alive the dues of the Edelweiss and the workmen despite the approval accorded to the resolution plan. In other cases, the statutory authorities had made a valiant attempt to recover the statutory dues but after the approval of a resolution plan as it did not provide for the payment of such dues. 25.3(b) The issues which confronted the Supreme court are: (i) whether the resolution plan approved by the Adjudicating Authority under Section 31(1) of the Code is binding on the Central Government, State Government, and local authorities; and (ii) whether the Central Government, State Government, and local authorities have any locus standi to maintain any action for the recovery for statutory dues after the resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors are paid in terms of Sec.30(2) of the IBC. The Court also added that the statutory authority need not prefer a claim as contended by the RP, since this was disclosed in the books of accounts of the corporate debtor. In other words, the decision of the Supreme Court was set to the facts of that case, but more significantly it recognised the fact that the Adjudicating Authority is not a mere rubber stamp for approving whatever resolution plan placed before it while exercising its jurisdiction under Sec.31 of the IBC. b) In the Paschimanchal Vidyut Vitran case, the claim relates to the electricity dues of the corporate debtor for realising which the electricity distribution licensee had approached the Tahasildar and attached the property of the corporate debtor, and during the liquidation proceedings upon the failure of the resolution process, the NCLT would require the Tahasildar to vacate the attachment over the property of the corporate debtor to enable the liquidation of assets of the corporate debtor, and this order came to be challenged and ultimately landed before the Supreme Court. Before the Court, it was argued by the electricity distribution licensee that it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a collective business decision. This Court also observed in K.Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] that [t]here is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. 161. These observations read with the observations in Essar Steel [Essar Steel India Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] with reference to the reasons stated in the Report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its members, who have direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted information has ushered in the much needed responsibility to the thought process of the CoC. The rule of commercial wisdom of the CoC should now satisfy the test that in exercising it CoC should help itself with optimum inputs of all the relevant information . And, they necessarily include those facts which are essential for the CoC to decide not only for the financial creditors, but also for the operational creditors. Thus through the Rajagopalan s case the Supreme Court has brought in greater clarity and balance not just to the understanding of the expression commercial wisdom of the CoC , but also to the marketability of the concept. 29. An inevitable corollary to the dilution of the supremacy of the commercial wisdom doctrine leaves its imprint on the clean slate theory . CST no more springs as an automatic consequence of an approval which an Adjudicating Authority might accord to a resolution plan, but depends on the quality of the resolution plan to which assent has been accorded. The resolution plan should now satisfy that it has passed the scrutiny of the CoC on complete disclosure of all relevant information. CST ceases to be a password for those who are keen to manipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is inconceivable an operational creditor would have wasted its confidence by investing it on its competitor read it as the financial creditor, or would have voluntarily outsourced its right to decide on what it may be interested in obtaining from his or its debtor by forsaking its own commercial wisdom. The IBC has however, placed the interest of the operational creditors on the lap of the CoC and authorized the latter to decide what the operational creditor might get. 31.3 Jurisprudentially, if anyone is either vested with the duty to protect the interest of another, or occupies a position where protecting another s interest becomes inevitable and inescapable, then such person is stated to hold the position of a trustee for the one whose interests he is required to protect. This now provides the jurisprudential basis for Explanation I to Sec.30(2) of the IBC. If it is not so understood, then for the purposes of Sec.30(2)(b), the role of the CoC vis- -vis the operational creditor will be in a jurisprudential vacuum, which will be an anathema to our understanding of jural relationships within our legal system. It therefore follows that the Essar Steel case pronouncement cannot hinde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in a liquidation proceedings of the corporate debtor. 33. It could be now derived that any resolution plan, even though approved by the Adjudicating Authority yet if it does not satisfy the triple criteria as enunciated in paragraph 32 above, there will be difficulty in attaching finality to it. 34. Therefore the comfort zone which the petitioner has created for itself on the bed of the Ganshyam Misra dictum may not provide the kind of coziness which it expects it to provide. (j) Understanding the Relevant Information sourcing them (i) Introductory 35.1 CoC s role having been defined, the focus should now shifts to the information which the IRP or the RP is required to make available to the CoC. This is critical to the interests of the operational creditors and integral to the nature of duty cast on the CoC under Sec.30(2)(b). Here there are two sets of creditors: (a) Those who are disclosed in the resolution process, and (b) those who are not disclosed. The challenge is always in negotiating the claim of the undisclosed creditors. 35.2 Hitherto, CST was lavishly used to reject the claim of the undisclosed creditors on the ground that he, who had not responded with his claim p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, then it would inflict injury on the rights of the creditors and that will derail the objectives of the IBC from its intended course. (iii) Duty of the IRP the RP 37. Under the scheme of the IBC, IRP and RP have been enjoined with the statutory duty to prepare the statement of assets and liabilities of the corporate debtor at the preliminary stage of the insolvency proceedings and an Information Memorandum at the final leg of the resolution process, as the case may be. They are but statutory offices temporarily created for each particular case from among the freelancing professionals, sponsored by registered agencies and approved by the IBBI, with no mechanism to ascertain their professional integrity and ethical fidelity beforehand. Still their role is central to the resolution process, and the commercial wisdom of the CoC of the M.K.Rajagopalan dictum variety depends chiefly on the quality of the information they provide. 38. It now shifts the spotlight to the Information Memorandum which the RP prepares under Sec.29 of the IBC. The Information Memorandum is critical not only for the CoC but is also for the resolution applicant since it forms the basis for the resolution plan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the building where the corporate debtor functions or has its factory unit is a rented premises or owned by it, and if it is rented premises whether there are rental arrears, or if there are any litigations for rental arrears. It only requires sheer commonsense. (But sadly, at the field level even this is not seen effectively done by many RPs and the IRPs, who claim themselves to be trained professionals). Similarly, will it be difficult for the IRP or the RP to hold a meeting with the suppliers of goods and services to the corporate debtor to the extent their names are disclosed in the books of accounts? For this purpose is it not necessary that he holds discussions with the auditors of the corporate debtor? Similarly, as regards the issue of statutory liability of any corporate debtor, is it not possible for the IRP or the RP to ascertain: (a) if there are immovable properties, if the property tax payable to the local body and the land tax or the kist payable to the Government have been paid; (b) if there are workers, if ESI contributions and EPF remittances have been made; (c) if there is electricity connection, whether electricity charges have been paid; (d) if any corporate ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, as the case may be. The level of comfort an operational creditor may obtain in his journey through the resolution process is directly proportionate to the extent of fairness with which the CoC treats the former s rights equitably. It is not what the RP or the CoC consider as fairness that matters to law, but how the operational creditors are treated on an impartial assessment by the Adjudicating Authority that matters. 43. Be it in private law or in public law, fairness is the fulcrum that holds together the societal discipline and administrative order, as the case may be. While transparency in public law echoes often in high amplitude, it is not alien to private law. Do not the parties to a contract owe mutual transparency to ensure fairness in their transaction? It must be remembered that the COC, the IRP and the RP are not purely private actors but are players in a statutory setting. Their respective roles are defined by the statute, and underlying beneath the same is their duty to be transparent. Fairness in action will be acknowledged only where the transparency in action is assured. 44. Therefore, there is a need for the RP to make transparent the correctness of the Inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is lack of transparency vis-a vis the correctness of the information to the knowledge of the operational creditors; c) where the CoC does not provide for the minimum payment which the operational creditors would have received in case of liquidation of the corporate debtor; d) where despite providing for the minimum, the operational creditors are not fairly and equitably treated in terms of Explanation I to Sec.30(2), such as where fairness and equity might have permitted payments above the minimum. To repeat, the Adjudicating Authority may not substitute the commercial wisdom of the CoC with its sense of equity and fairness, but can always refuse his assent to a resolution plan for breach of Explanation I to Sec.30(2) of the IBC. (l) Finality of the Resolution Plan the CST 47. Here the creditors of the corporate debtor, both financial and operational, form themselves into two classes: (a) Disclosed creditors, who had the opportunity to participate in the resolution process; and (b) the undisclosed creditors whose existence the IRP and the RP with due diligence could have found. 48. In the case of disclosed creditors, CST will definitely apply, if any of the aggrieved creditors d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the undisclosed creditors both financial and operational, and they can be proceeded against both for civil and criminal liability. And, none of them shall be let go anywhere near the shelter which Sec.32-A of the IBC provides, for the extinguishment of criminal liability contemplated under the said provision is not intended for those who conspire to defeat the intent of the IBC, play on fraud on the statute, and abuse its process. Indeed even Sec.32-A is intended to operate only if the resolution plan results in change in the management or control of the corporate debtor and to protect a third party resolution applicant who is unrelated to the erstwhile managers of the corporate debtor. b) None in the suspended board of the corporate debtor shall be granted a sanctuary behind the jurisprudential principle of corporate personality. After all, when the corporate debtor was in crisis and was one step short of going into liquidation when it was facing a resolution process, the jurisprudential difference between the company and its shareholders shall necessarily melt to pave the way for enthroning justice for the undisclosed creditors. Corporate veil is not an impregnable iron curt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an obligation to pay the liability to all its other creditors. ➢ Why should the financial creditor invoke IBC even though it has an option to invoke, and what has it achieved when it was only offered a promise to repay the debts by the sale of the non-core assets of the MSME petitioner? The point is not about the financial creditor s choice of remedy- either under the SARFAESI Act or under the IBC, or its right to invoke them, but about the intent behind exercising its option. Has fraud or collusion ever paraded with a placard proclaiming them to be one such? Fraud has to be unearthed through inferences from attending circumstances. It is hence, mandatory not to eschew the attending circumstances from judicial purview while evaluating the bonafides of a resolution plan, more significantly the fairness expected of it as there is an obligation on the CoC to protect the interests of the operational creditors. 51. Another aspect which is intriguing is that when the IBC contemplates a Committee of Creditors, it uses a plural and a not singular, and hence is it permissible within the scheme of IBC to recognize one member CoC? This requires examination but may have to be tested i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recoupment of electricity arrears is necessary to provide funding and investment in laying down new infra structure and maintaining the existing infrastructure. In the absence of such a provision, electric utilities would be left without any recourse and would be compelled to grant fresh electricity connection, even when huge arrears of electricity or outstanding. Besides impacting the financial health of the utilities, this would impact the wider body of consumers. It will be appreciable if the Parliament considers the views of Supreme Court in K.C.Ninan s case in all seriousness for protecting the statutory dues and other commercial dues payable to Government run companies or corporations which has the potential of adding to the financial burden of the common man. It is not about what constitutes a statutory liability that concerns this Court, but why should there be a social distribution of the liability of the corporate debtor, when in the best of times the latter hardly may have shared its profit with the society, except perhaps to the extent mandated by law through Corporate Social Responsibility. For instance, if electricity-distribution licensees suffer loss in the water-fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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