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TMI Blog2022 (9) TMI 1609X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. On 22nd October 2018, the RP informed the STO that its entire claim was waived or extinguished. The STO challenged the Resolution Plan and made an application in the form of an IA contending that its dues could not be waived or extinguished. It sought payment of the entire amount. The NCLT rejected this application as not maintainable. The last date for filing proof of claims was 17th December 2018. The extended date was 5th March 2019. The CoC approved the Resolution Plan on 3rd July 2019. MSEDCL s application for payment of dues post the moratorium was filed only in August 2019. It was not until 14th October 2019 that MSEDCL first forwarded a claim to the RP, that is to say, about three months after the CoC had approved the Resolution Plan was on 3rd July 2019. Its demand under Section 56(1) did not come until 21st January 2021. - G.S.PATEL GAURI GODSE, JJ For the Appellant : Mr C Keswani, with Akash Manwanai Tanvi Rana, i/b Economic Laws Practice. For the Respondent : Ms Deepa Chavan, with Kiran Gandhi, Nirav Shah Ravindra Chile, i/b Little Co. ORAL JUDGMENT (Per GS Patel J):- 1. We admitted the Petition on 22nd September 2022. On that date Mr Keswani needed time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be read with some portions of Section 45, Section 46, Section 47 and Section 50. One of these Regulations (earlier Regulation 10.5 and now Regulation 12.5) immediately falls for consideration. 8. NRC was originally National Rayon Corporation Limited. It used to manufacture many different products, including yarn and basic chemicals. In July 2009 NRC Ltd was declared sick under the provisions of the erstwhile Sick Industrial Companies (Special Provision) Act 1985 ( SICA ). Following this, with effect from 15th November 2009, NRC Ltd s previous management declared a lockout. This resulted in a complete and immediate cessation of NRC s operations and consequently of its earnings. NRC could not clear many debts, including those it owed to MSEDCL. 9. On 3rd November 2015, MSEDCL issued an electricity disconnection notice. NRC Ltd s rayon plant, chemical plant and nylon plant and the NRC colony where workmen stayed, and a river pump all received electricity supply from a single point connection of 22Kv from MSEDCL. On 18th April 2016, MSEDCL disconnected power entirely. The NRC Mazdoor Sangh filed Writ Petition No. 5211 of 2016 seeking a restoration of electricity supply. On 4th May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by law. 15. It was not until 7th August 2019 that MSEDCL filed a Miscellaneous Application No. 2731 of 2019 before the NCLT. In this, MSEDCL sought a modification of the NCLT s order of admission of 27th November 2018 passed on PNB s application under Section 7 of the IBC. What MSEDCL now sought was that the NCLT should clarify that the uninterrupted supply of goods and services, i.e., electricity by MSEDCL would be subject to payment of charges consumed during the entire moratorium period. The second relief sought was that if the corporate debtor in this case NRC Ltd or the Petitioning Creditor, i.e., PNB, failed to pay the regular current electricity bills then MSEDCL be set at liberty to disconnect electricity supply as per the provisions of the Electricity Act 2003. In the body of this Miscellaneous Application (page 78 of the Petition), MSEDCL averred that should the Resolution Plan be approved or should NRC Ltd held not to be capable of being revived through the CIRP, and, instead, be ordered to be liquidated, then MSEDCL would not be able to recover its dues. 16. On 14th October 2019, MSEDCL sent its claim to the Resolution Professional of NRC Ltd, including in hard copy. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adani Properties had paid the electricity dues from the date of the moratorium. The substance of MSEDCL s Miscellaneous Application stood fully addressed by virtue of that payment. 19. But, as is now abundantly clear, MSEDCL had split its claim into two streams. One was the claim for payment of dues from the date of the moratorium. That was the subject of the Miscellaneous Application, and it was actually paid, thus ending that controversy. What remained was MSEDCL s claim for past unpaid arrears. It was in these circumstances that on 21st January 2021, MSEDCL served a notice under Section 56(1) of the Electricity Act 2003 on Adani Properties. It said that on approval of the Resolution Plan, Adani Properties, the successful Resolution Applicant now had to pay an amount of Rs.29,94,09,779/- towards electricity arrears. 20. NRC Ltd, now under new management, denied liability by its response of 9th February 2021 on the simple ground that MSEDCL s claims did not form part of the approved and sanctioned Resolution Plan. Past liability stood extinguished, NRC Ltd maintained, and therefore MSEDCL had to issue fresh bills from the period commencing from 27th November 2018, i.e., the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of arrears on the premises. 25. On 9th March 2022, NRC Ltd said that it had regularly paid all electricity bills from 27th November 2018. The non-supply of electricity to NRC Ltd was putting NRC Ltd into loss. MSEDCL was thus requested to provide a new connection. 26. This Petition was filed on 29th June 2022. 27. As Ms Chavan correctly and fairly points out, what this Court is asked to do is to balance the competing interests going forward. This is not an order on final disposal of the Petition. MSEDCL s claims and contentions will be assessed at some later date. In the meantime, she submits, the interests of MSEDCL, not merely because it is a State-run authority but even otherwise, should be sufficiently safeguarded by an appropriate order of this Court. Whether this should take the form of a deposit in Court or by some other means is a matter best left to the discretion of the Court. 28. Mr Keswani agrees that an interim order will need to be fashioned. However, he submits that the viability of the Resolution Plan is indeed a very delicate thing. That plan is taken to fruition not by some off-the-cuff proposal. It goes to an extremely arduous and exacting process. The st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adani Properties, it is necessary that the Resolution Applicant knows exactly what it is committing itself to in terms of financial obligations, monetary obligations and even fiscal obligations, i.e., claims from tax authorities. He puts like this: if on the approval on the Resolution Plan even a claim by a tax authority is held by the Supreme Court s decision to stand extinguished, then this much surely apply down the line to all other classes of creditors irrespective of the nature of the goods or services supplied. 30. The other aspect of the matter, to which Mr Keswani points, is to take a step back and look at the initiation of the CIRP process under Section 7. A Petitioning Creditor comes to the NCLT and says its debts have not been paid and that the mandated CIRP process may begin. At this stage, nobody knows the final outcome. There is no assurance that the CIRP process will ultimately succeed or that a Resolution Plan will in fact be approved. Two routes or eventualities are clearly possible. The end results are entirely different and have different implications and connotations. One possibility is that Resolution Applicant comes forward, propounds a Resolution Plan, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... havoc with the entire structure of the CIRP process. Nobody would know with any certainty which claim existed in what form and to what extent. Nobody would know whether that claim had to be paid in full. This is because the next necessary implication of the submission on behalf of the MSEDCL is that once Adani Properties as the Resolution Applicant or the Resolution Professional disclosed what they must be deemed to have known, then the Resolution Plan should have provided for a full payment of that claim without any reduction. That is not the framework of the CIRP process at all. The process of inviting claims by the IRP or RP is not very different from the process that the Liquidator has traditionally taken in any corporate winding up or liquidation process. Claims are invited in both situations. The difference is that in the case of a resolution process the claims are invited at an earlier point in time i.e., not during liquidation. Those claims are invited precisely to avoid liquidation, this being the legislative mandate of the IBC itself. But the mere filing of a proof of the claim does not mean that the claims stand verified and proved on their own by the mere filing. The IR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Ghanashyam Mishra took into account the definition of creditor , which means any person to whom a debt is owned. The definition is inclusive. It includes a financial creditor, operational creditor, secured creditor an unsecured creditor and a decree holder. This is important because in the facts of our case MSEDCL says that it is an operational creditor. In Ghanashyam Mishra, the Supreme Court also looked at the definition of operational creditor . This means a person to whom an operational debt is owned and includes a transferee or assignee. An operational debt is a claim in respect of the provision of goods or services including employment or a debt in respect of payment of dues arising under any law for the time being in force and payable to the Central Government any State Government or local authority. 35. At this stage and with this in mind we look at paragraph 84 of Ghanashyam Mishra which dealt with the mischief sought to be corrected. The Supreme Court now interpreted the retrospectively- operational 2019 amendment to mean that on the Resolution Plan being approved under Section 31 by the NCLT, all claims and dues owed to any State Government, Central Government or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a claim before the RP claiming an amount of Rs. 46.37 crores that was due. That claim was filed beyond time. The Resolution Applicant submitted a Resolution Plan. Many creditors objected to it. There were further proceedings. On 22nd October 2018, the RP informed the STO that its entire claim was waived or extinguished. The STO challenged the Resolution Plan and made an application in the form of an IA contending that its dues could not be waived or extinguished. It sought payment of the entire amount. The NCLT rejected this application as not maintainable. The STO filed an appeal before the NCLAT. The NCLAT dismissed that appeal inter alia on the ground that the STO had not filed its claim within time. It was delayed not only before the Resolution Professional but also before the adjudicating authority. This was the factual matrix before the Court in Rainbow Papers. What is important, however, is the submission that there was statutory charge created by Section 48 of the GVAT Act and it was pointed out that the STO had made its claim to the RP well before the Resolution Plan was approved even by the CoC under Section 30(4) of the IBC. 38. This puts MSEDCL s case in a class apart. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over dues by purporting to attach or sell the premises to which the connection is given. But this Regulation does not permit MSEDCL to stand outside an approved Resolution Plan for the simple reason that its claim is for past dues, and these have been dealt with by the Resolution Plan. It was for MSEDCL to put in its claim, and to do so within time. It cannot, prima facie, by this circuitous route of deemed knowledge position itself outside, or distance itself from, the approved Resolution Plan. If tax authorities are within the net of the IBC and the CIRP process, so is MSEDCL. 42. On this perhaps somewhat unusually detailed consideration at an interim stage, we have now to fashion an appropriate interim order. We believe that this discussion was necessary even now to correctly position the rival submissions and the competing equities. Ms Chavan s submission is finally that if Adani Properties leaves, where is MSEDCL supposed to recover its current dues from. But this surely negates the submission in regard to Regulation 12.5. The answer is that the person who then follows and uses the premises will be liable. As to its past dues, prima facie, the Resolution Plan will prevail and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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