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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 ..... dues of MSEDCL. The stand that MSEDCL takes is, perhaps deceptively, simple: it says that unless its past dues are cleared, it cannot and will not provide a new connection to NRC Ltd at its units. This gets complicated by the fact that NRC Ltd has now emerged from a Corporate Insolvency Resolution Process ("CIRP") under a sanctioned and approved Resolution Plan at the instance of a Resolution Applicant. This process is governed and controlled by the provisions of the Insolvency and Bankruptcy Code 2016 ("the IBC"). The plan in question is approved by the National Company Law Tribunal ("NCLT"). We are told that there is some appeal before the National Company Law Appellate Tribunal ("NCLAT") but the sanctioned or approved plan has presently not been disturbed. 5. One of the questions that undoubtedly arises is of MSEDCL's role and standing within the framework of the Resolution Plan. Is it a statutory creditor? Have its claims for past dues been written off or reduced upon the sanction of the Resolution Plan? Can these past dues be said to have been extinguished upon approval of the Resolution Plan? Is it permissible for MSEDCL, whatever its description as a creditor to whom amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on 27th November 2018, triggering a moratorium under Section 14 of the IBC. The NCLT appointed an Interim Resolution Professional or IRP. 11. On 7th December 2018, the IRP issued a public notice or advertisement inviting claims from NRC Ltd's creditors. His correspondence address was set out in this notice. On that very day, MSEDCL issued a notice to NRC Ltd under Section 56(1) of the Electricity Act demanding payment of Rs.13,39,81,830/- towards uncleared and pending electricity dues as set out in its bill of 1st December 2018. MSEDCL agrees that it learnt of the initiation of the CIRP against NRC Ltd but says that it learnt of these in some legal proceedings in the High Court from submissions made in that regard by NRC Ltd itself. This is part of a litigation record. 12. Under the IRP's notice the last date for filing proof of claims by creditors was 17th December 2018. The relevant Regulations of 2016 of the Insolvency Board clearly say that proof of claims must be filed with the IRP before the last date mentioned in the public notice or announcement that the IRP issues. In this case that would be 17th December 2018. There is an additional time of 90 days from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rim Resolution Professional. 17. On 13th March 2020, now that the CoC had voted in favour of the Resolution Plan, the NCLT approved that Resolution Plan under Section 31 of the IBC. As we shall presently see this has consequences in law and the relevant provisions of the IBC in this regard have been interpreted by the Supreme Court in unambiguous terms. MSEDCL did not assail the Resolution Plan before the NCLT. MSEDCL has also filed no appeal against the NCLT's approval of the Resolution Plan before the NCLAT. Notably, the Resolution Plan, as approved, makes provision for payment to operational creditors and of "admitted government statutory authority claims". Ms Chavan for MSEDCL submits that the Resolution Applicant, now Adani Properties, knew from the information memorandum submitted by the Resolution Professional that there were indeed claims and demands by MSEDCL including from the Bombay High Court order in the NRC Mazdoor Sangh Petition, and which order was made on 4th May 2016. That order continued electricity supply for a limited section of the NRC Ltd premises. NRC Ltd was a party to the NRC Mazdoor Sangh Petition. Therefore, in her submission, the IRP, the RP and Adani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deceased Consumer or the erstwhile owner/ occupier of any premises, as a case may be, shall be a charge on the premises transmitted to the legal representatives / successors-in-law or transferred to the new owner / occupier of the premises, as the case may be and the same shall be recoverable by the distribution Licensee as due from such legal representatives or successors-in-law or new owner / occupier of the premises, as the case may be." (Emphasis added) 22. On 12th March 2021, MSEDCL issued a revised bill for Rs.1,69,09,540/- for the period 27th November 2018 till February 2021. NRC Ltd paid these by two cheques of 26th March 2021. This is therefore also not in dispute. 23. On 6th April 2021, MSEDCL issued an electricity bill for Rs.16,39,16,619/-. This was for the month of March 2021. NRC wrote back saying that its actual electricity consumption was only Rs.5,31,281/- and the balance of Rs.11,69,091.40 was towards current interest. Rs.7,31,25,943.45 was alleged arrears of principal and Rs.8,90,90,366.84 seemed to be a demand for arrears of interest. NRC Ltd contended that these were past liabilities and stood extinguished upon the approval of the sanctioned resolution pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered. The Resolution Plan may in fact undergo modifications and changes through this process. The Committee of Creditors, as the very name suggests, is one filter. The Resolution Professional is the next, for under Section 30, he must be satisfied as to the workability of the proposed plan. The next level filter is the approval of the NCLT which is mandated by law under Section 31 of the IBC. This considers the views of the CoC and the RP, but the law does not suggest, Mr Keswani submits, and we think correctly, that the NCLT has simply to rubber stamp the views of the CoC or the RP. 29. We are not required to make any final pronouncement on this aspect of the matter at all at this stage. The point is different. If, despite being given notice, a particular creditor, whether it is supplying essential services or otherwise, does not respond within the time or within the extended time, then the statute itself provides for an extinguishment of that claim. Again, Mr Keswani is careful to submit, that a final determination of this is not necessary at this stage. His submission is only directed to two purposes or ends; first, that it is in these circumstances that there cannot be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d distinct structure arises. This involves the husbanding of the assets of the company from different areas and sources by the liquidator and of then realising them, assessing the claims that are received by creditors, setting these in the priorities required by law and then making payment or pro-rated payment to creditors in that established order. The one thing that neither eventuality contemplates is what the Supreme Court described as "Hydra popping", a reference to the serpentine water monster from Greek and Roman mythology, a creature with many heads and a regeneration feature: for every head chopped off, Hydra would grow two more. 31. Mr Keswani says MSEDCL had every opportunity to present its claims before the IRP within the time or the extended time. It did not do so. In law, its claim for past dues is extinguished. 32. We believe Mr Keswani is right in this formulation. What Ms Chavan tells us is not that MSEDCL did not know or can be held to not have known of the IRP-set date by which claims were to be received or the extended date mandated by law. Instead, she canvasses the reverse, which is to say that IRP or RP 'ought to have known from litigation papers' that MSEDC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn first to the decision of a three Judge Bench of the Supreme Court in Ghanashyam Mishra & Sons Pvt Ltd v Edelweiss Assets Reconstruction Company. (2021) 9 SCC 657. This has an elaborate analysis of the IBC. Among other things, it also considers a previous three-Judge decision of the Supreme Court itself in Essar Steel India Ltd Committee of Creditors v Satish Kumar Gupta. (2020) 8 SCC 531. Among the findings by the Supreme Court in the Ghanashyam Mishra decision was that after the CoC approves the plan, the adjudicating authority, that is to say the NCLT, must arrive at a subjective satisfaction that the plan conforms to the requirements of the statute. Once this is done, the Supreme Court tells us, the plan "becomes binding on the corporate debtor, its employees, members, creditors, guarantors and other stake holders" (the words of the statute). The legislative intent is to freeze all claims "so that the Resolution Applicants starts on the clean slate and is not flung with any surprise claims". If that is permitted, the Supreme Court says, the very calculations on the basis of which the Resolution Applicant submits its plans, would go haywire and the plan would become unworkable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view different from that taken by the Supreme Court in Ghanashyam Mishra, a decision that was binding on it. It is for this reason that Ms Chavan is at some pains to point out that Rainbow Papers in fact cites and follows Ghanashyam Mishra but does not deviate from it. Her emphasis however is somewhat different. In paragraph 45, Rainbow Papers re-emphasises the very finding in the Ghanashyam Mishra decision that Resolution Plan must conform to the provisions of the statute. The Resolution Professional and the adjudicating authority must ensure this. The adjudicating authority must record its subjective satisfaction of such conformity. In paragraph 52, Rainbow Papers said that if the Resolution Plan ignores statutory demands payable to a State Government or a legal authority, the adjudicating authority is bound to reject the Resolution Plan. The Court went on to say that there must be a plan which contemplates a distribution of assets in a phased manner with uniform proportional reduction. Otherwise, the company would have to be liquidated and its assets sold and distributed. It went on to say that the CoC, which might include financial institutions and other financial creditors, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary 2021. 39. This takes us to a consideration of the submission that under the amended MERC Regulations of 2021 and Regulation 12.5, MSEDCL has a "charge" on the premises. 40. Prima facie, we do not believe that the submission is well founded. The word 'charge' is used in Regulation 12.5 as being the amount claimed or billed for electricity use. What Regulation 12.5 prima facie seems to say is that where there is a demand for electricity dues or any some other than such a demand due to distribution licensee was remained unpaid, then the amount is due in respect of those premises irrespective of the premises themselves changing hands. All that Regulation 12.5 says is that MSEDCL's claim is one that must be paid by whoever is occupying or using those premises. This is clear from the latter portion of Regulation 12.5: "... and the same shall be recoverable by the distribution Licensee as due from such legal representatives or successors-in-law or new owner / occupier of the premises ..." The recovery is not against the premises. It is against the person/entity. Therefore, this is not a "charge" in the nature of a security. 41. Two things are apparent. MSEDCL's demands are not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 44. The only course that is available to us, in these circumstances, is to direct MSEDCL to process the NRC Ltd's application for the connection at the four villages without insisting on payment of the previous demand for past arrears, but on the clear understanding that this creates no equities in favour of NRC Ltd in regard to MSEDCL demand. Second, that if NRC Ltd pursues its application for a connection at the four villages, it does so on the footing that that application will be processed, and the connection provided by MSEDCL subject to the outcome of this Petition. This must necessarily be so. The applications by NRC Ltd for the reconnection and the new connection will be processed by MSEDCL on this basis. 45. Despite the discussion above, this order will also be without prejudice to the rival rights and contentions of the parties at the final hearing of the Petition. 46. Finally given the narrow conspectus, it only remains to make Rule returnable at the earliest possible date. In the present circumstances that would be immediately after the ensuing Diwali Vacation and we, therefore, place the Petition peremptorily for hearing and final disposal on 30th November 2022. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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