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TMI Blog2024 (9) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14(2-A). Section 14(1) Explanation and Section 14(2-A) was clearly introduced by way of an amendment to fill critical gaps in the Corporate Insolvency framework and that a substantive provision was introduced into IBC framework which clearly provided that the supply of goods or services, critical to protect and preserve the value of the Corporate Debtor, could always be terminated or suspended or interrupted during the period of moratorium when the dues arising from such supply during the moratorium period is not paid. Thus, the benefit of electricity supply which is enjoyed by any Corporate Debtor given by government or authority should be continued subject to the condition that there is no default of payment of current dues. Explanation to Section 14(1) and Section 14(2-A) of the IBC is clearly attracted in the facts of the present case. The protection granted by Section 14(1) is clearly subject to no default in the payment of current dues as clearly stipulated in the explanatory clause. Further, Section 14(2-A) only prohibits interruption, termination or suspension of any such supply of goods or services to the Corporate Debtor which the RP considers critical to protect and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e NPCL not to disconnect electricity and provide for options for making payment on instalment basis. Since there was no response from the erstwhile IRP to the payment schedule proposed by the Appellant and failure on his part to clear the accrued electricity dues continued, a notice was sent again by the NPCL on 17.12.2021 to the Respondent for disconnection of electricity. The Respondent filed IA No. 82 of 2022 before the Adjudicating Authority on 28.12.2021 seeking permanent stay of electricity disconnection notice issued by the Appellant. On 20.01.2022, the Adjudicating Authority passed interim order on IA No. 82 of 2022 directing the Appellant not to proceed with the disconnection notice of 17.12.2021. Subsequently, on 10.03.2022 the Appellant filed IA No. 1432 of 2022 before the Adjudicating Authority seeking vacation of the interim order dated 20.01.2022 passed in IA No. 82 of 2022. On 14.06.2023 the Adjudicating Authority had passed interim directions in IA No. 1432 of 2022 directing the RP/Respondent to inter alia collect the electricity dues from the residents and make payment to the Appellant within one month and file a progress report thereafter. In the meantime, the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition of Essential goods or services as per Regulation 32 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( CIRP Regulations in short) since electricity is a direct input to the output of construction and maintenance of the project as carried out by the Corporate Debtor. Electricity dues are in the nature of current dues in terms of Section 14 of IBC and hence cannot be considered as Insolvency Resolution Process Costs under Regulation 31 of the CIRP Regulations and have to be paid by the Respondent during the moratorium period as and when raised by the Appellant. It was asserted that current dues do not come under the ambit of moratorium and therefore have to be paid regularly and failure to pay such dues would entitle the Appellant to disconnect the supply of electricity as the same was not barred under Section 14 of IBC. The Adjudicating Authority has wrongly held disconnection notices issued pursuant to non-payment of electricity dues as institution of suits or continuation of pending suits or proceedings which are prohibited under Section 14 of the IBC. It is contended that electricity dues having accrued during the period of moratori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor during the period of moratorium and whether it was entitled to disconnect the electricity connection in the event the current dues are not met. 7. Before we proceed to examine the issue framed in the paragraph above, it may be relevant to notice the reliefs which had been sought by the Respondent in IA Nos. 82 and 1432 of 2022 which read as under : I. A. No. 82 of 2022 a. Permanent stay the impugned disconnection notice dated 17.12.2021 issued by the Respondent; b. Direct the Respondent to not to disconnect the electricity connection of the Corporate Debtor during the pendency of the Corporate Insolvency Resolution Process of the Corporate Debtor and c. pass such other order or orders as this Hon ble Tribunal may deem fit and proper in the facts and circumstances of the present case. IA No. 1432 of 2022 a. Allow the present Application and pass an Order vacating the direction (to not to disconnect the electricity Connection of the Corporate Debtor) issued vide order dated 19.10.2020 in IA No. 3379/2020 and Order dated 20.01.2022 in IA No. 82 of 2022. b. Pass such Orders as this Hon ble Tribunal may deem fit in the facts and circumstances of the present case. 8. From the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricity dues are not met, the electricity connection was liable to be disconnected. The relevant excerpts of the judgment reads as follows: 3. Insofar as the current charges are concerned, we hold that the appellant is entitled to the electricity supply charges from the date of restoration of electricity i.e. from 12th October, 2017 and the Resolution Professional is required to pay the amount on behalf of the Corporate Debtor on month-to-month basis. 4. If the respondent fails to pay the amount within the stipulated period or in two consecutive months, it will be open to the appellant to give notice and disconnect the electricity supply of the Corporate Debtor. 12. The Appellant has also relied on the judgement of this Tribunal in Dakshin Gujarat VIJ Company Ltd. Vs M/s ABG Shipyard Ltd. and Anr. [2018 SCC OnLine NCLAT 576] to assert that current dues must be paid and if a Corporate Debtor is facing paucity of fund to pay for essential services, the question of keeping the Corporate Debtor going on does not arise. The relevant excerpts of the judgement reads as follows : If the Corporate Debtor has no fund even to pay for supply of essential goods and services, in such case, the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14 read with Section 238 of the Code. 18. We find force in the arguments of the Ld. Counsel appearing for the Resolution Professional. It is a settled principal of law that once the CIRP is initiated and moratorium in terms of Section 14 of the Code is declared, the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including the execution of any judgement, decree or order in any Court of Law, Tribunal, Arbitration Panel or other authority is prohibited. Therefore, in our considered view, the Respondent (M/s. Noida Power Company Limited) could not have initiated the proceedings as has been done in the present case against the Corporate Debtor during the moratorium period, even though the Respondent is a Statutory Authority. 19. The Resolution Professional has categorically stated that the moratorium in terms of Section 14 came into force from the date when the CIRP was initiated by this Adjudicating Authority vide order dated 08.11.2020 and therefore, the Respondent (M/s. Noida Power Company Limited) could not have initiated any action and proceeded against the Corporate Debtor in view of the moratorium and therefore, the disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion- For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period; (2-A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Professional consider the supply of goods or services critical to protect and preserve the value of the Corporate Debtor, the same shall not be terminated or suspended or interrupted during the period of moratorium except where Corporate Debtor has not paid such dues arising from such supply during the moratorium period. The insertion of sub-section (2-A) in the Section 14 has been brought with a purpose and object. Section 14, sub-section (1) explanation also clarifies that a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the same. The scheme delineated by Section 14(1) explanation as well as Section 14 (2-A) is same, that is, all benefits, which were enjoyed by the Corporate Debtor given by Government or authority should be continued, but subject to condition that there is no default of payment of current dues. Sub-section (2-A) also envisage contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and manage the operations of the Corporate Debtor as a going concern but with an exception carved out which provides that in case the Corporate Debtor has not paid dues arising from such supply during the period of moratorium. 19. In result, we hold the impugned order passed in I.A. No. 82 of 2022 to be legally unsustainable and accordingly set it aside. With the setting aside of this impugned order in I.A. No. 82 of 2022, the impugned order in I.A. No. 1432 of 2022 also falls. Both the Appeals succeed. The Respondent is directed to clear the outstanding electricity dues of the Appellant within 90 days from the date of this order failing which the Appellant can proceed to take coercive steps by invoking the applicable law and rules. However, to meet the ends of justice, the Respondent is allowed an opportunity to present a phased payment plan to the Appellant in respect of the entire outstanding dues within 30 days. The Appellant may consider the reasonability of any such phased offer of payment and convey their acceptance, rejection or modification of any such offer within 15 days from the date of receipt of such offer to the Appellant. However, if the phased offer proposal is rej ..... X X X X Extracts X X X X X X X X Extracts X X X X
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