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TMI Blog2025 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal has been filed. 2. Brief facts necessary to be noticed for deciding the Appeal are : - 2.1. The Corporate Debtor- 'Morarjee Textile Limited' had been granted electricity connection for running its textile mill by the Maharashtra State Electricity Distribution Company Ltd.. On 05.02.2024, electricity bill for the month of January 2024 of Rs.4,78,27,140/- was raised by the Appellant towards unpaid electricity bills. On 09.02.2024, CIRP was initiated against the Corporate Debtor on an application filed by Axis Bank Limited. IRP issued public announcement in response to which Appellant filed its claim of Rs.4,78,27,140/- in Form B towards unpaid bills of electricity supply prior to CIRP. The Appellant issued various electricity bills dues for CIRP period. Appellant issued notices under Section 56 of the Electricity Act 2003 informing that if current electricity dues of the corporate debtor are not paid, the Appellant shall disconnect their electricity supply. On 26.06.2024, the Appellant disconnected the electricity connection on account of non-payment of outstanding dues for the month of April and May, 2024. The electricity was reinstated upon the assurances to pay the electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the submissions of the Counsel for the Appellant submits that the electricity is essential supply as contemplated by Section 14(2) of the IBC. Counsel for the Respondent relied on Regulation 32 of the CIRP Regulations to support his submission that electricity being identified as essential supply it cannot be disconnected during moratorium period and the Appellant was obliged to continue the electricity of the corporate debtor. It is submitted that as per Regulation 31, the electricity dues during CIRP period are CIRP costs and Appellant is entitled for CIRP costs in priority as per the provisions of the IBC. It is submitted that the order passed by the Adjudicating Authority is in conformity with the provisions of Section 14(2) of the IBC and need no interference. It is submitted that the Resolution Professional has paid the partial payment during the CIRP. The CoC has also passed a resolution to obtain Rs.2.55 Crore for part payment towards outstanding electricity dues. It is submitted that the Resolution Professional has also informed Appellant that textile subsidy is to be received by the Government shall also be paid. It is submitted that the corporate debtor has to be run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective submissions of the parties. Section 14 deals with Moratorium. Section 14(2) and 14(2A) which are relevant for the issues which have arisen in this Appeal are as follows:- "14. Moratorium. -(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. [(2A) 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 during the moratorium period or in such circumstances as may be specified.]" 8. Regulations 31 and 32 of the CIRP Regulations has been relied by the parties. Regulation 31 deals with 'insolvency resolution process costs'. Regulation 31 is as follows:- "31. Insolvency resolution process costs. "Insolvency resolution process costs" under Section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not paid dues arising from such supply during the moratorium period. The goods or services which are critical to protect and preserve the value of the corporate debtor is thus dependent on the decision taken by the IRP and the resolution professional. Sub-section (2) and (2A) uses two expressions i.e. 'essential goods or supply' (which may be specified). The word 'specified' has been defined in sub-section (32) of Section 3 in following manner:- "3. Definitions. - (32) "specified" means specified by regulations made by the Board under this Code and the term "specify" shall be construed accordingly;" 12. The essential supply thus has need to be specified by the Board as per Regulation and Regulation 32 of the CIRP Regulations specified the 'essential supplies'. Thus, essential supplies have to be treated in a manner and to the extent as provided in Regulation 32. It is thus clear that the electricity which is not a direct input to the output produced is essential supply within the meaning of Section 14(2) read with Regulation 32 of the CIRP Regulations and it is clearly covered by the protection extended by legislature under Section 14(2). 13. Counsel for the Appellant has con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal v. Pradeshiya Industrial & Investment Corpn. of U.P. Ltd., (2003) 4 SCC 305] , this Court referred to Section 22(1) of the Sick Industries Companies (Special Provisions) Amendment Act, 1994 and applied the aforesaid Latin maxim to the words "suit" and "proceeding" as follows : (SCC pp. 313-15, paras 20 & 26-28) "20. There is an apparent distinction between the expressions "proceeding" and "suit" used in Section 22(1). While it is true that two different words may be used in the same statute to convey the same meaning, that is the exception rather than the rule. The general rule is that when two different words are used by the same statute, prima facie one has to construe these different words as carrying different meanings. In Kanhaiyalal Vishindas Gidwani [Kanhaiyalal Vishindas Gidwani v. Arun Dattatray Mehta, (2001) 1 SCC 78] , this Court found that the words "subscribed" and "signed" had been used in the Representation of the People Act, 1951 interchangeably and, therefore, in that context the Court came to the conclusion that when the legislature used the word "subscribed" it did not intend anything more than "signing". The words "suit" and "proceeding" have not been used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) and (2), it would be necessary to bear in mind the relevant rules of construction. The first rule of construction which is elementary, is that the words used in the section must be given their plain grammatical meaning. Since we are dealing with two sub-sections of Section 76, it is necessary that the said two sub-sections must be construed as a whole "each portion throwing light, if need be, on the rest". The two sub-sections must be read as parts of an integral whole and as being inter- dependent; an attempt should be made in construing them to reconcile them if it is reasonably possible to do so, and to avoid repugnancy. If repugnancy cannot possibly be avoided, then a question may arise as to which of the two should prevail. But that question can arise only if repugnancy cannot be avoided." 17. The judgment of the Hon'ble Supreme Court in "Sandeep Khaitan, Resolution Professional for National Plywood Industries Limited vs. JSVM Plywood Industries Limited and Anr.- (2021) 9 SCC 401" has been relied by the Counsel for the Respondent where Hon'ble Supreme Court had occasion to consider the provisions of Section 14(2) as well as Regulation 32 of the CIRP Regulations. It is usef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or services not covered by Section 14(2) are covered. The above judgment of the Hon'ble Supreme Court clearly laid down that the scope of Section 14(2) and Section 14(2A) are different. Counsel for the Appellant has relied on the judgment of this Tribunal in "Shailesh Verma, Resolution Professional of Lavasa Corporation Limited and Ors. vs. Maharashtra State Electricity Distribution Company Ltd.- 2022 SCC OnLine NCLAT 4321" decided on 02.09.2022 where this Tribunal after considering Section 14(2) and Section 14(2A) has held that the corporate debtor was liable to pay current electricity charges. In the above case, corporate debtor had taken a decision that supply of electricity is necessary to make the value of corporate debtor as was specifically pleaded. In the above case, the Resolution Professional has relied on Section 14(2A) and on account of reliance of resolution professional on Section 14(2-A), this Tribunal took the view that the payment of electricity dues was necessary. In paragraphs 11, 12, 13 and 14 following was laid down:- "11. When we look into the Statement of Objects and Reasons as extracted above, one of the object as expressly recorded was "in order to fill t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment 13. The submission of learned Counsel for the Appellant is that payment of electricity dues cannot be demanded by Respondent, since they are part of the CIRP cost and can be paid only at the conclusion of CIRP process, that is, after approval of the Resolution Plan. The above submission is clearly in conflict with the legislative scheme as delineated by Section 14(1) Explanation and Section 14(2-A). When the Corporate Debtor has opined that supply of electricity is essential and is to be continued by the Respondent, it is also under obligation to make payment of electricity dues of the CIRP period and direction issued by the Adjudicating Authority to make the payment of outstanding dues, cannot be faulted. The direction of Adjudicating Authority to continue the DFA, that is, to continue to supply the electricity was subject to payment of outstanding dues within 90 days as directed by the Adjudicating Authority. The Appellant cannot enjoy the benefit of direction of one part, that is, to continue the DFA and deny the payment of electricity dues of the CIRP period. 14. We thus are of the considered opinion that no exception can be taken to direction of the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P and the powers of the board of directors of the Company stands suspended and are being exercised by the IRP as per the provisions of the Code and the applicable regulations. The undersigned states that in response to various notices issued by you, threatening to disconnect the electricity at the said property, the undersigned has time and again informed you that by virtue of Section 14 (2) of the Code read with Regulation 32 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), the supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium period. The same has been enunciated in various judgements passed by the competent courts. The undersigned states that essential services include electricity, therefore, your illegal action of threatening to disconnect the electricity is in complete breach of the Code." 21. In the end of letter, following was stated by the Resolution Professional:- "In light of the above, it is stated that your actions of threatening to disconnect the electricity due to non- payment of elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king to the situation, pending power bill is below 2 Crores. We are seeking your support to re-establish power supply, which will definitely give us boost in tough time. NCLT is working on resolution and we are hoping in few months. If power supply is available we may save the life of more than 1500 employees, which is under threat on account of disconnection of power supply. Each person is head of his family to feed 05 more persons on average this implies that more than 7500 people are affected. We assure you that we will pay our energy bills regularly within due date and additional 50 Lacs every month of pending arrears. The first 50 Lacs will be paid latest by 10th Sept 2024. Currently there is no power and company is in dark. Earlier also theft incidences took place in the premises affecting us severely. Therefore, kindly arrange to provide the power immediately to enable us protect the life of employees and machinery of the plant. We will appreciate your kind consideration, Sir for restoration of power, today, to MTL." 23. We have already noticed Regulation 31 which contemplates amounts due to suppliers of essential goods and services under Regulation 32. Statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain issues and the operational aspects including management of essential services. It is useful to notice the Discussion Paper under the heading "B. Essential Services" which is to the following effect:- "B. Essential Services Section 14(2) of the Code states that the supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. These services are specified in regulation 32 of the CIRP regulation to cover four categories viz. electricity, water, telecommunication services, and information technology services to the extent these are not a direct input to the output produced or supplied by the corporate debtor. However, it has been observed that the protection of moratorium is being incorrectly applied to these services even when they are being used as a direct input for production or supply by the CD. Proposal In view of the above it is proposed to add certain illustrations in regulation 32. The current illustration regarding water supply is being replaced with a more comprehensive example that better demonstrates the distinction between essential and non-essential servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no effect on statutory scheme operating in the field and Discussion Paper only can be basis for amending regulation. The Discussion Paper, as noted above, thus highlights the issues and the amendment in statutory scheme, if any, may take place only when the regulation are amended and notified. Thus, as on date the statutory scheme governed by Section 14(2) and Regulation 32 operates under which the Appellant is obliged to continue electricity supply. We have already noticed above that the Resolution Professional himself issued a letter that the corporate debtor is taking a step to clear the electricity dues and for which CoC has already taken a decision to obtain interim finance and steps are being taken for payment. 28. In view of the foregoing discussions, we are of the view that the direction of the Adjudicating Authority based on Section 14(2) not to disconnect the electricity connection necessary for running the manufacturing facilities cannot be interfered with. It is useful to extract paragraph 15 of the judgment which is as follows:- "15. Section 14(2) of the Code provides that "the supply of essential goods or services to the corporate debtor as may be specified sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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