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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 ..... orate debtor has 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 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). The Hon'ble Supreme Court again in Madanlal Fakir Chand Dudhediya vs. Shree Changdeo Sugar Mills Ltd. and Ors. [1962 (3) TMI 33 - SUPREME COURT] had held that first rule of construction is that the words used in the section must be given their plain grammatical meaning and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing facilities of the corporate debtor is not interfered with. ii) The resolution professional shall endeavour to pay the electricity dues as assured by it through various letters to the Appellant by taking steps including raising interim finance, if any. iii) IBBI in furtherance of its Discussion Paper dated 04.02.2025 which proposes amendment in Regulation 32 may expedite its steps regarding amendment, if any, which amendment may redress several operational issues as noticed by the IBBI itself.
Appeal disposed off - Let Registry communicate the copy of this order to Insolvency and Bankruptcy Board of India (IBBI). X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2024. IA No.4168 of 2024 has been allowed. Aggrieved by the impugned order this Appeal has been filed. 3. Counsel for the Appellant challenging the order contends that the corporate debtor is running a textile mill which consumes substantial electricity and under Section 14(2A), it is obligatory for the corporate debtor to pay the current bills during the CIRP period. The Adjudicating Authority has ignored the mandate of Section 14(2-A) while directing the Appellant to restore the electricity but no direction has been issued regarding payment of electricity dues during the CIRP period. The Respondents were obliged to pay the dues during moratorium period. The Respondent despite acknowledging its liabilities and giving assurances for clearances failed to make the payment. There is no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during CIRP period. It is submitted that as per latest profit and loss statement of the corporate debtor for the year 2022-23 Rs.8,922 lakhs have been mentioned as manufacturing expenses which includes a cost of Rs.4,166.19 Lakhs towards power and fuel expenses. It is submitted that the Respondent h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order which is as follows:- "a. To direct the Respondents to comply with the provisions of Section 14 of the Code read with Regulation 32 of the CIRP Regulations and reinstate the electricity supply and continue to provide electricity to the factory/manufacturing plant of the Corporate Debtor situated at Plot No.G-2, MIDC, Industrial Area. Post - Salaidhaba Via Hingna. Nagpur-441 122, Maharashtra. b. During the pendency or disposal of this Application direct the Respondents to reinstate the electricity supply and continue to provide electricity to the factory/manufacturing plant of the Corporate Debtor situated at Plot No. G-2, MIDC, Industrial Area, Post Salaidhaba Via Hingna, Butibori, Nagpur - 441122, Maharashtra. c. During the pendency or disposal of this Application direct the Respondents not to take any action or discontinue the supply of electricity provided to the Corporate Debtor in any manner or take any coercive steps which affect the status of the Corporate Debtor as a going concern; d. To direct the Respondents to increase the contract demand load from 3500 KVA to 4300 KVA for the Corporate Debtor's connection in order to increase production to gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s essential component for running machines and manufacturing process. The expression used in Regulation 32 is the essential supplies enumerated therein to the extent that these are not a direct input to the output produced or supplied by the corporate debtor. There is nothing on the record to indicate that the electricity is a direct input to the output produced or supplied by the corporate debtor. Ofcourse, textile manufacturing uses electricity for running its machines and for other process for manufacturing of yarn and cloth but there being nothing to prove that electricity is a direct input to the output produced. Electricity supply has to be treated as essential supply within the meaning of Section 14(2) read with Regulation 32 of the CIRP Regulations. 11. The submission which has been advanced by the Counsel for the Appellant centre around Section 14(2A). Section 14(2A) was inserted by Act 1 of 2020 w.e.f. 28.12.2019. Sub-section (2A) contemplates that where the interim resolution professional or resolution professional 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 debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t matters. But if A mortgages Black-acre to X and mortgages White-acre to Y, the two transactions fall under the same category, but they would certainly be distinct matters. If the intention of the legislature was that the expression 'distinct matters' in Section 5 should be understood not in its popular sense but narrowly as meaning different categories in the Schedule, nothing would have been easier than to say so. When two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sense, and the conclusion must follow that the expression "distinct matters" in Section 5 and "descriptions" in Section 6 have different connotations." 15. Counsel for the Respondent has also relied on the judgment of the Hon'ble Supreme Court in "Rajendra K Bhutta vs. Maharashtra Housing and Area Development Authority and Anr.- (2020) 13 SCC 208" where the Hon'ble Supreme Court had occasion to consider expression used in Section 14 and in the said judgment, the Hon'ble Supreme Court has preferred and relied earlier judgments of the Hon'ble Supreme Court where different expressions were construed differently. It is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in another provision may not be disregarded.' 27. Since the legislature has expressly chosen to make a distinction between the suits for recovery of the money and enforcement of guarantees and proceedings for the recovery of money, that must be given effect to. 28. Furthermore, Parliament must be taken to be aware of the decision in Maharashtra Tubes [Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd., (1993) 2 SCC 144] and the fact that the word "proceeding" used in Section 22(1) had been widely construed to include proceedings for recovery of dues by the State Financial Corporation as arrears of land revenue. The deliberate choice of the word "suit" in the circumstances would indicate that Parliament intended to limit the ambit of the amendment introduced to particular modes for the recovery of money or enforcement of guarantees." 16. The Hon'ble Supreme Court again in "Madanlal Fakir Chand Dudhediya vs. Shree Changdeo Sugar Mills Ltd. and Ors.- AIR 1962 SC 1543" had held that first rule of construction is that the words used in the section must be given their plain grammatical meaning and the two sub- sections must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direct input to the output produced or supplied by the corporate debtor. Illustration.-Water supplied to a corporate debtor will be essential supplies for drinking and sanitation purposes, and not for generation of hydro-electricity." 28. Also, undoubtedly sub-section (2-A) of Section 14 of the Insolvency and Bankruptcy Code, 2016 provides as follows: "14. (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 during the moratorium period or in such circumstances as may be specified." This provision was inserted with effect from 28-12- 2019. No doubt under this provision goods or services not covered by Section 14(2) are also covered. The call however is to be taken by the IRP/RP. Raw material supply could fall within the provision. The IRP/RP must take a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht 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 continuation of the essential supply and provides for such termination, suspension or extension when payment has not been made for the such supply during the moratorium. 12. Sub-section (2) of Section 14 has to be read with the legislative intent, which is now reflected by Explanation to Section 14(1) and 14(2-A). In the facts of the present case, when Corporate Debtor took a decision that supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has not relied on Section 14 (2-A) rather has placed reliance on Section 14(2). In this context, we may refer to letter dated 28.08.2024 which is brought on the record as Annexure A6 written by the Resolution Professional to the Office of the Superintending Engineer where following was stated by the Resolution Professional: - "Respected Sir, We refer to your arbitrary action threatening to disconnect the electricity being consumed by the Corporate Debtor at plot no. G1 and G2 MIDC, Butibori, Nagpur ("said property") for its day to day business. We once again reiterate that the Corporate Insolvency Resolution Process ("CIRP") with respect to Morarjee Textiles Limited was initiated under the Insolvency and Bankruptcy Code, 2016 read with all the rules and regulations framed thereunder ("Code") by the Hon'ble National Company Law Tribunal, Mumbai Bench ("NCLT) vide order dated 9th February 2024 ("Insolvency Commencement Date") and the undersigned has been appointed as the interim resolution professional ("IRP"). The Committee of Creditors ("CoC") of the Corporate Debtor in its 3rd CoC meeting held on 15th May 2024 unanimously resolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the Chairman and CMD of the Appellant that the corporate debtor will pay energy bills regularly. It is useful to extract the last paragraph of the letter dated 05.09.2024 which is filed as Annexure A-9 to the Appeal:- "To, Chairman and CMD, MSEDCL, Prakashgadh Mumbai, Maharashtra SUB : Regarding restoration of HT Power Supply of M/s. Morarjee Textile Ltd. bearing consumer No. 420819012800 Respected Sir, With reference to disconnection of power supply on 28.08.2024, we would request you to kindly look at our critical situation, where we are keeping our operations live in spite of severe cash deficit and poor market scenario. We have been paying the pending electricity bills, but In the month of February 2024 company taken under NCLT. The pending amount of power bill has been considered in claim to be submitted to NCLT and we are running the plant under NCLT where we have paid March 24, Apr 24 and partially more than 70% of May'24 bill. MSEDCL has deducted 7.5% duty approx. 45 Lacs in the bills of Apr, May, and June'24 which MSEDCL need to adjust in power bill. Also Rs 2.0 Crores of Textile Subsidy for 02 months i.e. Jan 2019 and Feb 2019 is still pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also take notice of the submission which has been advanced by the Appellant that the corporate debtor is a textile industry engaged in manufacturing process and is consuming energy which require to be paid to the appellant who has only distributor of energy. Appellant purchased energy from generating company and distribute it to consumer and, if the appellant not paid its electricity charges, it shall not be able to carry on its business, hence, it is necessary to make the regular payment of electricity dues by the corporate debtor even though it was in insolvency. As noted above, the statutory scheme as of date obliged the appellant to continue supply of the electricity. 25. After we have heard the parties in the present appeal, we have come across to Discussion Paper issued by Insolvency and Bankruptcy Board of India dated 04.02.2025 on 'Streamlining Processes under the Code: Reforms for Enhanced Efficiency and Outcomes'. The IBBI is a regulatory authority and is empowered to make regulation under Section 240 of the IBC. Power to make regulations encompasses its power to carry on amendments in the regulations. IBBI for streamlining its regulation keeps on issuing amendment from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs would constitute essential services. However, if the corporate debtor operates a manufacturing facility, the high-voltage electricity supply required to run the machinery may be considered as critical services by the insolvency professional as it is being used as a direct input for production and current dues for such services must be paid during CIRP to prevent any service discontinuation. 5. In the principal regulations, in Regulation 32, the following illustration shall be deleted, namely: - Illustration-Water supplied to a corporate debtor will be essential supplies for drinking and sanitation purposes, and not for generation of hydro-electricity." 27. The above Discussion Paper highlights the issue of operational difficulty with regard to supply of electricity under Section 14(2) read with Regulation 32. The illustration which is now sought to be amended, amending the regulation now contemplate that if the corporate debtor operates a manufacturing facility that may be treated as critical service by the insolvency professional for which current dues for such services must be paid. In our judgment in Company Appeal (AT) (Insolvency) No.106 of 2025 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been disconnected the supply shall be reinstated forthwith." 29. We, however, are of the view that the resolution professional, as assured to the appellant, need to take steps to clear the electricity dues, however, non-payment of electricity dues cannot be a ground to discontinue the electricity which is a clear mandate by Section 14(2). We are of the view that the IBBI has already taken notice of the operational issues and having proposed Regulation 32 of the CIRP Regulations, need to expedite its process and amendment, if any, which may be carried out at an early date to mitigate the hardship of the supplier of essential services. 30. In view of the foregoing discussions, we dispose of this Appeal with following directions:- (i) The order of the Adjudicating Authority dated 24.10.2024 as contained in paragraph 15 directing Appellant not to discontinue the electricity connection necessary for running the manufacturing facilities of the corporate debtor is not interfered with. (ii) The resolution professional shall endeavour to pay the electricity dues as assured by it through various letters to the Appellant by taking steps including raising interim finance, if any. (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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