Adjustment Of Security Deposit By Electricity Company During Moratorium Violates S.14 Of IBC: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Mohan Prasad Tiwari (Member-Judicial) and Charanjeet Singh Gulati (Member-Technical), has held that the adjustment of the security deposit by the electricity company against outstanding energy bills during the moratorium period violates the mandate of section 14 of the IBC, 2016. The CIRP of the corporate debtor was admitted, and subsequently the liquidation order was passed. The application was filed by the resolution professional seeking directions to the respondent to refund the security of Rs. 13,23,102/- deposited by the corporate debtor into the designated account of the corporate debtor. Contention of the Parties The applicant argued that the corporate debtor deposited the amount of Rs. 13,23,102/- for which they were in correspondence with the electricity department for a refund. It submitted that during the imposition of the moratorium, the security deposit was adjusted against the outstanding energy bill. It argued that the said adjustment violates the moratorium; therefore, the respondent should be directed to refund the amount. For its submission, the applicant relied on the ruling of Superintending Engineer vs. Sivrama Prasad Bhamidi in Company Appeal (AT) (CH) (INS.) No. 104/2023. Per contra, the respondent argued that Maharashtra State Electricity Distribution Company Limited is a government entity and is governed by its rule and the Electricity Act 2002. And the adjustment of the security deposit was strictly done in accordance with Regulation 13.8 of the Maharashtra Electricity Regulatory Commission (Electricity Supply Code) Regulations 2021. Observations of the NCLT The NCLT discussed that by virtue of section 238 of the IBC, the code would prevail over any other law inconsistent with the provisions of the code. Further, the bench observed that the adjustment of the security deposit was done during the moratorium period, which is in violation of the mandate of section 14 of the IBC. Therefore, the respondents are directed to refund the security deposit to the designated account of the corporate debtor. Case Name: Kotak Mahindra Bank Ltd. Vs. Hybro Foods Pvt. Ltd. Case No.: IA/2940/2024 IA/651/2024 IA/5570/2023 IA/5571/2023 C.P. (IB)/295(MB)2022 Coram: Shri Mohan Prasad Tiwari (Member-Judicial) and Shri Charanjeet Singh Gulati (Member-Technical) For Applicant: Adv. Ayush J Rajani a/w. Adv. Khushboo Shah Rajani a/w Adv. Mitali Bhatt i/b AKR Legal (VC); Adv. Nikhil Rajani (PH); Adv Deepak Saxena (R2); Adv. Sarosh Damania (R1) For Respondent: Adv. Nirav Shah (R1) MSEDCL (VC) Order Date: 07.10.2025 Click Here To Read/Download The Order

Adjustment Of Security Deposit By Electricity Company During Moratorium Violates S.14 Of IBC: NCLT Mumbai

Mohd.Rehan Ali

Tags