NCLAT: Continuation Of Electricity Supply Subject To No Default On Current Dues Under Section 14(1) Of IBC

The National Company Law Appellate Tribunal (NCLAT), Delhi bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra (Technical Member) and Arun Baroka, Technical Member has directed the Resolution Professional to pay outstanding electricity dues incurred by the Corporate Debtor during the moratorium period. The Tribunal observed that the protection under Section 14(1) of the Insolvency and Bankruptcy Code (IBC) is subject to no defaults in payment of current dues as provided under the explanation of the provision.Brief Facts:Earthcon Infracon Pvt. Ltd. (the Corporate Debtor) was admitted into the Corporate Insolvency Resolution Process (CIRP), and a Resolution Professional (RP) was appointed to manage its operations during the moratorium period.On 17.06.2020, Noida Power Company Ltd. (NPCL) issued a notice for temporary disconnection of electricity due to the non-payment of post-CIRP electricity dues. The erstwhile Interim Resolution Professional (IRP) filed IA No. 3379/2020 before the Adjudicating Authority, praying for directions to the NPCL not to disconnect electricity and provide options for making payment on an instalment basis. Since there was no response from the erstwhile IRP regarding the proposed payment schedule, NPCL sent another disconnection notice on 17.12.2021. The Respondent-RP filed IA No. 82 of 2022 on 28.12.2021, seeking a permanent stay on the disconnection notice from NPCL. On 20.01.2022, the Adjudicating Authority passed an interim order preventing NPCL from proceeding with the disconnection notice.On 10.03.2022, NPCL filed IA No. 1432 of 2022 to vacate the interim order. The Adjudicating Authority directed the RP to collect electricity dues from residents and make payments to NPCL by 14.06.2023. The Home-buyers filed IA No. 1146 of 2022 praying for directions to the RP not to disconnect/interrupt the electricity supply. The Adjudicating Authority issued interim orders on 14.03.2022, directing home-buyers to pay all pending electricity dues. The RP was directed not to take any action for the disconnection of electricity. On 14.06.2023, the Adjudicating Authority modified this order, allowing the RP to take coercive steps for non-payment of electricity charges. On 14.07.2023, it directed that the electricity supply for lifts and corridors should not be disconnected and should be restored.By the impugned order dated 03.03.2024, the Adjudicating Authority allowed IA No. 82 of 2022, directing the Appellant not to disconnect the electricity connection of the Corporate Debtor.The Appellant thus filed the present appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the impugned order.Observations by the NCLAT:The issue before the Tribunal was whether the Appellant was lawfully entitled to demand the payment of current electricity dues incurred by the Corporate Debtor during the moratorium period and to disconnect the electricity connection if the dues were not met.The Tribunal observed that 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. The Tribunal placed reliance on the Judgments in Shailesh Verma vs Maharashtra State Electricity Distribution Company [CA(AT)(Ins) No. 383 of 2022] and Sanskriti Allottee Welfare Association & Ors Vs Gaurav Katiyar, Resolution Professional [CA(AT)(Ins) No. 878 of 2023], wherein it has been held that the RP was obligated to make payment of electricity dues to NPCL and the RP has been allowed to apply coercive measures to collect the electricity dues from the residents of the project to make payment to NPCL.The Tribunal held that Explanation to Section 14(1) and Section 14(2-A) of the IBC was applicable to the instant case. It reiterated that the protection granted by Section 14(1) is subject to no default in the payment of current dues.Thus, the impugned order passed in I.A. No. 82 of 2022 and I.A. No. 1432 of 2022 was set aside. The Respondent was directed to either clear the outstanding electricity dues within 90 days from the date of this order or to present a phased payment plan to the Appellant in respect of the entire outstanding dues within 30 days, subject to the acceptance, rejection or modification of any such offer by the Appellant within 15 days from the date of receipt of such offer. Case Title: Noida Power Company Limited vs Mr. Gaurav KatiyarCase Number: Company Appeal (AT) (Insolvency) No. 1209 of 2024 with Company Appeal (AT) (Insolvency) No. 1210 of 2024Counsel for Appellant: Mr. Anil Dutt and Mr. Sarthak Garg, Advocates. Counsel for Respondents: Mr. Rishabh Jain, Advocate.Date of Judgment: 23.09.2024Click Here To Read/Download Order

NCLAT: Continuation Of Electricity Supply Subject To No Default On Current Dues Under Section 14(1) Of IBC

Tazeen Ahmed

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