Pre-CIRP Electricity Dues Stand Extinguished Upon Approval Of Resolution Plan: NCLAT

The National Company Law Appellate Tribunal (NCLAT) bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) have reiterated that all claims which are not included in the approved Resolution Plan stand extinguished upon its approval. The Tribunal held that Damodar Valley Corporation (DVC/ Appellant) was not entitled to demand pre-CIRP dues from Mackeil Ispat & Forging Ltd. (Corporate Debtor/ Respondent No. 1) when it requested resumption of electricity supply. The Tribunal directed DVC to refund the pre-CIRP amount. Brief Facts The Appellant supplied electricity to the Corporate Debtor/ Respondent No. 1 for industrial use under a Power Purchase Agreement dated 14.12.2009. On 03.02.2020, the Adjudicating Authority admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Corporate Debtor. The Appellant disconnected electricity on 19.02.2020. On 19.10.2020, the Adjudicating Authority directed the Appellant to restore electricity within seven days of receiving payment for consumption during the moratorium period. On 13.11.2020, the Appellant submitted a claim of ₹2.32 lakh, which the Resolution Professional admitted. The Committee of Creditors (CoC) approved a Resolution Plan on 21.09.2021. The Appellant was offered ₹4.64 lakh. The Adjudicating Authority approved the plan on the same date. On 29.10.2021, the Corporate Debtor requested the restoration of power supply. The amount approved under the Resolution Plan was paid by Respondent No.1 on 02.11.2021. On 03.11.2021, the Appellant infomed the Respondent No. 1 that an outstanding amount of ₹1.72 lakh was payable to DVC. The Appellant demanded ₹1.60 lakh as balance dues and ₹1.35 lakh as a security deposit. The parties executed a new Power Purchase Agreement on 03.01.2022. On 13.05.2022, Respondent No.1 filed an application seeking refund of ₹1.88 lakh for pre-CIRP dues and compliance with the Order dated 21.09.2021. The Adjudicating Authority directed DVC to refund the pre-CIRP amounts within one month and barred it from disconnecting supply. Aggrieved by the Order, the Appellant filed the Appeal. Submissions Counsel for the Appellant argued that the Appellant was entitled to recover the outstanding amount from the Corporate Debtor before resuming electricity supply as per the WBERC (Electricity Supply Code Regulations) dated 07.08.2013. It was further submitted that since the Resolution Plan had been approved, Respondent No.1 had no right to file applications before the Adjudicating Authority, and the Authority erred in entertaining the application. The Counsel submitted that under the new Power Purchase Agreement, Respondent No.1 had agreed to bear all liabilities of the Corporate Debtor. Consequently, the Appellant could not be estopped from raising claims for the refund of payments. They argued that Respondent No.1 could not be permitted to approbate and reprobate. Per contra, Counsel for Respondent No.1 submitted that since the Appellant had filed its claim during the CIRP of the Corporate Debtor and received the amount granted under the Resolution Plan, all pre-CIRP dues stood extinguished. They contended that the Appellant's insistence on payment of pre-CIRP dues was illegal. Observations The issue before the court was whether DVC can demand pre-CIRP dues The Tribunal referred to the Judgment of the Supreme Court in Ghanshyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Ltd., which held that on the date of approval of the Plan, all claims which are not a part of Resolution Plan shall stand extinguished. The Tribunal noted that the claim of Appellant of electricity dues pre-CIRP including delayed charges stood dealt with in the Resolution Plan by virtue of allocation of an amount of ₹4.64 lakh. Hence, Appellant was not entitled to claim pre-CIRP dues when the SRA applied for resumption of electricity supply. DVC was entitled to take all necessary charges, including security and reconnection charges, but could not have insisted on payment of outstanding pre-CIRP dues. The Appellant had also challenged the Tribunal's jurisdiction, claiming it was quorum non-judice. The Tribunal noted that any question arising out of or in relation to the Insolvency Resolution or Liquidation proceeding of the Corporate Debtor is covered by Section 60(5)(c). It observed that the request for restoration of electricity supply clearly fell within Section 60(5)(c). The Tribunal held that the ratio held in Ghanshyam Mishra & Sons Pvt. Ltd. is binding on the Appellant and it cannot take any stand contrary to the law declared by the Supreme Court. It determined that any amount demanded by the Appellant prior to pre-CIRP period was illegal The Tribunal held that Appellant is not entitled for recovering any dues from the...

Pre-CIRP Electricity Dues Stand Extinguished Upon Approval Of Resolution Plan: NCLAT

Tazeen Ahmed

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