Successful Auction Purchaser To Pay All Dues For Availing A New Electricity Connection, Except For The Arrears Of Pre-CIRP Period: NCLAT Delhi

Background Facts

Shashi Oil and Fats Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT. Subsequently, on 21.02.2020 the NCLT ordered liquidation of the Corporate Debtor.

E-auction of Corporate Debtor was conducted by Liquidator on as is where is basis, as is what is, whatever there is and without recourse basis. HSA Traders (“Successful Auction Purchaser”) emerged as the highest bidder for an amount of Rs.3,78,00,000/- and a Sale Certificate was issued.

The Successful Auction Purchaser made an application to the Paschimanchal Vidyut Vitran Nigam Ltd. (“Appellant/Electricity Department”) for new electricity connection for the premises. The Appellant rejected the request on the ground that there is demand of electricity dues of Rs.39,15,625/- against the erstwhile Corporate Debtor and a new electricity connection can be given only upon payment of the dues.

Thereafter, the Successful Auction Purchaser filed an application before NCLT seeking direction to Appellant to grant electricity connection.

The Successful Auction Purchaser argued that the Appellant never filed its claim in the liquidation proceeding of Corporate Debtor and therefore, it cannot insist on payment of arrears at this stage. Further, the electricity dues were payable by the erstwhile Corporate Debtor.

On 21.02.2023, the NCLT directed the Electricity Department to energise the electricity connection without insisting on the payment of pre-CIRP dues.

The Electricity Department filed an appeal before the NCLAT against order dated 21.02.2023.

NCLAT Verdict

The Bench placed reliance on the Supreme Court judgment in Tata Power Western Odisha Distribution Limited (TPWODL) & Anr. vs. Jagannath Sponge Private Limited, Civil Appeal No.5556 of 2023, wherein it was held that the clean slate principle would stand negated if the successful resolution applicant is asked to pay the arrears payable by the corporate debtor for the grant of an electricity connection in her/his name.

The Bench rejected the Electricity Department's contention that the electricity connection could only be given post payment of Corporate Debtor's dues by the Successful Auction Purchaser. It was held that such contention would be contrary to the scheme of IBC.

“We, thus, are of the view that submission raised by learned counsel for the Appellant that Successful Auction Purchaser was liable to pay the arrears of electricity dues which were dues of the erstwhile Corporate Debtor and without payment of said dues electricity connection cannot be granted are not in accord with the statutory scheme of IBC. The Adjudicating Authority did not commit any error in issuing direction in Para 16 of the impugned order, as extracted above, to energise the electricity connection without insisting on the payment of pre-CIRP dues. It is made clear that the Successful Auction Purchaser shall be liable to pay all dues for getting the new connection except the arrears of the electricity dues of Rs.39,15,625/- as was being claimed by the Appellant.”

It has been held that the Successful Auction Purchaser shall be liable to pay all dues for availing a new connection except for the arrears of pre-CIRP period. The appeal has been dismissed.

Case title: Paschimanchal Vidyut Vitran Nigam Ltd. v HSA Traders & Ors.

Case No.: Company Appeal (AT) (Insolvency) No.527 of 2023

Counsel For Appellant: Mr. Pradeep Misra, Mr. Daleep Dhyani and Mr. Suraj Singh, Advocates.

Counsel For Respondent: Mr. Kunal Godhwani, Advocate for R-1 and 2.

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