Electricity Company Cannot Disconnect Power During Insolvency Moratorium

The Tribunal held that the Electricity Company cannot disconnect power supply to the Corporate Debtor during the moratorium period under the Insolvency and Bankruptcy Code, 2016. The Company can claim electricity charges as an Operational Creditor. The Tribunal directed the Company to file a claim with the Resolution Professional but not disconnect power. The case was disposed of without costs.

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Issues Involved:
1. Validity of the disconnection notice issued by the Electricity Company.
2. Applicability of Section 14(2) of the Insolvency and Bankruptcy Code, 2016 during the moratorium period.
3. Conflict between the provisions of the Electricity Act, 2003 and the Insolvency and Bankruptcy Code, 2016.
4. Rights and obligations of the Corporate Debtor and the Electricity Company during the CIRP.

Issue-wise Detailed Analysis:

1. Validity of the Disconnection Notice Issued by the Electricity Company:
The Electricity Company issued a disconnection notice on 28.9.2017 for non-payment of the electricity bill for September 2017 by the Corporate Debtor. The notice stated that the electric supply would be disconnected if the outstanding amounts were not paid. The Electricity Company contended that under Section 56 of the Electricity Act, 2003, it had the authority to disconnect the power supply in case of non-payment.

2. Applicability of Section 14(2) of the Insolvency and Bankruptcy Code, 2016 During the Moratorium Period:
The Resolution Professional argued that under Section 14(2) of the Insolvency and Bankruptcy Code, 2016, the supply of essential goods or services, including electricity, to the Corporate Debtor should not be terminated, suspended, or interrupted during the moratorium period. The Tribunal noted that Section 14(2) clearly states that essential goods or services shall not be terminated or interrupted during the moratorium period to ensure that the Corporate Debtor can continue as a going concern.

3. Conflict Between the Provisions of the Electricity Act, 2003 and the Insolvency and Bankruptcy Code, 2016:
The Electricity Company argued that the provisions of the Electricity Act, 2003, which allow for disconnection of supply in case of non-payment, have an overriding effect. However, the Tribunal observed that both the Electricity Act, 2003, and the Insolvency and Bankruptcy Code, 2016, are legislations made by Parliament and are part of the Concurrent List. The Tribunal held that when there is a conflict between two Central Acts, the later enactment, in this case, the Insolvency and Bankruptcy Code, 2016, which aims to provide a moratorium period to protect the Corporate Debtor, shall prevail.

4. Rights and Obligations of the Corporate Debtor and the Electricity Company During the CIRP:
The Tribunal emphasized that the Corporate Debtor is not absolved from paying the electricity consumption charges. The Electricity Company can claim the power consumption charges as an 'Operational Creditor' from the assets of the Corporate Debtor, following the priorities given in the Code and the Rules and Regulations. The Tribunal directed the Electricity Company not to disconnect the power supply during the moratorium period but allowed it to file a claim for the charges with the Resolution Professional.

Conclusion:
The Tribunal concluded that the electricity authorities are not entitled to disconnect the power supply to the Corporate Debtor during the moratorium period. The Electricity Company can claim the electricity consumption charges as an Operational Creditor. The Application was disposed of with no order as to costs.

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