Electricity Supply Deemed Essential in Insolvency Proceedings: CoC Obligations and Employee Cooperation

The Tribunal held that electricity supply is classified as essential services under the Insolvency and Bankruptcy Code, mandating its continuation during the moratorium period. The Corporate Debtor was directed to pay outstanding electricity dues as CIRP costs. The CoC was tasked with bearing financial obligations to maintain the Corporate Debtor as a going concern. Employees were instructed to cooperate with the Resolution Professional for smooth operations. The Tribunal emphasized the importance of essential services, financial infusion by the CoC, and employee cooperation for the Corporate Debtor's value maximization.

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Issues Involved:
1. Classification of electricity supply as essential services under the Insolvency and Bankruptcy Code (IBC).
2. Payment of outstanding electricity dues by the Corporate Debtor.
3. Continuation of electricity supply during the moratorium period.
4. Financial obligations of the Committee of Creditors (CoC) and Resolution Professional (RP) in maintaining the Corporate Debtor as a going concern.
5. Payment of salaries to employees and workmen of the Corporate Debtor.

Detailed Analysis:

Issue 1: Classification of Electricity Supply as Essential Services
The Applicant, Dakshin Gujarat Vij Company Limited, argued that the supply of electricity to the Corporate Debtor should not be classified as essential supplies under Regulation 32 of the IBBI (CIRP) Regulations. They contended that electricity used for the production of textiles does not fall under essential services protected by Section 14 of the IBC. However, the Tribunal emphasized that Section 14 of the IBC, which prescribes a moratorium, mandates that the supply of essential goods or services, including electricity, should not be terminated during the moratorium period. The Tribunal found that Regulation 32 cannot override the substantive provisions of Section 14.

Issue 2: Payment of Outstanding Electricity Dues
The Applicant sought the Tribunal's direction for the Corporate Debtor to deposit the outstanding amount of Rs. 26,07,848.71. The Tribunal noted that while essential services must continue during the moratorium, the Corporate Debtor is still liable to pay for the electricity consumed. The Tribunal directed that the electricity consumed from the commencement of the CIRP should be paid as per the prescribed charges and classified as CIRP costs. The Applicant was advised to lodge a claim for the outstanding dues with the Resolution Professional for consideration during the resolution process or liquidation.

Issue 3: Continuation of Electricity Supply During the Moratorium Period
The Tribunal reiterated that the supply of essential services, including electricity, must not be interrupted during the moratorium period as per Section 14 of the IBC. The Tribunal referred to previous orders where it directed the restoration of the electricity connection and emphasized that the continuation of such services is crucial for the Corporate Debtor's operations. The Tribunal cited the case of Dakshin Gujarat VIJ Co. Ltd. v. ABG Shipyard Ltd. to support the position that current charges for essential services must be paid and are not covered by the moratorium.

Issue 4: Financial Obligations of the CoC and RP
The Tribunal highlighted that the costs incurred in running the Corporate Debtor as a going concern, including the payment for essential services, should be borne by the CoC. The Tribunal referred to Regulations 33 and 34 of the IBBI (CIRP) Regulations, which state that the expenses incurred by the interim resolution professional and the resolution professional constitute insolvency resolution process costs. The Tribunal emphasized the need for the CoC to infuse sufficient capital to maintain the Corporate Debtor's operations and avoid liquidation.

Issue 5: Payment of Salaries to Employees and Workmen
A Miscellaneous Application was submitted by an employee of the Corporate Debtor seeking directions for the payment of salaries to all employees and workmen. The Tribunal directed the employees and workmen to cooperate with the Resolution Professional to ensure smooth operations. The Tribunal reiterated that interim finances are required for running the Corporate Debtor and that the members of the CoC should not create obstacles. The Tribunal directed the CoC to induct funds as per their voting share ratio to ensure the business continues without disruption.

Conclusion:
The Tribunal disposed of both Miscellaneous Applications, emphasizing the need for the continuation of essential services during the moratorium, the financial responsibilities of the CoC and RP, and the cooperation of employees to maximize the value of the Corporate Debtor's assets. The Tribunal scheduled the next hearing for the submission of a Commencement Report by the Resolution Professional.

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