Tribunal orders power restoration & dues adjustment during insolvency process

The Tribunal held that the disconnection of electricity supply during the Corporate Insolvency Resolution Process (CIRP) was in violation of the Insolvency and Bankruptcy Code. It ordered the restoration of power, directed the adjustment of pre-CIRP dues against current charges, and set aside the order to release funds to the Electricity Board. The Tribunal emphasized adherence to the moratorium and approved Resolution Plan provisions, ultimately allowing the appeals.

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Issues Involved:
1. Disconnection of electricity supply during the Corporate Insolvency Resolution Process (CIRP)
2. Payment of dues for the period prior to CIRP
3. Adjustment of pre-CIRP dues against current charges
4. Compliance with the moratorium under Section 14 of the I&B Code
5. Approval and implementation of the Resolution Plan

Issue-wise Detailed Analysis:

1. Disconnection of electricity supply during the Corporate Insolvency Resolution Process (CIRP):
The Kerala State Electricity Board disconnected electricity supply to the units of M/s. Paragon Steels (P) Ltd. and M/s. SMM Steel Re-rolling Mills Private Limited due to non-payment of dues during the CIRP. The Adjudicating Authority directed the Resolution Professional to deposit Rs. 3.25 Crores in an Escrow Account to cover the dues and ordered the restoration of power. The Tribunal held that the disconnection of electricity by the Electricity Board was in violation of Section 14(2) of the I&B Code, which mandates the continuation of essential services during the moratorium period.

2. Payment of dues for the period prior to CIRP:
The Resolution Professional had made payments towards electricity dues for the period before the initiation of CIRP to avoid disconnection and keep the Corporate Debtors as a going concern. The Tribunal noted that such payments should not have been made without the approval of the Adjudicating Authority and should have been adjusted against the current charges during the CIRP.

3. Adjustment of pre-CIRP dues against current charges:
The Resolution Plan approved by the Committee of Creditors and the Adjudicating Authority provided for the adjustment of dues paid by the Resolution Professional to the Electricity Board for the pre-CIRP period against the current charges. The Tribunal held that any amount wrongly paid for the earlier period should be adjusted from the current charges, and if any excess amount was found, it should be returned by the Electricity Board.

4. Compliance with the moratorium under Section 14 of the I&B Code:
The Tribunal emphasized that the moratorium under Section 14 of the I&B Code prohibits the termination or suspension of essential services, including electricity, during the CIRP. The Electricity Board should have approached the Adjudicating Authority for the payment of current dues instead of disconnecting the electricity supply.

5. Approval and implementation of the Resolution Plan:
The Resolution Plan, which included provisions for the adjustment of pre-CIRP dues, was approved by the Adjudicating Authority on 24th July 2018. The Tribunal held that the Adjudicating Authority's subsequent order on 25th February 2019 to release Rs. 3.25 Crores to the Electricity Board was not in accordance with the approved Resolution Plan. The Tribunal set aside the impugned order and allowed the appeals.

Conclusion:
The Tribunal concluded that the disconnection of electricity by the Kerala State Electricity Board during the CIRP was in violation of the I&B Code. It emphasized the importance of adhering to the moratorium and the provisions of the approved Resolution Plan. The Tribunal ordered the adjustment of any pre-CIRP dues paid against current charges and set aside the order to release Rs. 3.25 Crores to the Electricity Board, thereby allowing the appeals.

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