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Issues: (i) whether electricity supply disconnected before commencement of the corporate insolvency resolution process could be directed to be restored during moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016; (ii) whether the corporate debtor could be required to clear past dues or furnish a fresh security deposit as a condition for reconnection.
Issue (i): whether electricity supply disconnected before commencement of the corporate insolvency resolution process could be directed to be restored during moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The supply of electricity is an essential service within the meaning of regulation 32 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and section 14(2) protects essential supplies during moratorium. Section 14(2-A) further permits continuation of supplies critical to preserve the value of the corporate debtor and manage it as a going concern. Since the power supply agreement had not stood terminated by the time moratorium commenced, the prior disconnection did not prevent the adjudicating authority from protecting the supply needed for the resolution process. The matter was also treated as falling within the insolvency framework rather than being excluded merely because electricity law and supply code provisions existed.
Conclusion: The direction to restore electricity supply during moratorium was upheld.
Issue (ii): whether the corporate debtor could be required to clear past dues or furnish a fresh security deposit as a condition for reconnection.
Analysis: Past dues arising before commencement of insolvency resolution form part of the creditor's claim and are to be dealt with in the resolution process, or in liquidation if that occurs. In the same manner, insistence on an upfront deposit of pre-CIRP liabilities was not warranted as a precondition for reconnection of an essential supply required for the resolution effort.
Conclusion: The challenge to the waiver of upfront payment of past dues and security deposit was rejected.
Final Conclusion: The appeal failed and the impugned direction restoring electricity supply to the corporate debtor in insolvency resolution was maintained, with pre-CIRP claims to be addressed in the resolution process.
Ratio Decidendi: An essential supply needed for preservation and operation of the corporate debtor during moratorium may be continued or restored under section 14 of the Insolvency and Bankruptcy Code, 2016, and pre-insolvency dues cannot be insisted upon upfront as a condition for such restoration when they are to be dealt with through the insolvency resolution mechanism.
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