2022 (3) TMI 639 - AT - Insolvency and Bankruptcy

Tribunal Upholds Relief for New Connection to Successful Resolution Applicant

Damodar Valley Corporation Versus Kharkia Steels Pvt. Ltd., Mr. Uday Narayan Mitra LSI Resolution Private Limited

The Tribunal upheld the legality of the relief granted by the Adjudicating Authority directing DVC to provide a new connection to the Successful ... Jurisdiction - whether the relief granted by the Adjudicating Authority directing the DVC to provide new connection to the SRA after payment of the security deposit could have given by the Adjudicating Authority while the main appeal was pending and whether the jurisdiction under IBC is not proper in granting such a relief? - HELD THAT:- The legal validity of the resolution plan as approved by the Adjudicating Authority which was assailed in CA (AT)(Ins) 1111 of 2019 has been considered and decided by this tribunal and the approval of resolution plan has been upheld therein. The liabilities of DVC that relate to past dues prior to the Effective Date have been extinguished under the approved Resolution Plan and DVC is prohibited from raising any further demand on this account. The clause (d) in Para 6 Section VI of the Resolution Plan directs DVC to restore the power connection immediately after the Effective Date and not withhold/disconnect power supply on the ground of pending old dues whose claim has been submitted to Resolution Professional during CIRP and which have been taken care of in the resolution plan and clause (f) directs DVC to commit supply of power to the plant of CD immediately after the Effective Date - the Impugned Order directs SRA to apply for fresh connection with payment of security deposit that may be admissible under WBERC Regulations and DVC shall have to grant temporary connection within 10 days of its order after payment of security deposit. As the issue regarding legality of the resolution plan is being dealt with in CA (AT)(Ins) No. 111 of 2019 we are limiting our consideration in this appeal to the propriety of order directing DVC to grant new temporary connection to DVC after payment of security deposit. The commitment to supply power to the corporate debtor should be in accordance with the WBERC Regulations made under the Electricity Act. Clause (g) above, which directs DVC to ensure availability of continuous power to the plant at the same rate at which it is supplied power to the adjoining units, will have to be modified since the conditions that are applicable for supplying power to the corporate debtor under a new agreement shall be at the tariff rate and conditions that would prevail at the time of signing of the agreement for a fresh connection by DVC with the Successful Resolution Applicant under WBERC Regulations. The Impugned Order which directs a new temporary connection to be provided to the SRA within ten days of application after payment of requisite security deposit cannot be faulted, since this direction is in accordance with the provisions contained in the Successful Resolution Plan and it is now decided in CA (AT) (Ins) No. 1111 of 2020 that the successful resolution plan suffers from no illegality - the successful resolution applicant has to apply for fresh connection, payment of security deposit and any other charges that may be admissible under WBERC Regulations will have to be paid by the successful resolution applicant - the supply of electricity to the corporate debtor should be in accordance with the WBERC Regulations made under the Electricity Act. Appeal disposed off. Issues Involved:1. Legality of the relief granted by the Adjudicating Authority while the main appeal was pending.2. Jurisdiction of the Adjudicating Authority under IBC in granting relief related to electricity supply.3. Treatment of DVC's past dues and liabilities under the approved Resolution Plan.4. Compliance with WBERC Regulations and the Electricity Act in providing a new electricity connection.Detailed Analysis:1. Legality of the Relief Granted by the Adjudicating Authority:The main issue in this appeal is whether the relief granted by the Adjudicating Authority directing DVC to provide a new connection to the Successful Resolution Applicant (SRA) after payment of the security deposit could have been given while the main appeal was pending. The Tribunal noted that the legal validity of the resolution plan as approved by the Adjudicating Authority had already been considered and upheld in a separate appeal (CA (AT)(Ins) No. 1111 of 2019). Therefore, the Tribunal limited its consideration to the propriety of the order directing DVC to grant a new temporary connection after payment of the security deposit.2. Jurisdiction of the Adjudicating Authority under IBC:The Appellant argued that the Adjudicating Authority exceeded its jurisdiction by approving a resolution plan that took away the rights of the Appellant under the Electricity Act and WBERC Regulations. The Tribunal, however, held that the approved resolution plan, which extinguished DVC’s past dues and directed the provision of a new electricity connection, was within the jurisdiction of the Adjudicating Authority under IBC. The Tribunal emphasized that the resolution plan must be implemented in accordance with the relevant regulations and that the commitment to supply power should comply with the WBERC Regulations.3. Treatment of DVC's Past Dues and Liabilities:The Tribunal noted that the approved resolution plan included specific provisions for the treatment of DVC's liabilities. These liabilities, which were considered operational debts, were extinguished under the resolution plan, and DVC was prohibited from raising further demands for past dues. The plan directed DVC to restore the power connection and commit to supplying power to the plant at the same rate as adjoining units. The Tribunal found that the resolution plan's provisions regarding the extinguishment of DVC's past dues were legally sound and did not suffer from any infirmity.4. Compliance with WBERC Regulations and the Electricity Act:The Tribunal held that while the resolution plan directed DVC to ensure continuous power supply, this commitment should be in accordance with the WBERC Regulations made under the Electricity Act. The Tribunal modified the conditions to specify that the supply of electricity to the corporate debtor should be at the tariff rate and conditions prevailing at the time of signing the agreement for a fresh connection. The Tribunal affirmed that the direction to provide a new temporary connection was proper and legal, with the slight modification that the SRA must comply with WBERC Regulations.Conclusion:The Tribunal concluded that the direction given by the Adjudicating Authority to DVC to provide a temporary connection to the SRA was in accordance with a legally approved resolution plan and did not suffer from any illegality. The appeal was disposed of with the clarification that the SRA must apply for a fresh connection and comply with the WBERC Regulations. There was no order as to costs.