NCLAT upholds essential water supply obligations during moratorium under Section 14(2A) of IBC despite payment disputes

The NCLAT Chennai dismissed appeals regarding water supply during moratorium period. KWIPL was required to supply water to KMPCL under a 2014 Water Transport Agreement amended in 2015. Both companies entered CIRP with moratorium imposed. The RP of KWIPL sought payment for outstanding dues and suspended water supply due to non-payment. The tribunal held that Section 14(2A) of IBC clearly governs essential supplies during moratorium. The Committee of Creditors' commercial wisdom in ratifying agreements cannot be interfered with by either party. The tribunal concluded it lacks jurisdiction to adjudicate contractual disputes and found no legal or factual error in the adjudicating authority's decision.

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Issues Involved:
1. Jurisdiction of the Tribunal to adjudicate the issues/reliefs sought by the Appellants.
2. Validity and enforceability of the order passed by the Adjudicating Authority.
3. Entitlement of the Appellant to the reliefs prayed for.

Detailed Analysis:

Issue 1: Jurisdiction of the Tribunal to Adjudicate the Issues/Reliefs Sought by the Appellants
The Tribunal examined whether it could adjudicate the issues and reliefs sought by the Appellants. The Appeals were filed against the order passed by the Adjudicating Authority, which directed the Respondents to resume water supply to the Corporate Debtor (KMPCL) as per the 2014 Water Transport Agreement and invoices raised by KWIPL. The Tribunal noted that the reliefs sought in the Appeal included directions for continuous water supply, status quo based on the 2016 commercial arrangement, and refund of amounts paid under protest. The Tribunal concluded that it could not adjudicate these issues as they were not raised before the Adjudicating Authority and involved original reliefs. The Tribunal emphasized that it could not function as an original jurisdiction to decide contractual disputes between the parties, including the interpretation and enforcement of contract terms.

Issue 2: Validity and Enforceability of the Order Passed by the Adjudicating Authority
The Tribunal reviewed the order passed by the Adjudicating Authority, which directed the Appellants to make payments as per the 2014 Water Transport Agreement and invoices raised by KWIPL. The Tribunal noted that the Adjudicating Authority relied on Section 14(2A) of the Insolvency and Bankruptcy Code, 2016 (I&B Code), which mandates the continuation of supply of critical goods or services to protect and preserve the value of the Corporate Debtor and manage its operations as a going concern. The Tribunal found that the Adjudicating Authority's order was in line with the law and did not warrant any interference. The Tribunal also emphasized that the commercial wisdom of the Committee of Creditors (CoC) in ratifying the water supply arrangement under Section 28(1)(f) of the I&B Code could not be interfered with.

Issue 3: Entitlement of the Appellant to the Reliefs Prayed For
The Tribunal examined whether the Appellants were entitled to the reliefs sought in the Appeal. The Appellants argued that the 2015 Amendment Agreement, which revised the minimum off-take requirements for water supply, should be considered as a substitution to the 2014 Water Transport Agreement. The Respondents contended that the 2015 Amendment Agreement was valid only for two years and that the 2014 Agreement became effective again from 01.04.2017. The Tribunal concluded that the dispute over which agreement to follow could not be decided by the Tribunal, as it involved contractual obligations and interpretation of contract terms. The Tribunal also noted that the Appellants had not made out a case for the reliefs sought, as the Adjudicating Authority's order was free from any legal and factual error.

Conclusion:
The Tribunal dismissed the Appeals, finding no merit in the Appellants' arguments and upholding the Adjudicating Authority's order. The interim order passed by the Tribunal was vacated, and all pending applications were closed.

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