Court upholds personal liability of directors for corporate debts in challenge to recovery of electricity dues

The court dismissed the writ petition challenging the demand notice for recovery of electricity dues from the directors of a corporate debtor, affirming the validity of the notice. It held that the approval of a resolution plan under the Insolvency and Bankruptcy Code does not discharge the personal liability of directors who have provided personal guarantees. The court emphasized the personal liability of directors for corporate debts and clarified that the challenge to the validity of a specific clause in the Electricity Supply Code was not adequately supported in the petition and therefore not entertained.

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Issues Involved:
1. Validity of the demand notice under Section 3 read with Section 5 of the U.P. Government Electrical Undertakings (Dues Recovery) Act, 1958.
2. Impact of the Insolvency and Bankruptcy Code, 2016 (IBC) on the recovery of dues from the directors of a corporate debtor.
3. Personal liability of the directors for the electricity dues of the corporate debtor.
4. Applicability and validity of Clause 4.3(f)(v) of the Electricity Supply Code, 2005.

Issue-wise Detailed Analysis:

1. Validity of the Demand Notice:
The writ petition challenges the demand notice dated 30.06.2022 for recovery of electricity dues from the directors of M/s Trimurti Concast Pvt Ltd. The petitioner contends that the notice is invalid as the company is undergoing insolvency proceedings, and the dues should be settled as per the resolution plan approved by the NCLT.

2. Impact of the Insolvency and Bankruptcy Code, 2016 (IBC) on the Recovery of Dues from the Directors:
The petitioner argues that once the company went into insolvency and the resolution plan was approved, the outstanding electricity dues could not be recovered from its directors. The court examined the provisions of the IBC, noting that the Code is a complete legislation with an overriding effect on other laws. It was highlighted that the moratorium under Section 14 of the IBC applies only to the corporate debtor and not to personal guarantors. The court referenced the Supreme Court's decisions, emphasizing that the approval of a resolution plan does not discharge the personal guarantor's liability.

3. Personal Liability of the Directors for the Electricity Dues of the Corporate Debtor:
The court considered the affidavit filed by one of the directors, Ashok Sharma, who had undertaken to be personally liable for the company's dues. The court noted that the personal guarantee provided by the director makes him liable for the dues, independent of the company's insolvency proceedings. The court cited several Supreme Court rulings, affirming that the liability of personal guarantors remains intact despite the approval of a resolution plan for the corporate debtor.

4. Applicability and Validity of Clause 4.3(f)(v) of the Electricity Supply Code, 2005:
The respondents argued that Clause 4.3(f)(v) of the Electricity Supply Code, 2005, empowers the electricity department to recover dues from the directors of a company. The petitioner challenged the validity of this clause, but the court noted that no substantial arguments or foundation were laid in the writ petition regarding this challenge. Therefore, the court did not entertain this argument.

Conclusion:
The court dismissed the writ petition, holding that the demand notice for recovery of electricity dues from the directors of the corporate debtor is valid. The court concluded that the approval of a resolution plan under the IBC does not discharge the personal liability of the directors who have provided personal guarantees. The court also clarified that the challenge to the validity of Clause 4.3(f)(v) of the Electricity Supply Code, 2005, was not adequately supported in the petition and thus could not be entertained.

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