IBC overrides electricity recovery rules in liquidation, and charged electricity dues may qualify as secured claims.

In liquidation, the Insolvency and Bankruptcy Code, 2016 operates as a complete code with an overriding effect under Section 238, so inconsistent recovery mechanisms under the Electricity Act, 2003 and the Uttar Pradesh Electricity Supply Code, 2005 cannot displace the Code's waterfall distribution under Section 53. Secured creditors' rights are governed by Section 52 once liquidation begins. The document also notes that electricity dues treated as a charge on the corporate debtor's assets may amount to a security interest, allowing the distribution licensee to be treated as a secured creditor rather than a government dues claimant for liquidation purposes.

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Issues: (i) Whether the Insolvency and Bankruptcy Code, 2016 overrides the recovery framework under the Electricity Act, 2003 and the Uttar Pradesh Electricity Supply Code, 2005 in liquidation; (ii) Whether the electricity dues of the distribution licensee created a security interest so as to make it a secured creditor entitled to participate in the liquidation waterfall.

Issue (i): Whether the Insolvency and Bankruptcy Code, 2016 overrides the recovery framework under the Electricity Act, 2003 and the Uttar Pradesh Electricity Supply Code, 2005 in liquidation.

Analysis: The liquidation scheme under the Insolvency and Bankruptcy Code, 2016 is a complete code with a mandatory waterfall distribution under Section 53 and an express overriding clause in Section 238. Once liquidation is initiated, the secured creditor's rights are regulated by Section 52 and the proceeds are distributed only in the manner contemplated by the Code. The Court held that the special recovery mechanism under the Electricity Act, 2003 and the Supply Code cannot displace the liquidation regime under the Code, even though the Electricity Act contains non-obstante clauses.

Conclusion: The Insolvency and Bankruptcy Code, 2016 prevails over the Electricity Act, 2003 and the Supply Code in liquidation proceedings.

Issue (ii): Whether the electricity dues of the distribution licensee created a security interest so as to make it a secured creditor entitled to participate in the liquidation waterfall.

Analysis: The agreement between the parties and the Supply Code treated the outstanding electricity dues as a charge on the assets of the corporate debtor. On that basis, and applying the statutory definition of security interest, the Court accepted that the dues were backed by a security interest and that the distribution licensee was not to be treated as a governmental dues claimant within the meaning of Section 53. The Court also distinguished dues payable to a statutory corporation from dues payable to the Central or State Government and held that the latter category in Section 53(1)(e) did not cover the appellant.

Conclusion: The appellant's dues were treated as secured dues and not as government dues.

Final Conclusion: The appeal failed, and the claim of the appellant was left to be processed in accordance with law within the time directed by the Court.

Ratio Decidendi: In liquidation, the Insolvency and Bankruptcy Code, 2016 overrides inconsistent recovery mechanisms under other laws, and a legally created charge on the debtor's assets may qualify the claimant as a secured creditor for the purposes of the Code's distribution waterfall.

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