2023 (9) TMI 1071 - SCH - Insolvency and Bankruptcy

Supreme Court affirms lower court, dismisses appeals on electricity arrears & tribunal jurisdiction.

The Supreme Court upheld the lower court's decision, dismissing the appeals regarding the payment of arrears for an electricity connection and the ... Clean slate principle - waterfall mechanism - resolution plan - operational debt - jurisdiction of the adjudicating authority under the Insolvency and Bankruptcy Code - arising out of or in relation to insolvency resolution under section 60(5)(c)Clean slate principle - waterfall mechanism - resolution plan - Whether the electricity distribution licensee can insist that the successful resolution applicant pay the corporate debtor's arrears as condition for grant or restoration of an electricity connection. - HELD THAT: - The Court held that the licensee cannot insist on payment of arrears by the successful resolution applicant as a condition for grant or restoration of an electricity connection. Arrears of the corporate debtor must be dealt with in accordance with the waterfall mechanism and the approved resolution plan, and the clean slate principle would be defeated if the resolution applicant were required to pay the corporate debtor's arrears to obtain a connection. The successful resolution applicant, however, remains obliged to satisfy other non-monetary or regulatory requirements necessary for grant of the connection.Appellant cannot insist on payment of corporate debtor's arrears by the successful resolution applicant for grant/restoration of electricity connection; other valid requirements for connection remain applicable.Operational debt - jurisdiction of the adjudicating authority under the Insolvency and Bankruptcy Code - arising out of or in relation to insolvency resolution under section 60(5)(c) - Whether disputes concerning dues of the corporate debtor demanded by the electricity licensee for restoration/grant of connection fall within the jurisdiction of the tribunals constituted under the Code. - HELD THAT: - Relying on the Court's prior observations in Embassy Property Developments Pvt. Ltd. and subsequent decisions, the Court concluded that where dues of the corporate debtor are crystallised or where the demand relates to amounts payable by the corporate debtor, such claims qualify as operational debt and the controversy falls within matters 'arising out of or in relation to insolvency resolution' under section 60(5)(c). Consequently, the tribunal constituted under the Code has jurisdiction to adjudicate claims insofar as the licensee insists on payment of the corporate debtor's dues for grant/restoration of connection, and such dues must be addressed in the resolution plan approved by the adjudicating authority.Disputes over corporate debtor's dues claimed by the licensee for connection restoration/grant fall within the jurisdiction of the Code's adjudicating authority and must be dealt with through the approved resolution plan.Final Conclusion: Appeals dismissed; the electricity licensee cannot condition grant/restoration of connection on payment of the corporate debtor's arrears which must be dealt with under the waterfall mechanism and in the approved resolution plan, and disputes about such dues fall within the jurisdiction of the tribunals under the Code. Issues involved:The legal issue regarding payment of arrears for grant of electricity connection, jurisdiction of tribunal in relation to corporate debtor's dues.Payment of Arrears for Electricity Connection:The appellant, Tata Power Western Odisha Distribution Limited, cannot demand payment of arrears to grant an electricity connection, as per the precedent set in previous judgments. The successful resolution applicant must comply with other requirements for the connection, but insisting on arrears payment would negate the clean slate principle.Jurisdiction of Tribunal in Corporate Debtor's Dues:Referring to the case of Embassy Property Developments Private Limited vs. State of Karnataka, the tribunal under the Code has jurisdiction when the issue relates to dues payable to an operational or financial creditor. The tribunal's authority extends to cases where the government is an operational creditor, and the dues of the corporate debtor must be paid as per the resolution plan approved by the adjudicating authority. The tribunal's jurisdiction covers matters arising in relation to insolvency resolution under section 60(5)(c) of the Code.Judgment:The Supreme Court found no valid reason to interfere with the impugned judgment and orders, leading to the dismissal of the present appeals. Any pending applications are deemed disposed of as a result.