2023 (10) TMI 645 - AT - Insolvency and Bankruptcy

E-auction Bidder Wins: No Pre-CIRP Dues for Electricity Reconnection

The Tribunal deemed the application maintainable under Section 60(5) of the IBC. The appellant, as the highest bidder in the e-auction sale of the ... Jurisdiction under Section 60(5) of the IBC - residuary jurisdiction of NCLT for disputes arising out of or in relation to insolvency resolution or liquidation - claims extinguished by distribution under Section 53 of the IBC - clean slate principle on sale of corporate debtor as a going concern - prohibition on re agitation of claims after completion of liquidation distributionJurisdiction under Section 60(5) of the IBC - residuary jurisdiction of NCLT for disputes arising out of or in relation to insolvency resolution or liquidation - Maintainability of IA No.984(KB)/2021 under Section 60(5) of the IBC - HELD THAT: - The Tribunal held that Section 60(5) confers jurisdiction on the NCLT/NCLAT to entertain applications that raise questions of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings. In the present case the CIRP was initiated on a Section 9 application filed by Respondent No.2, Respondent No.2 had lodged and got its claim admitted in liquidation, and the buyer sought reconnection of electricity pursuant to reliefs granted in the liquidation related order. Applying the principles in Gujarat Urja and its progeny, and following later authoritative decisions of this Tribunal and the Supreme Court, the Tribunal found a sufficient nexus between the dispute and the liquidation proceedings to attract Section 60(5) jurisdiction. The Adjudicating Authority's reliance on earlier orders to hold the application non maintainable because disconnection pre dated CIRP was held to be erroneous in the factual matrix of this case. Consequently IA No.984(KB)/2021 is maintainable under Section 60(5). [Paras 7, 15, 39]IA No.984(KB)/2021 is maintainable under Section 60(5) of the IBC and the impugned order rejecting it is set aside.Claims extinguished by distribution under Section 53 of the IBC - clean slate principle on sale of corporate debtor as a going concern - prohibition on re agitation of claims after completion of liquidation distribution - Entitlement to reconnection and whether successful purchaser must pay pre CIRP electricity arrears already dealt with in liquidation - HELD THAT: - The Tribunal examined the liquidation record showing Respondent No.2's claim was admitted and dealt with in accordance with Section 53 and that sale proceeds had been distributed. The Adjudicating Authority's earlier order had granted reliefs to the successful purchaser that electricity be restored upon application and payment of required fees/charges. Relying on this Tribunal's precedents and recent Supreme Court authority, the Tribunal held that once a claim has been admitted and satisfied/distributed under Section 53 the underlying pre CIRP claim is extinguished and cannot be revived by the operational creditor to insist on payment as a condition for supply to the purchaser. Permitting renewal of such a claim would defeat the statutory scheme and the purpose of the clean slate principle for a purchaser of a going concern. Accordingly the purchaser was entitled to a fresh connection subject only to payment of usual charges for a new connection and not the extinguished pre CIRP dues. [Paras 23, 25, 38, 39]Respondent to grant fresh electricity connection on payment of necessary charges for a new connection but not on payment of outstanding pre CIRP dues which stood satisfied and extinguished in the liquidation proceedings.Final Conclusion: Appeal allowed. The impugned order dated 01.09.2022 is set aside; IA No.984(KB)/2021 is allowed. Respondent to grant a fresh electricity connection after receipt of requisite charges for a new connection, excluding outstanding pre CIRP dues already admitted and discharged in the liquidation distribution under Section 53 of the IBC. Issues Involved:1. Maintainability of the application under Section 60(5) of the IBC.2. Entitlement of the appellant for reconnection of electricity without paying pre-CIRP dues.Summary:Issue 1: Maintainability of the Application under Section 60(5) of the IBC:The application filed by the appellant under Section 60(5) of the IBC was deemed maintainable. The Tribunal emphasized that the NCLT has jurisdiction to entertain or dispose of any application or proceeding by or against the Corporate Debtor or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor. The Tribunal noted that the claim of the Respondent No.2 for arrears of electricity dues was admitted and dealt with as per Section 53 of the IBC during the liquidation proceedings. The Tribunal also referenced the Supreme Court's judgment in 'Gujarat Urja Vikas Nigam Limited vs. Amit Gupta & Ors.' which affirmed that NCLT has jurisdiction over disputes arising solely from or relating to the insolvency of the Corporate Debtor.Issue 2: Entitlement for Reconnection of Electricity without Paying Pre-CIRP Dues:The Tribunal ruled that the appellant, being the highest bidder in the e-auction sale of the Corporate Debtor as a going concern, is entitled to reconnection of electricity without paying pre-CIRP dues. The Tribunal noted that the claim of Respondent No.2 (Damodar Valley Corporation) was settled as per Section 53 of the IBC, and thus the claim for arrears stands extinguished. The Tribunal referenced several judgments, including 'Eastern Power Distribution Company of Andhra Pradesh Limited vs. Maithan Alloys Limited & Ors.' and 'Damodar Valley Corporation vs. Karthik Alloys,' which supported the view that claims settled in liquidation proceedings cannot be re-agitated. The Tribunal also cited the recent Supreme Court judgment in 'Tata Power Western Odisha Distribution Limited vs. Jagannath Sponge Private Limited,' which upheld that the successful resolution applicant cannot be burdened with past liabilities for grant of an electricity connection.Conclusion:The Tribunal set aside the impugned order dated 01.09.2022 and allowed IA No.984 of 2021. It directed Respondent No.1 to grant a fresh electricity connection after taking all necessary charges for the connection, excluding the outstanding dues of the Corporate Debtor which stood satisfied and extinguished as per the liquidation proceedings.