2023 (12) TMI 256 - AT - Insolvency and Bankruptcy

NCLAT rules successful auction purchaser not liable for corporate debtor's electricity dues worth Rs.39 lakh

NCLAT dismissed appeal challenging direction to provide electricity connection without payment of pre-CIRP dues. Corporate debtor owed Rs.39,15,625 in ... Recovery of arrears of electricity dues on the premises for providing new electricity connection - Respondent submits that the Successful Auction Purchaser is not liable to pay electricity dues which was payable by the erstwhile Corporate Debtor - HELD THAT:- There is no dispute between the parties regarding facts of the case. Electricity dues amounting to Rs.39,15,625/- was owed by the erstwhile Corporate Debtor – Shashi Oils and Fats Private Limited. E-auction notice was issued by the Liquidator for sale of the assets. There can be no dispute between the parties that the sale in the liquidation process was on “As Is Where Is, As Is What Is, Whatever There Is and Without Recourse basis”. ‘Due Diligence’ Clause also notes that any outstanding charge was also to be performed in the e-auction process by the prospective bidder. The question that electricity dues of the Corporate Debtor who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/ Successful Auction Purchaser is not res integra. The issue which has arisen in the present case has been recently considered by this Tribunal in Chinar Steel Segments Centre Pvt. Ltd. vs. Samir Kumar Agarwal [2023 (10) TMI 645 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. In the above case, an application filed by the Successful Auction Purchaser seeking direction to Damodar Valley Corporation to energize its electricity connection, was rejected relying on WBERC Regulation. Appeal was filed by the Successful Auction Purchaser which appeal was ultimately allowed by this Tribunal directing that fresh connection be granted without charging any outstanding dues of the Corporate Debtor. It is relevant to notice that the submission which has been advanced by the Appellant that the application filed by the Successful Auction Purchaser was not maintainable was also considered by this Tribunal in the above case and it was held that the application was fully maintainable under Section 60(5). This Tribunal held that application filed by the Successful Auction Purchaser was fully entertainable under Section 60(5) since it arose out of liquidation proceeding of the Corporate Debtor. The Hon’ble Supreme Court in Tata Power [2023 (9) TMI 1071 - SC ORDER] clearly held that Tata Power cannot insist on payment of arrears for granting electricity connection. The submission raised by learned counsel for the Appellant that Successful Auction Purchaser was liable to pay the arrears of electricity dues which were dues of the erstwhile Corporate Debtor and without payment of said dues electricity connection cannot be granted are not in accord with the statutory scheme of IBC. The Adjudicating Authority did not commit any error in issuing direction in Para 16 of the impugned order, to energise the electricity connection without insisting on the payment of pre-CIRP dues. There are no ground to interfere in the impugned order of the Adjudicating Authority - there are no merit in the appeal - appeal dismissed. Issues Involved:1. Maintainability of the application filed by the Successful Auction Purchaser.2. Liability of the Successful Auction Purchaser to pay pre-CIRP electricity dues.3. Entitlement of Paschimanchal Vidyut Vitran Nigam Ltd. to claim electricity dues from the Successful Auction Purchaser.Summary:Issue 1: Maintainability of the application filed by the Successful Auction PurchaserThe Appellant argued that the application filed by the Successful Auction Purchaser was not maintainable since the Adjudicating Authority had become functus officio after the liquidation process was closed. However, the Tribunal held that the application was fully maintainable under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) as it arose out of the liquidation proceeding of the Corporate Debtor. The Tribunal referenced the case of 'Chinar Steel Segments Centre Pvt. Ltd. vs. Samir Kumar Agarwal,' where it was held that applications arising from liquidation proceedings are entertainable under Section 60(5).Issue 2: Liability of the Successful Auction Purchaser to pay pre-CIRP electricity duesThe Appellant contended that the Successful Auction Purchaser was liable to pay the electricity dues of Rs. 39,15,625/- owed by the erstwhile Corporate Debtor, as the property was purchased on an 'as is where is' basis. The Tribunal, however, concluded that the right of Paschimanchal Vidyut Vitran Nigam Ltd. to recover outstanding dues of the pre-CIRP period was extinguished due to the completion of the CIRP process and liquidation of the Corporate Debtor. The Tribunal relied on the judgments of the Hon'ble Supreme Court, particularly in 'Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Private Ltd. & Ors.' and 'Tata Power Western Odisha Distribution Limited (TPWODL) & Anr. vs. Jagannath Sponge Private Limited,' which clarified that the dues of the Corporate Debtor must be settled within the IBC process and cannot be claimed from the Successful Auction Purchaser.Issue 3: Entitlement of Paschimanchal Vidyut Vitran Nigam Ltd. to claim electricity dues from the Successful Auction PurchaserThe Appellant relied on Clause 4.3(f) of the UP Electricity Supply Code, 2005, and judgments such as 'Telangana State Southern Power Distribution Company Ltd. & Anr. vs. Srigdhaa Beverages' to argue that electricity dues are statutory and cannot be waived. However, the Tribunal distinguished these cases, noting that they did not arise from the IBC process. It was held that the Appellant should have filed its claim during the liquidation process, and its failure to do so extinguished its right to claim the dues from the Successful Auction Purchaser. The Tribunal directed Paschimanchal Vidyut Vitran Nigam Ltd. to provide a new electricity connection to the Successful Auction Purchaser without insisting on the payment of pre-CIRP dues.Conclusion:The Tribunal dismissed the appeal, affirming that the Successful Auction Purchaser is not liable for the pre-CIRP electricity dues of the Corporate Debtor and that the application filed by the Successful Auction Purchaser was maintainable under Section 60(5) of the IBC.