TANGEDCO can refuse electricity connection to IBC debt relief beneficiary despite missing claim deadline

The Madras HC dismissed a writ petition challenging TANGEDCO's refusal to provide electricity connection. The petitioner argued that TANGEDCO failed to lodge its claim before the resolution professional within the stipulated time under IBC, preventing enforcement of electricity dues. The HC held that while TANGEDCO cannot enforce its claims against the petitioner, it can decline to grant fresh electricity service connection or restore earlier connection. The court ruled that refusing service does not constitute claim enforcement but is statutory compliance under the Electricity Act. TANGEDCO's refusal to provide connection to a defaulter who received debt relief was deemed justified.

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Issues:
1. Whether the electricity dues payable to TANGEDCO should be considered in the resolution plan under the Insolvency and Bankruptcy Code, 2016.
2. Whether the resolution plan approved by NCLT is binding on TANGEDCO despite ignoring the statutory dues.
3. Whether TANGEDCO can enforce its claims against the petitioner after the resolution plan has been approved.

Analysis:
1. The petitioner, a liquor manufacturing company, underwent insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. TANGEDCO demanded payment of electricity dues from the petitioner post-resolution plan approval. The petitioner argued that TANGEDCO failed to lodge its claim within the stipulated time, and the electricity dues should be extinguished as per the Code. The petitioner relied on legal precedents to support their position, emphasizing the statutory scheme of the Code.

2. TANGEDCO contended that electricity dues cannot be ignored in a resolution plan, citing provisions of the Electricity Act, 2003. An amicus curiae highlighted that the resolution plan's validity depends on compliance with statutory requirements and proper publication. The court referred to a Supreme Court decision emphasizing that resolution plans must address statutory dues to be valid and binding on authorities. The court found that the resolution plan ignored TANGEDCO's dues, rendering it invalid and not binding on TANGEDCO.

3. The court acknowledged the petitioner's argument that the resolution plan may not be binding on TANGEDCO due to its apparent invalidity. However, the court declined to issue a Writ of Certiorari as sought by the petitioner. The court noted that while TANGEDCO may not enforce its claims, it can refuse to provide or restore electricity services based on outstanding dues. The court referenced relevant provisions of the Electricity Act, 2003, indicating that TANGEDCO can deny service connections until dues are paid, without violating the Code's principles. The court dismissed the writ petition, emphasizing that TANGEDCO's actions align with statutory provisions and do not amount to enforcing a claim or seeking a remedy for breach of contract.

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