Liquidator's claim rejection cannot be challenged after 209-day delay without pleading condonation grounds under Section 42 IBC

NCLT Hyderabad dismissed an application seeking to set aside liquidator's rejection of claim as not maintainable due to limitation. The appeal was filed 209 days after the prescribed 14-day period under Section 42 of IBC. Despite SC precedent in Sesh Nath Singh allowing condonation of delay under Section 5 of Limitation Act without formal application, the tribunal held that delay cannot be condoned suo-moto when no grounds for condonation are pleaded by the applicant.

---

---

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

(a) Whether the Applicant Company's claim for Rs.28,28,14,013/- towards wheeling charges and related dues against the Corporate Debtor is admissible and liable to be admitted by the Liquidator.

(b) Whether the rejection of the Applicant's claim by the Liquidator was justified, particularly in light of the wheeling charges determined by the Andhra Pradesh Electricity Regulatory Commission (APERC) and upheld by the Supreme Court.

(c) Whether the Applicant Company complied with the procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016 and the relevant regulations, especially Rule 17 of IBBI Regulations, 2016, in submitting proof of its claim.

(d) Whether the delay of 209 days in filing the appeal against the rejection of the claim by the Liquidator is condonable under Section 5 of the Limitation Act, 1963, and Section 42 of the IBC.

(e) Whether the wheeling charges claimed are payable by the Corporate Debtor, especially considering the nature of the wheeling agreements and the source of electricity supply (own wind power unit versus third-party supplies).

(f) Whether the Applicant Company's claim for wheeling charges related to power supplied by third parties, such as Rail Calcining Limited, is valid in absence of any wheeling agreement with the Corporate Debtor for such third-party supplies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Admissibility of the Applicant's claim for wheeling charges and related dues

The relevant legal framework includes Section 42 of the IBC, 2016, which allows a creditor to appeal against the liquidator's decision on claims within 14 days, and Rule 17 of the IBBI Regulations, 2016, which prescribes the manner of proving existence of debt by operational creditors through relevant documents such as contracts, invoices, and court orders.

The Applicant Company contended that the Corporate Debtor had entered into an HT Service Agreement and subsequent wheeling agreements with the Applicant, and had consumed electricity supplied under these agreements. The Applicant claimed dues including electricity charges, surcharge, and wheeling charges amounting to Rs.28,28,14,013/-. The Applicant relied on the APERC tariff orders and subsequent judicial pronouncements, including the Supreme Court's order dated 29.11.2019 upholding the wheeling charges determined by the Commission from FY 2002-03 onwards.

The Applicant submitted invoices and contracts to substantiate the claim and argued that the Corporate Debtor was liable to pay wheeling charges for power availed from captive and third-party providers as per the Open Access Agreement and Electricity Act provisions.

The Liquidator admitted only Rs.3,72,08,961/- towards CC charges but rejected the balance claim primarily on the ground that part of the wheeling charges related to power supplied by Rail Calcining Limited and other third parties for which no wheeling agreements existed with the Corporate Debtor. The Liquidator also questioned the applicability of the Wheeling Agreement dated 02.03.1996 to third-party supplies.

The Respondent contended that the APERC tariff order did not envisage end consumers like the Corporate Debtor being saddled with wheeling charges and that the Wheeling Agreement was applicable only to the Corporate Debtor's own wind power unit. The Respondent further argued that the Applicant failed to produce any wheeling agreements with respect to third-party supplies, rendering the claim baseless.

The Tribunal noted the Applicant's reliance on Rule 17 of IBBI Regulations, which allows proof of debt by relevant documents, and the judicial pronouncements upholding the wheeling charges. However, the Tribunal also recognized the Respondent's argument regarding the absence of wheeling agreements for third-party supplies and the limited applicability of the Wheeling Agreement.

Issue (c): Compliance with procedural requirements under IBC and IBBI Regulations

The Applicant submitted its claim in Form C to the Liquidator as required under Rule 17(1) of the IBBI Regulations. The Applicant relied on contracts, invoices, and regulatory orders to prove the existence of the debt as per Rule 17(2)(b). The Tribunal acknowledged that the Applicant had followed the due procedure for submission of claim and provided clarifications to the Liquidator.

However, the Tribunal emphasized that the procedural compliance alone does not guarantee admission of the claim if the substantive liability is not established or if the claim is barred by limitation or other legal infirmities.

Issue (d): Delay in filing appeal against rejection of claim and condonation of delay

Section 42 of the IBC mandates that an appeal against the liquidator's decision must be filed within 14 days of receipt of the decision. The Applicant's appeal was filed after a delay of 209 days.

The Tribunal referred to the ruling of the National Company Law Appellate Tribunal (NCLAT) which held that delay in filing appeal under Section 42 is condonable under Section 5 of the Limitation Act, 1963. The Supreme Court's judgment in Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd was cited to clarify that while it is usual to file a formal application for condonation of delay, the Court or Tribunal may condone delay even in absence of such an application if sufficient cause is shown.

However, the Tribunal noted that the Applicant had not even made an oral or written prayer for condonation of delay nor provided any reasons for the delay in filing the appeal. The Tribunal held that in absence of any grounds pleaded for condonation, the delay could not be condoned suo-moto.

Issue (e) & (f): Liability of Corporate Debtor for wheeling charges on third-party power supplies

The Tribunal examined the nature of the Wheeling Agreement dated 02.03.1996, which pertained to evacuation of power from the Corporate Debtor's own wind power unit. The Applicant claimed that the Corporate Debtor availed third-party sales from a windmill as captive usage under this agreement and was liable to pay wheeling charges accordingly.

The Respondent disputed the applicability of this agreement to power supplied by Rail Calcining Limited and other third parties, pointing out the absence of any wheeling agreements with respect to those third-party supplies. The Respondent argued that the Corporate Debtor had no contractual liability to pay wheeling charges for such third-party power.

The Tribunal found that the Applicant failed to produce any wheeling agreements or documentary evidence establishing liability for wheeling charges related to third-party supplies. The Tribunal observed that the Wheeling Agreement relied upon by the Applicant was not applicable to third-party supplies.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Section 42 of IBC mandates that an appeal against the liquidator's decision accepting or rejecting claims must be filed within fourteen days of receipt of such decision."

"Delay in filing the Appeal under Section 42 is condonable under Section 5 of the Limitation Act, 1963, provided sufficient cause is shown for the delay."

"In the absence of any prayer or grounds for condonation of delay, the Tribunal cannot condone the delay suo-moto."

"The Wheeling Agreement dated 02.03.1996 pertains only to the Corporate Debtor's own wind power unit and does not extend to power supplied by third parties such as Rail Calcining Limited."

"The Applicant failed to produce any wheeling agreements or relevant documents establishing liability for wheeling charges on third-party power supplies."

"The Applicant complied with procedural requirements under Rule 17 of IBBI Regulations for submission of claim; however, substantive liability and admissibility of the claim depend on the existence of valid contractual obligations."

"In the absence of condonation of delay and valid grounds for admission of the claim, the Application is dismissed as not maintainable."

---