2024 (7) TMI 1173 - AT - Insolvency and Bankruptcy

NCLAT upholds Resolution Professional's authority to collect maintenance charges and electricity dues from home buyers during insolvency proceedings

Sanskriti Allottee Welfare Association (Reg.), Lalit Chauhan, Rohit Kumar, Vinod Kumar Upadhyay, Rahul Yadav, Akash Chauhan Versus Versus Gaurav Katiyar Resolution Professional Earthcon Universal Infratech Pvt. Ltd., Noida Power Company Limited

The NCLAT dismissed an appeal challenging the Adjudicating Authority's direction allowing the Resolution Professional to take coercive steps for ... Payment of maintenance charges including electricity charges - payment of dues arising from essential services supply during CIRP period - electricity charges - propriety of the directions issued by the Adjudicating Authority that the RP shall be free to take coercive steps with regard to the non-payment of maintenance charges including the electricity charges of the common area and make the payment to the NPCL - HELD THAT:- It is an undisputed fact that when the RP took over the charge of the Corporate Debtor, there was shortfall in maintenance charges collected from the Home Buyers and an outstanding electricity due payable to NPCL. In the present case since the Corporate Debtor was admitted into CIRP and RP had been appointed, the responsibility to discharge the pending payments of maintenance charges including electricity dues fell on the RP in terms of the statutory construct of IBC. It is also an admitted fact that in terms of Section 11(4)(d) of RERA Act, the Corporate Debtor was obligated to provide essential services including electricity supply till the maintenance of the project was taken over by the association of allottees. Besides the RP placing the issue of maintenance charges and electricity dues before the CoC for its deliberations and consideration, it is also found that the RP, in all fairness, had from time to time sent communications to the allottees regarding the electricity overdue amount and emphasised the need to clear the outstanding dues of NPCL to avoid disconnection of electricity supply - the communications though not an exhaustive list, clearly depicts that the RP had been making bonafide efforts to apprise the allottees of the need to clear the outstanding electricity dues to stave off the stark possibility of electricity disconnection. There are no credible ground which has been brought before us by the Appellants to substantiate any impropriety, procedural or otherwise, to have been committed by the RP in placing the correct facts before the allottees and the CoC members regarding the need to enhance the maintenance charges and need to clear the cascading electricity dues to avoid any possible power disconnection by the NPCL. In the given facts of the case, since it was the prime responsibility of the RP to run the Corporate Debtor as a going concern, it was entirely appropriate on the part of the RP to seek the approval of the CoC in the determination of maintenance fees and recovery of electricity dues - After having been present in the CoC meetings and exercised their voting rights on the determination of the maintenance fees and electricity dues, the allottees cannot question the authority of the CoC to have made these business decisions. It goes without saying that the commercial decision of the CoC is paramount and nonjusticiable and every dissatisfaction cannot partake the character of a legal grievance. Whether payment of electricity charges being an essential service, such amount can be accounted towards CIRP costs and that the Corporate Debtor is not liable to pay the amount till the completion of the period of moratorium? - HELD THAT:- This issue has been squarely covered by the judgement of this Tribunal in Shailesh Verma vs Maharashtra State Electricity Distribution Company [2022 (9) TMI 143 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. This Tribunal by making a contextual and purposive interpretation of statutory provisions of moratorium and its subsequent amendment by Act 1 of 2020 had held that while benefit of essential services should be continued, there should not be any default in the discharge of the dues arising therefrom. In the present case, the RP has admitted that electricity supply by NPCL, being in the nature of supply of essential goods and services, was necessary to be continued so as to protect and preserve the value of the Corporate Debtor and hence dues arising from electricity supply require to be discharged. This subject matter has been considered and deliberated at length by the CoC from time to time in its various meetings and resolutions passed to collect the outstanding amount from the allottees to square off the dues of NPCL - There is no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during CIRP period nor is there any statutory provision which stipulates that the Corporate Debtor is not liable to pay such amounts till completion of the period of moratorium. There are no infirmity in the impugned order of the Adjudicating Authority holding that the Corporate Debtor through the RP was obligated to make payment of the electricity dues as approved by the CoC and apply coercive measures to collect the same to make payment to the NPCL - appeal dismissed. Issues Involved:1. Validity of the decision to increase maintenance charges.2. Responsibility for payment of outstanding electricity dues.3. Classification of electricity dues as CIRP costs.4. Authority and actions of the Resolution Professional (RP) during CIRP.5. Legal standing of the CoC's decisions.Issue-wise Detailed Analysis:1. Validity of the Decision to Increase Maintenance Charges:The appellants contended that the original maintenance charge of Rs. 1 per sq. ft. was adequate and that the RP arbitrarily increased the charges by 100% without valid reasons. The Adjudicating Authority had passed an unreasoned order without adjudicating on the validity of the RP/CoC's decision to levy maintenance charges at Rs. 2 per sq. ft. The appellants argued that neither the RP nor the CoC were empowered by IBC to determine maintenance charges, as this responsibility fell under Section 11(4) of RERA and Section 14(1) of the UP Apartment Act. The RP countered that the increase was necessary to cover electricity consumption in common areas and that the decision was approved by the CoC with the requisite majority.2. Responsibility for Payment of Outstanding Electricity Dues:The RP submitted that there was an outstanding electricity due of Rs. 70 lakhs when they took over. The CoC resolved to increase electricity rates from Rs. 7 to Rs. 8.91 per unit to cover these dues. The RP argued that the Corporate Debtor was obligated to provide essential services, including electricity, until the maintenance was taken over by an association of allottees. The CoC's decision to increase maintenance charges was aimed at ensuring uninterrupted electricity supply. The NPCL also contended that the Corporate Debtor was obligated to pay current dues on account of electricity supply, which could not be treated as CIRP costs.3. Classification of Electricity Dues as CIRP Costs:The appellants argued that under Regulations 31 and 32 of the CIRP Regulations, electricity dues form part of the CIRP costs and should be paid only at the time of distribution of CIRP costs to all stakeholders. The RP's collection of electricity dues was alleged to violate IBC provisions. However, the Tribunal referred to the judgment in Shailesh Verma vs. Maharashtra State Electricity Distribution Company, which clarified that while essential services should continue, there should be no default in the discharge of dues arising from such services.4. Authority and Actions of the Resolution Professional (RP) During CIRP:The RP was responsible for managing the Corporate Debtor as a going concern, including providing maintenance services and electricity. The RP took necessary steps to apprise the CoC about the dues payable to NPCL. The Tribunal found that the RP had acted appropriately in seeking the CoC's approval for the determination of maintenance fees and recovery of electricity dues. The RP's communications to the allottees emphasized the need to clear outstanding dues to avoid electricity disconnection.5. Legal Standing of the CoC's Decisions:The Tribunal emphasized that the commercial decisions of the CoC are paramount and non-justiciable. The allottees, represented by their Authorized Representative in CoC meetings, participated in the voting process. The Tribunal found no credible grounds to substantiate any impropriety by the RP in placing the correct facts before the allottees and CoC members. The CoC's decision to increase maintenance charges and recover electricity dues was upheld.Conclusion:The Tribunal found no infirmity in the Adjudicating Authority's order directing the RP to take coercive steps for non-payment of maintenance charges, including electricity dues. The appeal was dismissed, and the Corporate Debtor, through the RP, was obligated to make payment of the electricity dues as approved by the CoC. The Tribunal reiterated that there is no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during the CIRP period.