TaxTMI 
TaxTMI 
2021 (10) TMI 117
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.... of the case, as stated and argued by the Appellant, is that on an application filed by Citibank N.A. against the Corporate Debtor Cosmic Ferro Alloys Limited (CFAL in short) under Section 7 of IBC, an admission order was passed by the Adjudicating Authority on 16.1.2018, thereby setting the Corporate Insolvency Resolution Process (CIRP) in motion. The Appellant Damodar Valley Corporation (DVC in short), which is the Operational Creditor, used to supply power to the Corporate Debtor, and it is alleged by the Appellant that the Corporate Debtor was in huge arrears in payment of electricity dues and delay payment charges. Consequently, a disconnection notice was given by DVC to the Corporate Debtor on 1.1.2018 and its power supply was disconnected on 17.1.2018. It is also claimed by the Operational Creditor DVC that when the electricity supply was disconnected it was not aware of the initiation of Corporate Insolvency Resolution Process (CIRP in short) of the Corporate Debtor. 3. It is further stated by the Appellant that a letter dated 18.1.2018was given by the Corporate Debtor CFAL to Operational Creditor DVC for reconnection with promise to pay arrears of electricity dues in inst....
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....RC dated 2.4.2013 of the West Bengal Electricity Regulatory Commission (WBERC) and the Power Purchase Agreement and the Supplementary Agreement (supra).The Learned Counsel for Appellant has also stated that the Resolution Plan does not contain any explicit provision regarding waiver of security deposit over the next five years. It only includes a request for waiver of security deposit for next five years regarding which the Adjudicating Authority should pass specific order, which was not given by the Adjudicating Authority while approving the resolution plan. Therefore, in the absence of a specific and explicit order there is no case for waiving off security deposit over the next five years for increased contract demand and electricity supply through a new 132 KV powerline. 6. The Learned Counsel for Appellant has further argued that DVC is a Distribution Company ('discom' in short), which is an entity run on commercial principles and any waiver, that is accorded to the Successful Resolution Applicant which is not explicitly provided in the approved Resolution Plan, will cause loss to the Appellant affecting its overall functioning. The Learned Counsel has also stated that Appella....
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....ng revived after its successful resolution. 8. We have perused the appeal memo, reply and rejoinder submitted by Respondent No. 1 and the Appellant and considered carefully the averments made therein and the oral arguments submitted by the parties. 9. The Approved Resolution Plan contains provision regarding accrued/contingent liabilities claimed by DVC and other demands relating to security deposit at pp. 139-140 of the Appeal Paperbook Volume II, filed vide diary No. 17632 dated 8.1.2020), which is reproduced below for ready reference: - "Accrued/Contingent Liabilities claimed by the Damodar Valley Corporation ("DVC) for supply of power-Waiver Approval by NCLT for all Power Dues which includes Principal, Arrears, Interest Arrears, any Delayed Payment Charges or Penalty etc. till the Date of NCLT Order approving the Resolution Plan as well as Charges, if any demanded for Resumption of Power Supply over and above the Amount to be paid under this Resolution Plan. This will assist in immediate start of the Production of Goods. Waiver of all Liabilities (including Interest, Penal Interest, Penalty, Interest on Penalty, any kind of Late Fee as well as Principal Liability due) rel....
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....ed to a peak level of 55000 MT pa only and this ensures higher fixed costs of production on per tonne basis. WBIDC had given the permission for the power corridor in 2017 stating that the line would be given to the three consumers including the Corporate Debtor, which is now at completion stage. xxxxxxxxxxxxxxxxxxxxxxxx" 10. We now peruse the order dated 11.10.2018 passed by the Adjudicating Authority in CP IB No. 596/KB/2017, which relates to the approval of the Resolution Plan, wherein the relevant approval is in paragraph no. 8:- "8. In view of the above, I have gone through the Resolution Plan submitted for my approval. In Part-A of the Resolution Plan, I found that the provision is made for payment of insolvency resolution process costs. It appears to be somewhat at higher side because provision of amount of Rs. 12.20 crores is made to incur resolution costs, which includes fees of resolution professional amounting to Rs. 6.33 crores (page 29). However, since it is approved by the CoC and this authority has no reason to doubt wisdom of CoC, I hold that the provisions of section 30(2)(a) of I&B Code is complied with. The plan also provides that repayment of debts of o....
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....ll the date of the approval of the Resolution Plan by the Adjudicating Authority is waived as per Resolution Plan. We also note that the Corporate Debtors ought reconnection during the ongoing CIRP vide letter dated 18.1.2018 (page 74 of Appeal Paperbook, Volume I) and through which the Corporate Debtor also committed itself to pay the amounts due to DVC in monthly installments. This letter is signed by the Director of Cosmic Ferro Alloys Limited and not by the IRP even though it was issued after the initiation of CIRP on 16.1.2018. We also note from the written submissions of the Appellant (diary no. 29878 dated 20.9.2021) that electricity supply was reconnected to the Corporate Debtor. 13. On perusing the letters exchanged between the Appellant and Respondent No.1 between 15.1.2019 and 19.8.2019, we find that the Respondent No. 1 has been making different requests in each letter regarding the quantum of increase of contract demand and waiver of security deposit. For example, in the letter dated 15.1.2019 (attached at page 643 of the Appeal Paperbook, Vol. IV). Respondent No.1 sought an increase in contract demand from 10 MVA to 20 MVA from 31.1.2019, on which through letter date....
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....er 31.3.2020, but before 31.3.2021 - Rs. 4.93 crores (iv). Payment after 31.3.2021, but before 31.3.2022 - Rs. 4.94 crores (v) Payment after 31.3.2022, but before 31.3.2023 -Rs. 4.94 crores Total: -Rs. 24.67 crores According to the Appellant, the Respondent No. 1 has defaulted in making payment in accordance with this schedule, as only Rs. 2.25 crores was paid within 30 days of the approval of the Resolution Plan against an approved amount of Rs. 4.93 crores. His claim is that while a monitoring committee was in place, it failed to ensure payment to the Appellant in accordance with the approved Resolution Plan. For this reason, and also because the Respondent No. 1 failed to provide security deposit as required by letter dated 6.8.2019 (attached at pg. 653 of Appeal Paperbook Vol. IV), the Appellant issued disconnection notice on failure to pay the security deposit vide a letter dated 30.8.2019 and disconnection took place thereafter. 16. It is, thus, clear that Respondent No. 1 did not adhere to the payment schedule for the payment of resolution amount to Appellant DVC hence a disconnection notice was given to the vide letter dated 30.8.2019 to Respondent No. 1. 17. Th....
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....increase in the contract demand to 45 MVA and supply of power at an enhanced voltage of 132 KV is concerned, waiver of bank guarantee/cash as security deposit by DVC against regular power usage on basis of contract demand for at 132 KV for next five years from the date of approval of the Resolution Plan by the Adjudicating Authority is not given bya specific order by the Adjudicating Authority (NCLT). Similarly, providing power supply through 132 KV supply line is also not granted by a specific order of NCLT. Thus, these requests only remain as proposals which have not been accepted or approved by specific order of the Adjudicating Authority while approving the Resolution Plan. Therefore, in our view in the absence of any specific orders, the Appellant is not obliged to grant any waiver of payment of security deposit over the next five years for increase in contract demand or supply of electricity by a 132 KV supply line. 23. Moreover, we are also of the view that any statutory or legitimate dues which might be demanded from the Successful Resolution Applicant (SRA) for supply of any services should be paid by the SRA and no waiver for any period of time for the future is not perm....