AI Drafter 
TaxTMI 
TaxTMI 
2022 (8) TMI 717
X X X X Extracts X X X X
X X X X Extracts X X X X
....respondent no.1-Distribution Licensee, demanding past outstanding dues against respondent no.3. 2. In such context, the petitioner refers to certain dates. 3. On October 22, 2019, the respondent no.3 was admitted under Corporate Insolvency Process (CIRP) vide an order of the NCLT, Kolkata Bench. 4. On January 5, 2021, on the failure of a resolution plan to materialize, the NCLT passed an order admitting the respondent no.3-Company into liquidation. The claim of respondent no.1 in respect of dues was admitted by the Resolution Professional during the CIRP on June 23, 2020 as well as by the Liquidator, at the stage of liquidation, on January 3, 2022. 5. Vide order dated January 4, 2022, the NCLT granted certain reliefs and concessions in favour of the petitioner in respect of the respondent no.3 so that the business could be carried on smoothly by the petitioner as a successful bidder. 6. However, the respondent no.1 issued a Demand Notice on January 27, 2022 for the alleged outstanding dues to the tune of Rs. 26,87,37,466/- for starting the procedure of new connection. 7. On March 15, 2022, balance confirmation was issued by respondent no.1 to the petitioner to adm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness of the corporate debtor as a going concern, were also introduced by the amendment dated October 22, 2018 from the said date. 12. Relying on Regulation 32A, the Supreme Court held in Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta & Ors., reported at (2019) 2 SCC 1 that if there is a Resolution Applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see this possibility. 13. It is submitted by the petitioners that Regulation 32A of the said Regulations provides that liquidation sale has two facets, asset sale and sale as a going concern. Going concern sale can be with or without liabilities. As, in the present case, no liabilities were indentified, whether by the committee of creditors or the liquidator, as would be apparent from the Expression of Interest (EoI), no liabilities could be cast upon the present petitioners. 14. In such context, the petitioners rely on Isha Marbles Vs. Bihar State Electricity Board & Anr., reported at (1995) 2 SCC 648, for the proposition that when the corporate debtor is sold as a going concern under liquidation and the claims are to be distributed as per Section 53, clai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty dues should be imposed on the successful purchaser, since in the said judgment it was held that liabilities can also be included in a going concern sale. In Shiv Shakti Inter Globe Exports Pvt. Ltd. Vs. KTC Foods Private Limited [(2022) SCC Online NCLAT 85], the same Bench which decided M/s. Visisth Services Limited (supra) on the issue of electricity dues, did not refer to its earlier judgment in M/s. Visisth Services Limited (supra) as it was not a case on the point of electricity dues and successful auction purchaser. 19. The Supreme Court, it is submitted, held in Telengana State Southern Power Distribution Vs. Srigdhaa Beverages, reported at (2020) 6 SCC 404, relied on by the respondent, in respect of a sale under the provisions of the SARFAESI Act, which, thus, differs from the present liquidation proceeding under the IBC. 20. The case of Dollar Industries Vs. The Assistant Commissioner, Central Excise Customs and Service Tax, Dindigul and others, reported at MANU/TN/5978/2020, relied on by the petitioners, it is argued, is directly on the issue of a liquidation sale under the Company Law. It was also a sale under the SARFAESI Act and therefore the principle does not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner, which categorically provided that the assets of the Company in liquidation were being sold as a going concern on as is where is basis, as is what is basis, whatever there is basis and without recourse basis. On obtaining such possession the petitioner applied for fresh electricity connection on December 17, 2021. 26. Learned counsel for the respondent no.1 contends that, under Section 3 of the West Bengal Electrical Undertakings Recovery of Dues, 2000, when any dues are payable by a consumer to an electrical undertaking, the prescribed authority after expiry of thirty days of such due, may issue notice of demand on the defaulting consumer demanding the amount payable by him. By virtue of Section 5 of the said Act, in the event of failure of the consumer to make such payment, he would be treated as defaulter with penalty and cost of recovery, which would be recoverable as arrears of land revenue. 27. Again, a notice for recovery of dues was issued by the respondent no.1 for filing a suit under the Bengal Public Demands Recovery Act, 1913 but immediately thereafter the CIRP started and, by order of moratorium, respondent no.1 was precluded from filing the suit. Ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he liability of electricity dues have been held to be included in sale, as going concern on as is where is basis. 32. Learned counsel also seeks to distinguish the judgments cited by the petitioners. Isha Marbles (supra) is sought to be distinguished on the ground that it was pronounced in 1995, that is, 21 years prior to enactment of the IBC and setting up of NCLTs and as such, cannot apply to IBC cases. 33. The grant of reliefs and concessions by the NCLT, Kolkata vide order dated January 4, 2022, it is submitted, was without any authority of law and in exercise of excess jurisdiction not vested upon the NCLT. 34. In the affidavit-in-reply, the petitioner has admitted that they are not praying for order directing reconnection but challenging the liability prior to initiation of CIRP for outstanding electricity charges. Since the claim arose for non-payment prior to the initiation of the CIRP, the issue cannot come under the scope of adjudication of the NCLT, it is submitted. The NCLT, it is argued, has no jurisdiction to extinguish the rights of property of any other person/creditor without any authority of law as guaranteed under Article 300A of the Constitution. 35.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... came in force. 42. The amendment made on July 25, 2019, was with effect from July 25, 2017, which is the date of commencement of evaluation of insolvency proceeding under the IBC. 43. Learned counsel seeks to cite instances in support of his proposition. In any event, it is argued that the purchaser-Company carries the liabilities with the sale as a going concern, payable subsequent to the said sale in liquidation. Thus, the quantum of sale proceeds would be lesser than the actual consideration if it was sold without liabilities. Hence, the said lesser quantum of sale proceeds is being paid on auction sale as going concern, which will be distributed amongst the list of creditors in terms of Section 53 of the IBC, to bypass which there is no scope. 44. The doctrine of clean slate relied on by the petitioner was pronounced without considering Regulation 32A (3) and has no application in the present case. M/s. Shiv Shakti (supra) is relied on by respondent no.1 in support of his proposition in respect of sale of corporate debtor as a going concern including both assets and liabilities. With regard to Bhatpara Municipality Vs. Nicco Eastern Private Limited and others, it is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, subject to Section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate or to sell the same in parcels in such manner as may be specified. The proviso thereto says that the liquidator shall not sell immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant. Clause (j) empowers the liquidator to invite and settle claims of the creditor and claimants and distribute proceeds in accordance with the provisions of the Code. 50. Section 38 of the IBC provides for consolidation of claims by the liquidator, Section 39 the verification of claims and Section 40 deals with the admission or rejection of claims by the liquidator. 51. Hence, the powers of the liquidator are on a similar footing as those of a Resolution Professional in a resolution proceeding. It is also noteworthy that Section 5 (18) of the IBC stipulates that a Liquidator has to be a Resolution Professional in the first place. 52. Section 53 provides for distribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely:- (a) the insolvency resolution process costs and the liquidation costs paid in full; (b) the following debts which shall rank equally between and among the following:- (i) workmen's dues for the period of twenty-four months preceding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52; (c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date; (d) financial debts owed to unsecured creditors; (e) the following dues shall rank equally between and among the following:- (i) any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Persons Regulations, 2016, is unambiguous and leaves no scope of construing that all the liabilities, including pre-CIRP liabilities, are transferred to the successful Resolution Applicant in a going concern sale. 62. It is well-settled that the debts of the power distribution licensee do not operate as charge on the assets of the corporate debtor. 63. Hence, both sale of the corporate debtor and the business(es) of the corporate debtor as a going concern, as envisaged in Regulation 32, Clauses (e) and (f) respectively, do not contemplate automatic transfer of all pre-CIRP liabilities of the corporate debtor to the auction purchaser. 64. In any event, the Regulations framed under the authority conferred by the IBC cannot be construed to override the provisions of the Code itself. Hence, no interpretation contrary to Section 53 of the IBC which, again, is preceded by a non obstante clause, can be attributed to the expression "going concern sale", as contemplated in Rule 32 of the Liquidation Process Regulations, 2016. 65. In the present case, the distribution licensee had made its claim during the resolution process as well as before the liquidator. Thus, whate....