TaxTMI 
TaxTMI 
2023 (10) TMI 645
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant. 2. Brief facts of the case necessary to be noticed for deciding this Appeal are:- 2.1. 'Damodar Valley Corporation'- Respondent No.2 herein filed an Application under Section 9 of the IBC before the Adjudicating Authority as Operational Creditor claiming arrears of unpaid electricity charges as operational debt against the Corporate Debtor- 'Bhaskar Sarchi Alloys Limited'. The Adjudicating Authority admitted Section 9 application by order dated 27.09.2019 commencing CIRP against the Corporate Debtor. No Resolution Plan having approved, the Adjudicating Authority passed an order of liquidation on 29.04.2020. Liquidator issued Public Announcement under Regulation 12 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016 notifying 23.12.2020 as a last date of submission of claims. Different stakeholders including Financial Creditors, workmen, employees, Operational Creditors including 'Damodar Valley Corporation'- Respondent No.2 filed their claims. Liquidator admitted the claims of different stakeholders. 'Damodar Valley Corporation' filed its claim for arrears of electricity dues due on the Corporate Debtor for an amount of Rs.49,51,59,781/-. Liquidator....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Appellant filed an application under Section 60(5) of the Code being IA No.984(KB)2021 in which application, following reliefs were sought for:- "(a) The communication of the Respondent no.2 dated September 3, 2021 be set aside and/or quashed. (b) Direct the Respondent No. 2 to either restore or grant fresh connection of electricity to the factory premises of Bhaskar Shrachi Alloys Limited situated at Varia Road, Mouza- Angadpur, Durgapur, District- Paschim Bardhaman- 713215, West Bengal. (c) Direct the Respondent No.2 to allow the Applicant to apply for grant of new connection along with requisite fee; (d) Direct the Respondent No.2 to provide a new electricity connection to the factory premises of Bhaskar Shrachi Alloys Limited situated at Varia Road, Mouza- Angadpur, Durgapur, District- Paschim Bardhaman- 713215, West Bengal; (e) Ad interim order in terms of prayers above; (f) Pass such further or other order or order and/or direction or directions be given as this Hon'ble Tribunal may deem fit and proper." 2.4. In reply to the application, an Affidavit was filed on behalf of the Respondent No.2. In the Affidavit, it was s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2021 filed by the Appellant, the relief granted was that electricity and water connections shall be restored by the concerned authorities upon application and payment of required fees/charges by the applicant company. Appellant has made a request to the Respondent No.2 to restore the connection which was refused by letter dated 03.09.2021 where the Respondent No.2 informed that unless the arrear outstanding dues of the pre-CIRP and post-CIRP was paid, the electricity cannot be restored. It is submitted that the said stand taken by the Respondent No.2 is illegal and against the settled law. In the liquidation proceeding, when the claim of Respondent No.2 who was an Operational Creditor has been settled as per Section 53 of the IBC, the claim for arrear stands extinguished and cannot be pressed by indirect method of asking the Appellant to pay all arrears which stood extinguished in the liquidation proceedings. The order impugned rejecting the application is not maintainable and is clearly erroneous. Application praying for restoration of electricity was consequent to IBC proceeding and was fully maintainable under Section 60(5) of the Code. The order which has been relied by rejecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant has to pay statutory dues including the arrear of the electricity dues and other charges prior to disconnection. 6. We have heard the submissions of the Learned Counsel for the parties and perused the record. 7. From the submissions of the parties and materials on the record, following questions arise for consideration:- (i) Whether Application filed by the Appellant Company IA No.984(KB)2021 was maintainable under Section 60(5) of the IBC? (ii) Whether the Appellant was entitled for the reliefs claimed in IA No.984(KB)2021 i.e. reconnection on payment of all necessary charges except arrears of electricity charges which was payable to the Corporate Debtor i.e. pre-CIRP dues? Question No.(i) & (ii) 8. Section 60(5) of the IBC provides: - "60. Adjudicating Authority for corporate persons. - xxx xxx xxx (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of - (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or again....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 of the IBC. 14. The Adjudicating Authority on an application filed by the Appellant in IA No.144 of 2021 has granted various reliefs and concessions to the Appellant consequent to sale in favour of the Appellant. One of the reliefs and concessions granted was "the electricity and water connection shall be restored by the concerned authorities upon application and payment of required fees/charges by the Applicant Company". We, thus, have to proceed to examine the maintainability of application of the Appellant under Section 60(5) in light of the admitted facts of the present case, as noted above. 15. Learned Counsel for the Respondent has placed reliance on the judgment of the Hon'ble Supreme Court in "Gujarat Urja Vikas Nigam Limited" (supra). In "Gujarat Urja Vikas Nigam Limited", Learned Counsel for the Respondent has placed reliance on paragraphs 69, 71 and 74, which are to the following effect:- "69. The institutional framework under IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora. In the absence of a court exercising exclusive jurisdiction over matters relating to inso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he corporate debtor. xxx xxx xxx 74. Therefore, we hold that the RP can approach NCLT for adjudication of disputes that are related to the insolvency resolution process. However, for adjudication of disputes that arise dehors the insolvency of the corporate debtor, the RP must approach the relevant competent authority. For instance, if the dispute in the present matter related to the non- supply of electricity, the RP would not have been entitled to invoke the jurisdiction of NCLT under IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the corporate debtor, NCLT is empowered to adjudicate this dispute under Section 60(5) (c) of IBC." 16. What has been laid down by the Hon'ble Supreme Court in the above case is that the NCLT has jurisdiction to adjudicate dispute which arise solely from or which relate to the insolvency of the Corporate Debtor. When we look into Section 60(5), the provision clearly provides that NCLT shall have jurisdiction to entertain or dispose of any application or proceeding by or against the Corporate Debtor or corporate person or any question of law or facts, arising out of or in rela....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of mining lease which was held beyond the jurisdiction of the Adjudicating Authority. In Embassy, paragraphs 41 and 46, following has been laid down:- "41. Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. xxx xxx xxx 46. Therefore, in fine, our answer to the first question would be that NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute supplemental lease deeds for the extension of the mining lease. Since NCLT chose to exercise a jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis that NCLT was coram non judice. 19. The judgment of the Embassy was a case where the Adjudicating Authority has issued direction pertaining to exclusion of supplementary lease which was in the jurisdict....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e restrained from terminating the contract only if it is central to the success of CIRP. Crucially, the termination of the contract should result in the corporate death of corporate debtor. In Gujarat Urja, this Court held thus: (SCC pp. 309-10, paras 176-177) "176. Given that the terms used in Section 60(5)(c) are of wide import, as recognised in a consistent line of authority, we hold that NCLT was empowered to restrain the appellant from terminating PPA. However, our decision is premised upon a recognition of the centrality of PPA in the present case to the success of CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by corporate debtor. In doing so, we reiterate that NCLT would have been empowered to set aside the termination of PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of NCLT under Section 60(5)(c) of IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the liquidator is as follows:- "9. It is submitted that the Respondent No.1 on receipt of entire sale consideration had distributed the same amongst the stakeholders as per Section 53(1) of the Code. It is further submitted that even the claim of Respondent No.2, which was admitted to the tune of Rs.49,51,59,781/- was dealt in accordance with provisions of the Code." 23. As noted above, the claim filed by the Respondent No.2 in the liquidation proceeding was admitted and has been dealt with in accordance with Section 53 of the IBC. We have noted above that an Application IA No.144 of 2021 was filed by the Appellant before the Adjudicating Authority claiming certain reliefs and concessions consequent to the Appellant having been declared successful bidder of the Corporate Debtor as a going concern. Paragraph 6 of the order contains certain reliefs and concessions and the order of the Adjudicating Authority has also been noted in paragraph 2 of the order. We may notice paragraphs 5 and 6 of the order, which is to the following paragraphs:- "5. This is an unusual case where the company could not be revived through a Resolution Plan during the CIRP and has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Notice and copy of the Sale Agreement which contains the terms and conditions of the agreement. This is also to inform you that we are bound by Clause 4.6.4 of WBERC Regulation dated 07.08.2013 which states as follows, "Notwithstanding anything contained contrary elsewhere in these regulations were deemed termination of agreement has taken place, then on the basis of application of any consumer, new service can only be provided in the same premises if the outstanding dues against the deemed terminated consumer is cleared along with the late payment surcharge. Without prejudice of the afore going, we would be able to take action in this regard once the above mentioned documents are provided to us. Thanking you, Yours sincerely Chief Engineer (Commercial)" 25. The above letter communicated that by virtue of clause 4.6.4 of WBERC Regulation dated 07.08.2013, any new service connection can only be provided in the same premises if the outstanding dues against the deemed terminated consumer is cleared along with the late payment surcharge. Letter dated 03.09.2021 was questioned by IA No.984 of 2021. We have already noticed above that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Plan. Appeal filed by the DVC was dismissed and following was held in paragraph 28:- "28. We thus note that the liabilities of DVC that relate to past dues prior to the Effective Date have been extinguished under the approved Resolution Plan and DVC is prohibited from raising any further demand on this account. The clause (d) in Para 6 Section VI of the Resolution Plan directs DVC to restore the power connection immediately after the Effective Date and not withhold/disconnect power supply on the ground of pending old dues whose claim has been submitted to Resolution Professional during CIRP and which have been taken care of in the resolution plan and clause (1) directs DVC to commit supply of power to the plant of CD immediately after the Effective Date. The other condition that is approved as part of resolution plan relates to withdrawal of all legal cases, if any, immediately after the Effective Date. Since the admitted claim of DVC has been paid in accordance with the provisions of IBC, DVC cannot claim any further payment of pre-CIRP dues which are now extinguished. Also as the successful resolution applicant has to apply for fresh connection, payment of security depos....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the Liquidation stage, to aid the purchaser of the Company as a 'going concern to start on a 'clean slate. The Hon'ble Supreme Court in 'Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., Civil Appeal No. 8129 of 2019 and in 'CoC of Essar Steel India Ltd. v. Satish Gupta' (2020) 8 SCC 531 has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the 'Sale Notice'. 24. It is no longer Res Integra that while approving a 'Corporate Debtor' sale as a going concern in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the 'Corporate Debtor' is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a 'going concern' and after payment of the sale proceeds distributed in accordance with Section 53 of the Code. The Impugned Order in I.A. 889 of 2020 is modified to the extent that the sale of the first Respondent as a 'going concern' i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....party, for worth of Rs. 9,72,000. 2. As per Doc No. 657/2015 dated 5-2-2015, the mortgager has sold the property to the extent of 620.83 sq. yd. to the Executive Officer, Ramapally Gramapanchayat for worth of Rs. 12,42.000. 3. As per Doc No. 2721/2014 dated 5-8-2014, the mortgager has sold the property to the extent of 204.75 sq. yd. to the Gramapanchayat Executive Officer, Ramapally for worth of Rs. 2,48,000. Details outstanding of dues of local Government (property tax. water sewerage, electricity bills, etc.) Rs. 83,17,152 (Rupees eighty-three lakhs seventeen thousand one hundred fifty-two only) Reserve price of property For Property No. 1: Rs. 77,63,000 For Property No. 2 Reserve price: Rs 5,83,37,000 (Rupees five crores eighty-three lakhs thirty-seven thousand only) Total 28 nos. of machineries items reserve price: Rs. 3,25,28,000 (Rupees three crores twentyfive lakhs twenty-eight thousand only) Terms and conditions 21. The successful bidder shall bear the stamp duties, charges including those of sale certificate, registration charges, all statutory dues payable to the Central/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsolvency) No. 961 of 2021- "Eastern Power Distribution Company of Andhra Pradesh Limited" (supra) decided on 26.05.2022. In the above case, in the liquidation proceeding of the Corporate Debtor in e-auction Maithon Alloys Ltd. was declared as Successful Auction Purchaser of the Corporate Debtor. The Corporate Debtor had electricity connection from Appellant- "Eastern Power Distribution Company of Andhra Pradesh Limited" (supra). Respondent No.1 filed an IA No.748 of 2021 before the Adjudicating Authority seeking restoration of the electricity supply to the premises of the Corporate Debtor. The Appellant- "Eastern Power Distribution Company of Andhra Pradesh Limited" opposed the application stating that the Respondent No.1 is liable to pay all outstanding dues of the Corporate Debtor as per Regulation 8.4 of General Terms and Conditions of Supply and if auction purchaser clears the entire dues of the Corporate Debtor only then the fresh connection can be granted. Adjudicating Authority allowed the Application and directed to energise the connection. The Eastern Power challenging the order of the Adjudicating Authority before the Appellate Tribunal. The question which was framed by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Purchaser, which is not the intend of the IBC proceeding nor a claimant even if it is Electricity Supply Provider can realize its claim against a Corporate Debtor in liquidation contrary to the scheme of IBC. 22. We, thus, are fully satisfied that the submission of the Appellant that they are entitled to recover the entire pre-CIRP and post-CIRP dues from the Successful Auction Purchaser i.e. Respondent No. 1 cannot be accepted. The Adjudicating Authority did not commit any error in issuing the directions as contained in the order dated 05.10.2021. We, however, are of the view that the Appellant is entitle to claim its electricity dues both pre-CIRP and post-CIRP in accordance with Section 53 of the Code. Ends of justice be served in granting liberty to the Appellant to move the Adjudicating Authority regarding aforesaid claims, if not already filed, which may be considered and decided in accordance with law. In result of the above discussion, we uphold the impugned order of the Adjudicating Authority dated 05.10.2021 with liberty to the Appellant to file appropriate application, if not already filed, before the Adjudicating Authority with regard to its entitlement of pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the corporate debtor, since, in such cases, the dues payable to the Government would come within the meaning of the expression "operational debt" under Section 5(21), making the Government an "operational creditor" in terms of Section 5(2). The moment the dues to the Government are crystallised and what remains is only payment, the claim of the Government will have to be adjudicated and paid only in a manner prescribed in the resolution plan as approved by the adjudicating authority, namely, the NCLT." The above-quoted observations from Embassy Property Developments Private Limited (supra) would confer jurisdiction on the tribunal constituted under the Code insofar as the appellant - Tata Power Western Odisha Distribution Limited is insisting on payment of the dues of the corporate debtor for restoration/grant of the electricity connection. The dues of the corporate debtor have to be paid in the manner prescribed in the resolution plan, as approved by the adjudicating authority. The resolution plan is approved when it is in accord with the provision of the Code. Thus, the issue of corporate debtor's dues falls within the fold of the phrase 'arising out of or in relation to....