NCLT Empowered to Decide Whether Successful Resolution Applicant is Liable to Pay Pre-CIRP Electricity Dues u/s 60(5) of IBC: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has held that the National Company Law Tribunal (NCLT) is empowered to decide an issue whether Successful Resolution Applicant (SRA) is liable to pay Pre-Corporate Insolvency Resolution Process (CIRP) electricity dues after the approval of the resolution plan and taking over of the corporate debtor under section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (Code).

By an order dated August 23, 2018, Akums Lifesciences (Corporate Debtor) was subject to the Corporate Insolvency Resolution Process (CIRP).  On January 12, 2021, the resolution plan was approved.  The Successful Resolution Applicant (also known as "SRA") was given management and control of the business.  In order to reestablish the electrical connection, the SRA contacted Punjab State Power Corporation Limited (PSPCL/the "Appellant"). However, the appellant claimed that the corporate debtor had failed to pay power bills, resulting in an overdue balance of Rs. 3,87,96,889/-.  After the resolution plan was approved, the SRA had already paid the operational creditors whose claims the resolution professional had accepted.

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The SRA filed an Interlocutory Application (IA) to restore the electricity, and it was granted.  The NCLT ruled that the respondent Electricity Company's claim for the pre-CIRP period was void once the resolution plan was approved.  The current appeal has been filed against this order.  The appellant argued that problems pertaining to PSPCL's electricity supply, which are governed by the Electricity Act of 2013, are outside the NCLT's jurisdiction.

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It was contended that the NCLT lacked the power to order a business to furnish electricity and to forgive unpaid statutory dues. It also had no authority to intervene with PSPCL's ability to deny connection to a location where payments were past due.

 On the other hand, the respondent argued that all pre-CIRP debt and expenses were eliminated when the plan was adopted.  In compliance with the resolution plan, the Respondent has already paid stakeholders.  A resolution plan that has been accepted is legally binding on all parties involved, as stated in Subsection (1) of Section 31 of the IBC, 2016.

According to section 60(5) of the code, the NCLT has the authority to decide any matter pertaining to priorities, laws, or facts that arise from or are connected to the settlement of the corporate debtor's insolvency.

 The Tribunal noted that the question of whether the SRA is responsible for paying pre-CIRP power dues following the resolution plan's approval and the corporate debtor's takeover stems directly from the resolution plan's approval and its execution.

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It further added that the NCLT is empowered to dispose of any application or proceeding against the corporate debtor arising out of or in relation to insolvency resolution. This position was also affirmed by the NCLAT in Damodar Valley Corporation Vs. Mackeil Ispat & Forging Ltd. & Anr.

The bench of Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) observed that the SRA has assumed responsibility for the corporate debtor and that the resolution plan authorized by the adjudicating authority does not require the SRA to reimburse the corporate debtor for pre-CIRP power payments.  According to the code's structure, creditors who owe money to the corporate debtor must present their claims to the Resolution Professional.  The appellant in this case did not file such a claim, and there was no mention of such payments in the resolution plan either.

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The Tribunal dismissed the appeal, ruling that the appellant could not exploit its failure to file the claims before the Resolution Professional by requesting pre-CIRP power dues before reestablishing the connection.  Under duress and protest, the corporate debtor paid the payment in order to restore the electricity and start up again. In order to restore the power connection, the appellant cannot demand arrears of the amount that has been extinguished by operation of law.

To Read the full text of the Order CLICK HERE

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