Pre-CIRP Electricity Dues Expires on Approval of Resolution Plan under IBC: NCLAT [Read Order]

The bench of the National Company Law Appellate Tribunal (NCLAT) has reaffirmed that all claims that are not covered by the Resolution Plan that has been approved are nullified upon its approval. The Tribunal determined that when Damodar Valley Corporation (DVC/Appellant) asked for the resumption of the energy supply, it had no right to demand pre-CIRP dues.

Under a Power Purchase Agreement dated December 14, 2009, the Appellant provided industrial use of electricity to Corporate Debtor/Respondent No. 1. An application against the corporate debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was accepted by the adjudicating authority on February 3, 2020. On February 19, 2020, the appellant turned off the electricity. Within seven days of being paid for electricity used during the moratorium, the appellant was ordered by the adjudicating authority to restore power.

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The Resolution Professional accepted the ₹2.32 lakh claim that the appellant had filed on November 13, 2020. On September 21, 2021, a Resolution Plan was agreed by the Committee of Creditors (CoC). An offer of ₹4.64 lakh was made to the appellant. On the same day, the plan was authorized by the Adjudicating Authority. The Corporate Debtor asked for the electricity supply to be restored on October 29, 2021. Respondent No. 1 paid the sum authorized under the Resolution Plan on 02.11.2021.

The appellant's attorney contended that, in accordance with the WBERC (power delivery Code Regulations) of 07.08.2013, the appellant had the right to collect the unpaid balance from the corporate debtor prior to resuming the delivery of power. Additionally, it was argued that Respondent No. 1 had no right to present petitions to the Adjudicating Authority because the Resolution Plan had already been adopted, and the Authority had erred in considering the application. The Counsel argued that Respondent No. 1 had committed to paying all of the Corporate Debtor's debts under the terms of the new Power Purchase Agreement. As a result, it was impossible to preclude the appellant from requesting money refunds. Respondent No. 1 could not be allowed to approve and reprobate, they contended.

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In contrast, Counsel for Respondent No. 1 argued that all pre-CIRP dues were extinguished because the Appellant had submitted its claim during the Corporate Debtor's CIRP and had been awarded the sum allotted under the Resolution Plan. They argued that it was unlawful for the appellant to insist on paying pre-CIRP dues.

According to the bench, which was made up of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), and Arun Baroka (Technical Member), the appellant's claim for electricity dues prior to CIRP, including delayed charges, was addressed in the Resolution Plan by allocating ₹4.64 lakh. Therefore, when the SRA requested the resumption of the electrical supply, the appellant was not permitted to recover pre-CIRP dues. DVC could not have demanded payment of unpaid pre-CIRP dues, but it was allowed to collect all required fees, including security and reconnection fees.

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The Tribunal pointed out that Section 60(5)(c) covers any inquiry pertaining to or arising out of the Corporate Debtor's Insolvency Resolution or Liquidation procedure. It was noted that the request to restore the energy supply was obviously covered by Section 60(5)(c). The Tribunal ruled that the Appellant must abide by the ruling in Ghanshyam Mishra & Sons Pvt. Ltd. and that it could not take a position that went against the Supreme Court's stated law. It found that the appellant's demand for any sum before the pre-CIRP period was unlawful.

According to the Tribunal, the Appellant has no right to recoup any debts owed to the Respondent that date back to the pre-CIRP era. It ordered the appellant to reimburse the sum that was requested prior to the CIRP period. The applications were accepted.

To Read the full text of the Order CLICK HERE

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