Electricity Connection cannot be Refused only on account of Past Dues: NCLT [Read Order]

The Mumbai bench of the National Company Law Tribunal (NCLT) has held that government authority cannot refuse the electricity connection only on account of past dues for which claims have been submitted to liquidator and have been admitted by the Liquidator and are to be dealt with in accordance with Section 53 of the Insolvency Bankruptcy Code(IBC), 2016.

This application has been filed by a successful auction purchaser, M/s. Agra Gwalior Pathways Pvt Ltd against Madhya Pradesh Paschim Kshetra Vidyut Vitaran (R-1) seeking following prayers and where Liquidator has been arrayed in the Memo of Parties as R-2 as Proforma Party

The law is well settled, once the Authority files its claim with the liquidator, the said claim has to be settled in accordance with the waterfall mechanism provided under Section 53 of the Code and the dues of the statutory authority are covered under 53(1)(e) of the Code. Therefore, the Government Authority cannot refuse to grant electricity connection only on account of past dues for which claims have been submitted to liquidator and have been admitted by the Liquidator and are to be dealt with in accordance with Section 53 of the Code.

In the light of the clear law laid down by the Supreme in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. & Ors., (2023), the claims of R-1 shall stand settled on distribution of liquidation estate by the liquidator, in accordance with the ‘waterfall mechanism’ provided under section 53 of the Code. Upon receipt of payment from liquidator as per Section 53 of the Code, the admitted claims of R-1 for Rs.99,49,857/- shall stand settled.

It is submitted that CIRP of the corporate debtor commenced on 24.04.2018. During the liquidation process, the above properties of the corporate debtor were put to e-auction and upon applicant emerging as the successful purchaser and having paid the entire sale consideration, were sold to the Applicant.

It is submitted by the applicant that after acquisition of the above properties, the applicant applied for connection of electricity vide letter dated 26.05.2022 which is annexed at Annexure 12 page 166 of the application. However, Respondent No.1 has refused to provide the electricity connection on account of past dues amounting to Rs. 99,49,857/-.

Reply on behalf of both the respondents are on record. The stand of Respondent No.1 is that the above properties have been sold on “As is where is basis”, “as is what is basis”, “whatever there is basis” and “No recourse basis”. Therefore, the purchase properties were transferred to the applicant along with the liabilities of electricity dues of Rs. 99,49,857/-. Therefore, the successful purchaser has to deposit the transfer amounts.

The R-1 has relied on judgement in the case of Telangana State Southern Power Distribution Company Ltd & Anr. Vs. Srigdhaa Beverages (2020) which dealt with auction of a unit under SARFAESI Act, 2002 and Supreme Court stated that electricity dues are statutory in character and cannot be waived in view of section 56 of the Electricity Act, 2003 as they cannot partake the character of dues of purely contractual nature.

The respondent submitted that the Electricity Act, 2003 has an overriding effect on all other laws. Being a special law relating to all aspects of electricity, it has primacy over all other laws including the Insolvency and Bankruptcy Code. In the end, the respondent has prayed for release of outstanding dues of Rs. 99,49,857/- before supply of electricity connection for the mentioned properties.

In its Reply, the liquidator has stated that R-1 had filed its claim for an amount of Rs. 99,49,857/- which has been fully admitted. Upon sale of the property of the corporate debtor, the payment would be distributed to the stakeholders in accordance with the provisions of Section 53 of the Code and accordingly the dues of the R-1 would stand settled upon distribution of the assets of the corporate debtor.

The two member bench of Ms. Lakshmi Gurung (Judicial Member) and Shri Hariharan Neelakanta Iyer (Technical Member) observed that once the Authority files its claim with the liquidator, the said claim has to be settled in accordance with the waterfall mechanism provided under Section 53 of the Code and the dues of the statutory authority are covered under 53(1)(e) of the Code. Therefore, the Government Authority cannot refuse to grant electricity connection only on account of past dues for which claims have been submitted to liquidator and have been admitted by the Liquidator and are to be dealt with in accordance with Section 53 of the Code.

In the light of the clear law laid down by Supreme, the claims of R-1 shall stand settled on distribution of liquidation estate by the liquidator, in accordance with the ‘waterfall mechanism’ provided under section 53 of the Code. Upon receipt of payment from liquidator as per Section 53 of the Code, the admitted claims of R-1 for Rs.99,49,857/- shall stand settled.

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