The National Company Law Appellate Tribunal (NCLAT) in Punjab State Power Corporation Limited Versus Akums Lifesciences Limited held that the Successful Resolution Applicant (SRA) cannot be compelled to pay pre-CIRP electricity dues as a condition for restoring the electricity connection after the approval of the Resolution Plan and the takeover of the corporate debtor.
The corporate debtor was admitted into the Corporate Insolvency Resolution Process (CIRP). The Resolution Plan submitted by the SRA was approved and later sanctioned by the Adjudicating Authority. Following the approval, the SRA discharged all claims of operational creditors admitted by the Resolution Professional as per the plan.
When the SRA approached Punjab State Power Corporation Limited (PSPCL/“Appellant”) for the restoration of the electricity connection, the Appellant refused, insisting that all pre-CIRP electricity dues of the corporate debtor be cleared before restoring the connection.
Whether NCLT/NCLAT Is Empowered To Decide The Issue Whether Pre-CIRP Electricity Dues To Be Paid By SRA
The primary question before the Appellate Tribunal was whether the Adjudicating Authority is empowered to decide if the SRA is liable to pay pre-CIRP electricity dues under Section 60(5)(c) of the Code. Section 60(5)(c) clearly indicates that the NCLT is empowered to adjudicate any question of priorities or any question of law or fact arising out of or in relation to the insolvency resolution of the corporate debtor.
The Supreme Court while delineating the scope of the Adjudicating Authority under section 60(5)(c) in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta & Company & Ors observed that the institutional framework under the Code aims to create a single forum to decide all issues related to the insolvency of the corporate debtor, ensuring that the corporate debtor is not compelled to approach or defend itself in multiple proceedings across different fora. Resolving all insolvency-related issues through a single forum is crucial, as multiple proceedings would hinder the timely completion of the insolvency process, ultimately leading to the depletion of the corporate debtor’s asset value.
The court observed that, given the text of this provision and similar provisions in other insolvency statutes, the NCLT and NCLAT are clearly empowered to adjudicate disputes arising from or relating to the insolvency of the corporate debtor. However, the court cautioned that this does not mean the legitimate jurisdiction of other fora should be usurped by the NCLT and NCLAT. There must be a clear nexus with the insolvency of the corporate debtor for a dispute to be adjudicated by these tribunals.
After discussing the Supreme Court’s judgment, the Tribunal referred to Section 31 of the Code, which states that once a resolution plan is approved by the Adjudicating Authority, it is binding on all stakeholders, including the government, statutory authorities owed dues, guarantors, and other stakeholders involved in the resolution plan.
Based on this, the Tribunal held that the question of whether the SRA is liable to pay pre-CIRP electricity dues after the approval and takeover of the corporate debtor directly arises from the insolvency resolution and the implementation of the resolution plan. Since the NCLT has jurisdiction under Section 60(5) of the Code to adjudicate matters related to the insolvency of the corporate debtor, this issue falls within its purview.
IBC Prevails Over Electricity Act
The second issue before the Tribunal was whether matters related to the supply of electricity and its arrears should be adjudicated under the Electricity Act or the Code when they directly pertain to the insolvency of the corporate debtor.
The question of similar nature came up for consideration before the NCLAT in Madhya Gujarat Vij Company Ltd. v. Kalptaru Alloys Pvt. Ltd. where The Tribunal held that once a resolution plan is approved, all stakeholders, including corporate debtors, financial creditors, and operational creditors, are bound by it. Consequently, an operational creditor cannot claim unpaid dues arising under the Gujarat Electricity Regulatory Commission (Electricity Supply Code and Related Matters) Regulations, 2015, as Section 238 of the Code grants overriding effect to its provisions over any other law in force.
Similarly, the Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Private Limited & Ors. held that the provisions of the code shall have overriding effect over the Electricity Act in view of section 238 of the code.
In light of the above discussion, the Tribunal held that the provisions of the code shall prevail over the Electricity Act.
The Tribunal concluded that since the approved resolution plan does not include any commitment to settle the pre-CIRP electricity dues, the SRA cannot be directed to pay them after the plan’s approval. Such claims should have been filed before the Resolution Professional during the insolvency process. Once the corporate debtor is taken over by the SRA, all pre-CIRP liabilities are extinguished.
Accordingly, the Appeal was dismissed.
Conclusion
The issue analyzed herein above was important as far as maintaining the integrity of the insolvency process is concerned. This judgment furthers the objective of the Code because of the fact that the SRA, who has taken over the corporate debtor, should not continue to be amenable to further litigations. If such claims, including dues of the government, are allowed to be claimed after the approval of the resolution plan, the object of the Code to provide a resolution of the distressed company in an effective and timely manner would be defeated.
1Company Appeal (AT) (Insolvency) No. 1258 of 2023.
2(2021) 7 SCC 209.
3(2018) SCC NCLAT 550.
4Civil Appeal Nos. 7976 of 2019.
