TMI Blog2022 (3) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... nd services which are critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern. Admittedly the disconnection of the electricity supply to the Durgapur unit took place on 14.9.2019. According to clause 4.6.1 of the Power Supply Agreement, deemed termination of the agreement could happen only after 180 days from the date of disconnection. Thus deemed termination could have taken place on or after 12.3.2020 i.e. 180 days after the date of disconnection. The order for initiation of CIRP was passed on 17.12.2019 and moratorium was imposed under section 14 from the same date. Thus the deemed termination of the Power Supply Agreement to the Durgapur unit of the corporate debtor which could not take place by 17.12.2019, could not happen during the moratorium period, by virtue of protection provided under Section 14(2) - It is also noted that the IRP has asked for reconnection of the electricity supply so that a better resolution plan can be obtained in the resolution of the CD which is the intent of the IBC. In passing the Impugned order by which directions have been given to DVC for reconnection of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erbook). Again, another notice dated 26.6.2019 (attached at page 59 of Appeal paperbook) was sent the Appellant to the Corporate Debtor for payment of ₹ 1,09,00,000 within 15 days from the date of issuance of the notice failing which the power supply line would be disconnected without any further reference to the Corporate Debtor. In response to the notices sent by DVC the power supply to corporate debtor s Durgapur factory was disconnected on 14.9.2019. 4. A Company Petition bearing CP(IB) No. 2119/MB-IV/2019 under section 9 of the IBC, filed by the Operational Creditor Vedanth.com Worldwide Limited ,was admitted vide order dated 17.12.2019 of the Adjudicating Authority thereby initiating CIRP against the Corporate Debtor/Karthik Alloys Ltd. Later the Interim Resolution Professional (IRP) requested DVC to restore power supply to the Durgapur unit of the Corporate Debtor vide letter dated 12.2.2020 (attached at pp. 84-89 of the Appeal paperbook) stating that as power supply was a basic requirement for running the factory of the Corporate Debtor, it was a part of essential goods and services covered under regulation 32of the Insolvency and Bankruptcy Board of India (Insolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and from the illustration given with regulation 32 it is clear that water supplied to a Corporate Debtor will be essential supplies for drinking and sanitation purposes and not for generation of hydro electricity. He has also argued that the scope of section 14(2) is limited to prohibiting termination or suspension or interruption during the period of moratorium only, and therefore the Adjudicating Authority has passed the Impugned Order without considering the actual intent of the provision under section 14(2). 8. The Learned Senior Counsel for Appellant has argued that the Durgapur plant of the Corporate Debtor is not a going concern and hence the scope of section 14(2) of IBC read with regulation 32 of CIRP Regulations is limited to continuation of electricity supply for day-to-day functioning of the premises and not as an input in the manufacturing or production of output. She has contended that in a situation where the electricity supply is required for running the unit as a going concern, the Adjudicating Authority has no scope to expand the purview of section 14(2). 9. The Learned Senior Counsel for Appellant has also claimed that the disconnection of electricity wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Ltd. Vs. State of Karnataka and Ors. (2019 SCC OnLine SC 1542) (2) Telangana State Southern Power Distribution Company Ltd. Anr. vs. M/s. Srigdhaa Beverages (2020 6 SCC 478) (3) State of U.P. vs. Ramsukhi Devi (2005 9 SCC 733) (4) Gujarat Urja Vikas Nigam Ltd. Vs. Amit Gupta and Ors. (2021 SCC Online SC 194) 12. The Learned Senior Counsel for Appellant has further stated that reconnection of power supply is covered under West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 dated 7th August 2013 and has cited provisions therein regarding disconnection for non-payment (clause 4.1) and reconnection of supply (clause 6.0). 13. The Learned Counsel for Respondent No. 2/IRP has referred to clauses 21 and 23 of the Power Supply Agreement dated 1.1.1997 (attached at pp. 38 56 of Appeal paperbook) to claim that if any bill remains unpaid for a period exceeding 60 days from the date of its issue, the licensee after having given 7 days notice in writing to the consumers of its intention to do so could discontinue the power supply till such time as the outstanding bills along with surcharge and other charges for such disconnection and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.0 Disconnection of supply: 4.1 Disconnection for non-payment: 4.1.1 The licensee shall issue a disconnection notice under sub-section (I) of section 56 of the Act through the bill against electricity consumption under regulation 3.2 or regulation 3.5 (for provisional payment) itself, where following issues shall be specifically mentioned: (i) Disconnection will be effected if payment has not been made within fifteen days after the due date as provided in the bill following the regulation 3.2 where the billed amount does not include full or part of any deposit that is required for the security deposit maintenance as per Miscellaneous Regulations. 4.1.4 The Licensee may disconnect or cut off supply of electricity to any defaulting consumer who fails or neglects to pay the electricity charges and/or other charges due from the consumer as per the electricity bill and/or demand notice subject to fulfillment of the conditions of regulations 4.1.3 and 4.1.1 or 4.1.2 whichever is applicable. 4.6 The deemed termination of agreement: 4.6.1 If the power supply to any consumer remains disconnected continuously for a period of one hundred and eighty days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity dues amounting to ₹ 22,57,06,151.00 (Rs. Twenty Two Crores Fifty Seven Lacs Six Thousand One Hundred and Fifty One only). It was also observed that the corporate debtor is running its Durgapur unit through the generator by using diesel which is unnecessarily imposing extra cost to the corporate debtor and at the same time creating impact in the profit of the corporate debtor. iii. That the applicant has immediately wrote a letter to DVC on 12.02.2020 seeking restoration of electricity connection at the factory premises of the corporate debtor. The DVC through its advocate replied to the notice sent by the IRP on 24.02.2020 alleging the nonpayment of outstanding ₹ 27,78,95,386/-. The copy of letter dated 12.02.2020 issued by the applicant and the copy of reply dated 24.02.2020 by the advocate of the DVC are annexed here with and marked as Annexure B .(COLLY) iv. That the Respondent No. 1 has already filed its claim before the IRP as a operational creditor and the applicant has already considered the same. In Para 7 of the pleadings the following is stated: 7. Furthermore, as per Section 14(2) of the Insolvency and Bankruptcy Code, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied by the corporate debtor. Illustration. Water supplied to a corporate debtor will be essential supplies for drinking and sanitation purposes and not for generation of hydro-electricity . 22. From the above-stated provision in Section 14(2) of IBC we find that supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. The essential goods and supplies have been defined and explained through an illustration in Regulation 32 of the CIRP Regulations wherein it is clarified that essential goods and services referred to in Section 14(2) shall be considered essential supplies only to the extent they are not a direct input to the output produced or supplied by the Corporate Debtor. Moreover, under Section 14(2-A) the IRP/RP can ask for continuation of the supply of such goods and services which are critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern. 23. Admittedly the disconnection of the electricity supply to the Durgapur unit took place on 14.9.2019. According to clause 4.6.1 of the Power Supply Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation versus Cosmic Ferro Alloys Limited (2020 SCC OnLine NCLAT 392) wherein this Tribunal has held that no waiver for any period of time for the future is permissible and that the parties should take action regarding these or any subsequent dues, including security deposit in accordance with the extent and relevant regulations of WBERC. The dues of electricity supplied by DVC to the Corporate Debtor during the CIRP period, if not paid, should be paid from out of CIRP costs and the Resolution Professional should ensure it. ‟This judgment holds that for future supply of electricity, and also supply during the CIRP period, the dues should be paid by the Corporate Debtor and any dues relating to security deposit after the approval of the resolution plan by Adjudicating Authority should be considered in accordance with the extant regulations of the WBERC. 26. Another judgment cited by the Ld. Senior Counsel for Appellant is in the case of Gujarat Urja Vikas Nigam Ltd. Vs. Amit Gupta and Ors. (2021 SCC Online SC 194), where it is held that the Power Purchase Agreement was organic to the resolution of the Corporate debtor, and hence it could not have been terminated. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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