Navigating the Legal Maze: Electricity Dues vs. Insolvency Proceedings

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..... y Act, 2003 (hereinafter 2003 Act ) and the Insolvency and Bankruptcy Code, 2016 (hereinafter IBC ). The crux of the matter lies in determining the priority of dues owed to an electricity distribution company under the 2003 Act over the claims of other creditors under the IBC in the context of the liquidation process of a corporate debtor. Factual Background Paschimanchal Vidyut Vitran N .....

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..... electricity supply, should override the general provisions of the IBC. This contention was supported by the precedence set in Board of Trustees Port of Mumbai v. Indian Oil Corporation, asserting that special laws have primacy over general laws like the IBC. Definition of 'Security Interest' and 'Secured Creditor' under IBC : PVVNL asserted that electricity dues constitut .....

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..... stribution of assets during liquidation, known as the 'waterfall mechanism'. This mechanism places government dues and operational creditors lower in the order of priority compared to secured creditors who relinquish their security. Recovery Mechanism under the Electricity Act : The 2003 Act and the 2005 Code provide a distinct recovery mechanism for electricity dues, empowering .....

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..... electricity dues to qualify as a security interest under the IBC, they must be registered and comply with the requirements stipulated under the IBC and the Companies Act . Waterfall Mechanism and Legislative Intent : The IBC s waterfall mechanism reflects a legislative intent to provide a uniform and comprehensive framework for insolvency and liquidation. This includes altering the pri .....

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..... lvency proceedings with the rights of electricity suppliers under the 2003 Act. The final determination would significantly impact the prioritization of claims in insolvency proceedings, particularly for operational creditors like electricity suppliers. Full Text : 2023 (7) TMI 831 - Supreme Court - FAQ - Frequently Asked Questions, TMI Short Notes , Experts comment, opinion Ta .....

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