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TMI Blog2024 (9) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 the Adjudicating Authority has allowed I.A No. 82 of 2022 filed by the present Respondent and placed permanent stay on disconnection of electricity by the present Appellant during the moratorium period. Consequent upon the order passed in I.A. No. 82 of 2022, the Adjudicating Authority in the second impugned order dated 03.05.2024 has held I.A. No. 1432 of 2022 filed by the present Appellant as disposed of. Aggrieved by both the impugned orders, the present set of appeals have been preferred by the Appellant. 2. To outline the factual matrix and map the chronology of events of the case which is common in both the appeals, we note that following the admission of the Corporate Debtor-Earthcon Infracon Pvt. Ltd. into Corporate Insolvency Resolution Process ('CIRP' in short), the Respondent- Resolution Professional ('RP' in short) was appointed to manage the operations of the Corporate Debtor as a going concern during the moratorium period. On account of non-payment of post CIRP electricity dues, the Appellant-Noida Power Company Ltd. ('NPCL' in short) issued a notice for temporary disconnection of electricity of the Corporate Debtor on 17.06.2020. The erstwhile IRP of the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disconnect the electricity connection of the Corporate Debtor. The Adjudicating Authority further held that in view of IA No. 82 of 2022 having been allowed, IA No. 1432 of 2022 stands disposed of. Aggrieved with these two orders, the Appellant has preferred the present appeals. 3. We have heard Shri Anil Dutt, Ld. Counsel for the Appellant and Shri Rishabh Jain, Ld. Counsel representing Respondent. Since the facts and pleading in both the appeals overlap and are intertwined, the pleadings and facts in CA No. 1209 of 2024 will suffice for deciding both the matters. 4. Making his submissions, the Ld. Counsel for the Appellant assailing the impugned order contended that the Respondent is liable to pay electricity dues which had arisen during the CIRP period. The Adjudicating Authority has failed to take into account the current position of law with respect of Section 14 of the IBC. It was pointed out that Explanation to Section 14(1) and Section 14(2-A) provides that all benefits enjoyed by any party which has been given by the government or any authority should be continued subject to the condition that there is no default of payment of current dues. Further, it was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding dues. The Adjudicating Authority had correctly held that Section 14 of the IBC mandates uninterrupted supply of essential goods or services to the Corporate Debtor and hence electricity supply cannot be terminated, suspended or interrupted by the Appellant. It was also contended that under CIRP Regulations 31 and 32, electricity being an "essential supply" forms part of the CIRP costs and thus could be paid at the time of distribution of CIRP costs to all stakeholders. Any shortfall in the deposit of electricity dues should therefore be considered as CIRP costs. Submission was also pressed by the Respondent that in terms of Section 53 of the Electricity Act, 2003, the disconnection of electricity is optional and not mandatory. It was also added that uninterrupted supply of electricity was necessary to protect and preserve the value of the Corporate Debtor. Further, disconnection of electricity connection would severely affect the life of residents in the real estate project of the Corporate Debtor. 6. We have duly considered the arguments advanced by the Ld. Counsels for both the parties and perused the records carefully. The short question before us to consider is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supply of electricity was admittedly necessary to protect and preserve the value of the Corporate Debtor, Section 14(2-A) of the IBC was attracted which carves out an exception when the Corporate Debtor does not pay the dues arising from such supply. It has also been asserted that Regulation 31 and 32 of the CIRP Regulations are not applicable in the facts of the present case. 10. In support of their contention, the Appellant has relied on the judgment of this Tribunal in Executive Engineer Uttar Gujarat VIJ Company Ltd. Vs Mr. Devang P. Sampat RP of M/s Kanoovi Foods Pvt. Ltd. [2021 SCC OnLine NCLAT 601] to assert that in case electricity is provided for normal business operations of the Corporate Debtor, the dues arising thereafter has to be paid during moratorium. The relevant excerpts of the judgment is as follows: "11. ....... Sub-section 2A of Section 14 read with Regulations referred above makes it clear that if the supply is for managing the operations of the Corporate Debtor the supply cannot be interrupted during moratorium except where Corporate Debtor has not paid dues arising from such supply during the moratorium period...." 11. Reliance has also been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 14. It is also their case that electricity an "essential service" under CIRP Regulation 32 and necessary to protect and preserve the value of the Corporate Debtor. It is their contention that electricity disconnection would adversely affect the goodwill of the project and future sale of the real estate units and hence shortfall in payment of the electricity dues should be treated as CIRP costs under CIRP Regulation 31 and paid at the time of implementation of resolution plan. It was also canvassed that the RP has been making all the efforts for clearing the electricity dues but not having sufficient cash flow, this has impeded full discharge of unpaid electricity dues. It is also their contention that the Adjudicating Authority has rightly noticed the inconvenience that would be caused to the residents of the project in holding that electricity connection is required to be continued by the Appellant. 15. At this juncture, for our better understanding, we are reproducing the relevant portions of the findngs of the Adjudicating Authority as under: " 17. We are of the considered view that under Section 238 of the Code, the Provisions of the Code shall prevail over any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the amendments which were brought about in Section 14 of the IBC by Act 1 of 2020. The impugned order is clearly in conflict with the legislative scheme as contemplated in Explanation appended to Section 14(1) and the provisions contained in Section 14(2-A). The impugned order has also failed in subscribing to the settled position of law as has been laid down in the judgment of this Tribunal in Shailesh Verma supra which is squarely applicable to the facts of this case. The relevant portion of the judgment reads as under : "8. We need to notice the provisions of the Code to find out as to whether the Respondent, who was directed to supply the electricity was entitled to claim payment of electricity dues during CIRP period of the Respondent had to wait till the resolution of the CIRP of the Corporate Debtor to receive its dues. Section 14, sub-section (2) provides for supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during the moratorium period. Section 14(2) is as follows: "14(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was felt to give the highest priority in repayment to last mile funding to corporate debtors to prevent insolvency, in case the company goes into corporate insolvency resolution process or liquidation, to prevent potential abuse of the Code by certain classes of financial creditors, to provide immunity, against prosecution of the corporate debtor and action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions, and in order to fill the critical gaps in the corporate insolvency framework, it has become necessary to amend certain provisions of the Insolvency and Bankruptcy Code, 2016." 11. When we look into the Statement of Objects and Reasons as extracted above, one of the object as expressly recorded was "in order to fill the critical gaps in the corporate insolvency framework". Explanation to sub-Section (1) of Section 14 and insertion of subsection (2-A) of Section 14 was with the object to fill the critical gap in the corporate insolvency framework. Section 14, sub-section (2) as contained in the Code only provided for supply of essential goods or services to the Corporate Debtor contained an indicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the value of the Corporate Debtor, could always be terminated or suspended or interrupted during the period of moratorium when the dues arising from such supply during the moratorium period is not paid. Thus, the benefit of electricity supply which is enjoyed by any Corporate Debtor given by government or authority should be continued subject to the condition that there is no default of payment of current dues. Infact the ratio this Sailesh Verma judgment has been reiterated by this Tribunal in the matter of the Sanskriti Allottee Welfare Association & Ors Vs Gaurav Katiyar, Resolution Professional, dated 19.07.2024 in CA(AT)(Ins) No. 878 of 2023 wherein it has been held that the RP was obligated to make payment of electricity dues to NPCL and the RP has been allowed to apply coercive measures to collect the electricity dues from the residents of the project to make payment to NPCL. 18. We are of the considered view that Explanation to Section 14(1) and Section 14(2-A) of the IBC is clearly attracted in the facts of the present case. The protection granted by Section 14(1) is clearly subject to no default in the payment of current dues as clearly stipulated in the explanatory c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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