Maharashtra State Electricity Distribution Company Ltd. & Anr. Vs Ravi Sethia Resolution Professional of Morarjee Textiles Ltd. (NCLAT Delhi)
Conclusion: Electricity being an essential supply could not be disconnected during moratorium period under section 14 of the Insolvency and Bankruptcy Code, 2016 (Code) as providers of necessary products or services were not permitted to stop or reduce their delivery during the moratorium period. Even if payment for these services or items was not made during the CIRP’s period, the corporate debtor was still entitled to obtain necessary supplies.
Held: Appellant, supplied an electricity connection to Morarjee Textile Limited, the corporate debtor. It raised the electricity bill for January 2024 due to overdue electricity dues. Axis Bank Limited’s application resulted in the corporate debtor’s admission into the Corporate Insolvency Resolution Process (CIRP) a week later. Appellant filed its claims for unpaid power dues after the Interim Resolution Professional made a public notification. When the corporate debtor failed to pay the outstanding power obligation, appellant subsequently cut off the electrical service. On the condition that the outstanding balance be paid, the power connection was restored. The supply was not discontinued. Resolutional Professional then sent a letter indicating that, in accordance with section 14(2) of the code, the energy supply could not be cut off during the CIRP period. He filed an Interlocutory Application (‘IA’), requesting a number of reliefs, including instructions to restore the electricity supply. Adjudicating Authority issued an interim order requiring the Appellant to restore the corporate debtor’s power service for a period of 15 days. The application was accepted. This appeal had been filed because the contested order had angered the parties. In directing the appellant to restore the electricity, Adjudicating authority disregarded the mandate of Section 14(2-A), according to the appellant, although no directive was given about the payment of electrical dues during the CIRP period. It was also argued that there was no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during CIRP period. In contrast, the respondents cited Regulation 32 of the CIRP Regulations to argue that the appellant was required to maintain the corporate debtor’s power since it was deemed an essential supply and could not be cut off during the moratorium period. According to Regulation 31, it was also stated that the power dues during the CIRP time were CIRP expenses. Appellant was entitled to CIRP costs in priority according to the IBC’s requirements, and the appellant could not demand payment during the CIRP period. It was held that electricity which was not a direct input to the output produced was essential supply within the meaning of Section 14(2) read with Regulation 32 of the CIRP Regulations and it was clearly covered by the protection extended by legislature under Section 14(2). Tribunal observed that under section 14 of the code, providers of necessary products or services were not permitted to stop or reduce their delivery during the moratorium period. Even if payment for these services or items was not made during the CIRP’s period, the corporate debtor was still entitled to obtain necessary supplies. The Rcost of the CIRP will include the payment for these goods. Resolution professional must take action to collect the electrical debt; nevertheless, failure to do so could not serve as justification for cutting off the electricity, as stipulated in Section 14(2). Tribunal concluded that the direction of the Adjudicating Authority based on Section 14(2) not to disconnect the electricity connection necessary for running the manufacturing facilities could not be interfered with.
