Dimension Steel And Alloys ... vs Damodar Valley Corporation And ...
2022 Latest Caselaw 2502 Cal

                     In the High Court at Calcutta
                    Constitutional Writ Jurisdiction
                             Appellate Side

The Hon'ble Justice Sabyasachi Bhattacharyya



                           W.P.A. No.3360 of 2022

           Dimension Steel and Alloys Limited and another

                                    Vs.

                Damodar Valley Corporation and others



     For the petitioners            :     Mr. Joy Saha,
                                          Ms. Sanchari Chakraborty,
                                          Mr. Soumik Chakraborty,
                                          Mr. Ayan Sarkar,
                                          Mr. Ishaan Saha

     For the respondent no.5        :     Mr. Anuj Singh,

Mr. Aman Agarwal

Hearing concluded on : 01.04.2022

Judgment on : 04.05.2022

Sabyasachi Bhattacharyya, J:-

1. The writ petitioner has primarily prayed for immediate restoration of

the petitioner's electricity supply by the Respondent no. 1, the

Damodar Valley Corporation (DVC).

2. The brief facts, shorn of unnecessary details, are:

3. The DVC, upon prior notice, disconnected the electricity supply to the

factory premises of the petitioner no. 1-company on June 7, 2019.

4. On October 18, 2019, the petitioner no. 1 was admitted to a Corporate

Insolvency Resolution Process (CIRP). On April 8, 2021, the

Committee of Creditors approved the Resolution Plan. The NCLT

approved the same on October 8, 2021.

5. Thereafter the Resolution Professional wrote to the DVC tendering

payment of Rs. 7,45,608/- as per the approved Resolution Plan and

requested reconnection of electricity, which request was reiterated by

a later communication by the petitioner no. 1.

6. However, the DVC, by its letter dated November 25, 2021, demanded

payment of Rs. 31,77,33,915/- as outstanding dues of electricity

charges from the petitioner no. 1.

7. The learned Senior Advocate appearing for the petitioners places

reliance on Ghanshyam Mishra & Sons (P) Ltd. V. Edelweiss Asset

Reconstruction Company Ltd. [(2021) 9 SCC 657] and Committee of

Creditors of Essar Steel India v. Satish Kumar Gupta [(2020) 8 SCC

531] and submits that all the pre-existing debts of a creditor stand

extinguished upon the approval of a Resolution Plan. In this context,

the petitioners also rely on the following judgments:

(i) Ruchi Soya Industries v. Union of India (Civil Appeal Nos. 447-

448 of 2013)

(ii) DVC v. Kharkia Steel Pvt. Ltd. [Company Appeal (AT) Insolvency

No. 119 of 2022]

(iii) DVC v. Karthik Alloys Ltd. [Company Appeal (AT) Insolvency No.

13 of 2021

(iv) Shiv Shakti Inter Globe Exports Pvt. Ltd. V. ktc Foods Pvt. Ltd.

[Company Appeal (AT) Insolvency No. 650 of 2020

(v) Sri Vasavi Industries Limited and Another v. WBSEDCL [WPA No.

1936 of 2022]

8. The learned Senior Advocate for the petitioners secondly contends that

Clause 4.6.4 of the West Bengal Regulatory Commission (Electricity

Supply Code) Regulation 2013, on the basis of which the DVC makes

its claim, is contrary to the objectives and provisions of the Insolvency

and Bankruptcy Code (IBC), 2016 and is, thus, hit by Section 238 of

the IBC, which gives the IBC primacy over other laws, including the

Electricity Act, 2003. In support of such submission, the petitioners

cite Paschimanchal Vidyut Vitran Nigam Ltd. V. Raman Ispat Pvt. Ltd.

&Ors. [2019 SCC OnLine NCLAT 883].

9. For effective revival of the debtor company, the Resolution Plan is

binding with immediate effect from its approval by the NCLT on

October 8, 2021, it is argued. Moreover, Section 43 of the Electricity

Act, 2003 mandates the DVC to restore supply of power, since the

claims of the DVC stand extinguished in law.

10. Moreover, it is contended by the petitioners, the DVC has accepted the

amount of Rs. 7,45,608/- tendered by the petitioners and is now

estopped from claiming its pre-CIRP dues as a pre-condition for

restoring electricity supply.

11. The learned Senior Advocate appearing for the petitioners contends

that although an appeal against the order approving the Resolution

Plan is pending at the behest of the DVC before the NCLAT, no stay of

operation of the said order of approval has been passed in the appeal.

On or about January 31, 2022, the NCLAT recorded that the present

petitioners were not proposing to file any contempt application against

the DVC. However, it is submitted that the said recording cannot

debar the writ court from passing any order.

12. Since no contravention of any condition of license has been alleged in

the present case, Section 129 of the 2003 Act is not applicable, it is

argued. Moreover, neither the Grievance Redressal Officer under

Section 42 (5) nor the Ombudsman under Section 42 (6) of the 2003

Act are competent to determine the legal question as to whether or not

the dues of the DVC in respect of a pre-CIRP period survives after the

approval of the Resolution Plan.

13. To stress upon the wide discretionary powers of the High Court under

Article 226 of the Constitution of India, learned senior counsel places

reliance on Maharashtra Chess Association v. Union of India [(2020) 13

SCC 285].

14. On the other hand, the learned Senior Advocate appearing for the

DVC relies on the pendency of the appeal before the NCLAT, against

the order of the NCLT approving the Resolution Plan, as a deterrent in

the petitioners virtually seeking implementation of the said impugned

order of approval.

15. The power supply agreement between the petitioner no. 1 and the

DVC, it is contended, stood terminated independently of the ground of

insolvency, by operation of Clause 4.6.1. of the West Bengal Electricity

Regulatory Commission (Electricity Supply Code) Regulations, 2007,

read with Clause 23 of the said agreement.

16. Even as per Essar Steel (supra), relied on by the petitioners, it is

argued that the Supreme Court treated electricity dues as distinct and

separate from dues of other operational creditors, for which the former

has primacy over the Resolution Plan.

17. The learned Senior Advocate for the DVC next relies on Gujarat Urja

Vikas Nigam's Case, reported at (2021) 7 SCC 209. The Supreme

Court held there that the power purchase agreement was terminated

solely on the ground of insolvency, since the event of default

contemplated under Article 9.2.1(e) was the commencement of

insolvency proceedings against the corporate debtor. In the absence of

the insolvency of the corporate debtor, there would be no ground to

terminate the agreement, since the termination was not on a ground

independent of the insolvency.

18. Applying the same ratio, it is argued, the present claim of the

petitioners for restoration of electricity supply should also be turned

down.

19. As far as the decisions cited by the petitioners are concerned, the

learned Senior Advocate for the DVC submits that there is no

inconsistency between those and Gujarat Urja Vikas Nigam (supra).

20. In DVC v. Karthik Alloys (supra), the DVC had disconnected supply

during the moratorium period, as opposed to the present case, where

such disconnection was earlier.

21. In Sri Vasavi Industries (supra), it is contended, Gujarat Urja (supra)

was not considered.

22. Lastly, learned senior counsel appearing for the DVC submits that the

undertaking given by the petitioners that they will not initiate

contempt proceedings during pendency of the appeal before the

NCLAT, by necessary implication, includes filing the writ petition for

implementation of the directions given by the NCLT.

23. In reply, the learned Senior Advocate for the petitioners seeks to

distinguish Gujarat Urja (supra) on the ground that the ratio decidendi

in the said case and the issues involved in the present matter are

different. There, the question decided was whether the inherent power

of the Tribunal embodied in Section 60(5) of the IBC can be used to

oust all powers vested in regular Courts and Tribunals. However, in

the present case the issue is not whether the termination of electricity

was relatable to the CIRP, but whether the claim of dues of the DVC

still survives or has been extinguished and, if so extinguished,

whether DVC has a mandatory obligation to supply electricity in terms

of Section 43 of the 2003 Act.

24. Upon hearing the contesting parties, this court decides as follows:

25. Gujarat Urja (supra) was on a different footing, inasmuch as the

context was the termination of a power purchase agreement in

exercise of the powers of the Tribunal under Section 60(5) of the IBC,

whereas, in the present case, the germane issues are, whether the

pre-CIRP claims of the DVC survives the acceptance of the approval of

the Resolution Plan and what is the effect of the pendency of the

appeal against the order of approval before the NCLAT and the

'undertaking', if any, made before it on behalf of the petitioners.

26. In the present case, there does not arise any question of the power

purchase agreement itself being terminated. Section 238 of the IBC

clearly provides that the provisions of the said Act shall have effect,

notwithstanding anything inconsistent therewith contained in any

other law for the time being in force or any instrument having effect

by virtue of any such law.

27. A harmony can be struck between the ratio of Gujarat Urja (supra) and

the proposition reiterated in Essar Steel (supra) onwards to Sri Vasavi

(supra), in the context of the facts of the present case.

28. As per Gujarat Urja (supra), the NCLT cannot oust the powers of any

other statute by virtue of its inherent powers under Section 60(5) of

the IBC. Instead of having any quarrel with the said proposition, let us

proceed by accepting the same.

29. In the present case, admittedly, the disconnection of the electricity

supply of the petitioner no. 1 took place prior to the commencement of

the CIRP.

30. The "dues" claimed under Section 56 of the 2003 Act pertain to the

juncture of such disconnection. Section 56 of the 2003 Act confers

dual rights on the licensee - first, to recover the dues and secondly, to

withhold reconnection of electricity till repayment of such dues. Thus,

both the said rights are dependent on the single touchstone - "dues",

which relate to electricity and other charges due from the consumer at

the time of disconnection. Admittedly, in the present case,

disconnection took place prior to commencement of the CIRP; hence,

the dues are pre-CIRP debts.

31. Section 56 further provides that the electricity supply may be

discontinued "until such charge or other sum, together with any

expenses incurred by him in cutting off and reconnecting the supply,

are paid" but no longer. The expression "such charge" refers to the

first part of the section which relates the charge to the time of

disconnection. Insofar as the electricity charges and disconnection

charges are concerned, those obviously refer to the juncture of

disconnection. However, only the reconnection charges, by definition,

are incurred at the time of restoration of connection.

32. Hence, in the present case, as per the scheme of the IBC, as

interpreted in the light of the judgments cited by the petitioners,

including Essar Steel (supra), Ghanshyam Mishra (supra), Sri Vasavi

(supra), etc., all pre-CIRP debts (in other words, "dues") are

extinguished once and for all by approval of the Resolution Plan, so

that hydra heads of new debts do not confront the successor of the

consumer-company even after the approval of the Resolution Plan by

the NCLT.

33. This is not a case of ouster of the powers of the licensee conferred by

the 2003 Act. Even if such powers under Section 56 of the 2003 Act

remain intact, those become illusory in view of the dues themselves

having been extinguished on the approval of the Resolution Plan, by

independent operation of the IBC. Thus, even if the DVC retains its

powers to recover debts and/or withhold electricity supply till the

dues are cleared, there remain no dues to be cleared, since all pre-

CIRP debts of the petitioner no.1-company, that is, the successful

resolution applicant stand extinguished.

34. Thus, the DVC acted without jurisdiction and de hors the law in

further withholding the electricity supply of the petitioner no.1.

35. Insofar as the pendency of the appeal before the NCLAT against the

order of the NCLT approving the Resolution Plan is concerned, it is

well-settled that mere pendency of an appeal does not operate of its

own as a stay. In the absence of any specific stay order being passed

in the appeal, there is no impediment to the petitioners asserting their

right of immediate resumption of business in terms of the approved

Resolution Plan.

36. The so-called undertaking before the NCLAT was a mere submission

that no contempt proceeding shall be initiated against the DVC. It is

well-known that the contempt jurisdiction is penal in nature and is

distinct and different from execution or implementation of an order.

Even without initiating any contempt proceeding, the petitioners are

fully at liberty to seek implementation of the validly approved

Resolution Plan until, if at all, the same is set aside by the NCLAT.

37. That apart, the balance of convenience and inconvenience is squarely

in favour of directing the DVC to restore electricity connection

immediately to ensure that the valid Resolution Plan is given effect to

and, more importantly the previously going concern does not suffer a

serious set-back again, despite the approval of the corporate

resolution plan, due to sitting idle for dearth of power supply. On the

other hand, if the DVC restores electricity supply, the same will not be

an irreversible act, so much to the detriment of the DVC that it would

suffer substantial hardship.

38. Another determinant is the acceptance of the DVC of the amount of

Rs. 7,45,608/- on November 8, 2021, that is, after and in terms of the

order of approval of the Resolution Plan by the NCLT on October 8,

2021. Such acceptance of the amount can definitely be construed as

waiver of the right of the DVC, if there was any, to discontinue

electricity supply.

39. Thus, in the light of the above observations, W.P.A. No.3360 of 2022 is

allowed, thereby directing the Damodar Valley Corporation

(Respondent no. 1) to restore the electricity supply of the writ

petitioner no. 1-company at the earliest, positively within four weeks

from date, subject to payment of the reconnection charges by the

petitioner no. 1. However, such restoration of connection shall be

subject to the final result of the appeal pending at the behest of the

DVC before the NCLAT which will, in turn, affect the approval of the

Resolution Plan itself, which has extinguished the prior debts of the

petitioner no. 1-company as of now, unless set aside.

40. There will be no order as to costs.

41. Urgent certified copies of this order shall be supplied to the parties

applying for the same, upon due compliance of all requisite

formalities.

( Sabyasachi Bhattacharyya, J. )