Madhya Pradesh High Court
Mittal Soya Protein Private Limited ... vs Madhya Pradesh Paschim Kshetra Vidyut ... on 13 May, 2025
Author: Pranay Verma
Bench: Pranay Verma
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IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE PRANAY VERMA
WRIT PETITION No. 23914 of 2023
MITTAL SOYA PROTEIN PRIVATE LIMITED ACTING THROUGH ITS
AUTHORISED SIGNATORY / DIRECTOR MR. SHREY MIT
Versus
MADHYA PRADESH PASCHIM KSHETRA VIDYUT VITRAN CO.
LTD. UJJAIN AND OTHERS
Appearance:
Shri Manoj Munshi - Senior Advocate along with Shri Shri Rajat
Lohia -Advocate for the petitioner.
Shri Prasanna Prasad - Advocate for the respondents.
Reserved on :14.11.2024
Pronounced on : 13.05.2025
ORDER
This petition under Article 226 of the Constitution of India has
been preferred by the petitioner being aggrieved by the order dated
14.06.2023 [Annexure P/12] passed by the Superintendent Engineer
(Transmission and Infrastructure) of Madhya Pradesh Paschim Kshetra
Vidyut Vitharan Company Ltd. - Dewas/respondent No.2, whereby he has
declined to refund the electricity dues of the previous owner to the petitioner
which had been deposited by it.
2. As per the petitioner, it is a company incorporated under the
provisions of Companies Act, 2013. M/s. Dhanlaxmi Solvex Private
Limited was having an industrial unit in Dewas, Madhya Pradesh and had
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borrowed loans from banks and financial institutions. Due to default
committed by it one of the financial creditors, Dena Bank,
initiated Corporate Insolvency Resolution Process (CIRP) under Section 7 of
Insolvency and Bankruptcy Code, 2016, (IBC'16) against the company
before National Company Law Tribunal, Indore, Bench at Ahmedabad. By
order dated 02.04.2019, the NCLT allowed the application and initiated
CIRP appointing one Shikhar Chand Jain an Insolvency Professional as
Interim Resolution Professional. The CIRP could not be implemented and
was declared failed. Thereafter, by order dated 27.02.2020, the NCLT
ordered for liquidation of M/s. Dhanlaxmi Solvex Private Limited under
Section 33(1) and 33(2) of IBC 16. A liquidator was appointed under Section
34(1) to initiate and implement liquidation process.
3. The liquidator issued notice for sale of liquidation estate under
Section 36 of the IBC16. The petitioner participated in e-auction and was
declared successful auction purchaser by the liquidator for a sum of Rs.
10,49,40,000/-. The liquidator issued letter of intent on 18.12.2020 and
23.12.2021 confirming sale of industrial unit of company in liquidation to the
petitioner. Upon payment of the entire sale consideration, the liquidator
issued sale certificate on 06.04.2021 to the petitioner and handed over
possession of industrial unit to it. The petitioner then applied for new H.T.
electricity connection to the respondents on 15.04.2021. By letter dated
10.05.2021, respondent No.1 declined to provide the connection on the
ground that there are dues payable by the previous owner of the industrial
unit.
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4. The petitioner being aggrieved by the decision preferred WP
No. 9723 of 2021 before this Court, which was withdrawn by order dated
28.10.2021 with liberty to file fresh in case necessity so arises in the future.
On 27.10.2021, the petitioner made payment of Rs.55,29,000/- to the
respondents and gave a bank guarantee for remaining 50% of the amount of
Rs.55,28,974/- under protest only to obey the order of Chief Engineer, Ujjain
in order to obtain new H.T. electricity connection since it was to start
its industrial unit. The petitioner was issued new H.T. electricity connection
on 30.12.2021 with mandatory condition that previous outstanding dues of
M/s. Dhanlaxmi Solvex Private Limited are cleared by it. The petitioner then
preferred WP No.6570 of 2023 before this Court, in which by order dated
24.03.2023, the respondents were directed to decide its representation.
Thereafter by the impugned order dated 14.06.2023, the representation of the
petitioner has been rejected and refund of the amount as sought for by it has
been declined.
5. Learned senior counsel for the petitioner has submitted that the
respondents being operational creditors are entitled to recover their dues
pertaining to previous owner from the liquidator under the provisions of IBC
16. Under Section 53 of the Code, a waterfall mechanism for payment of
dues of operational creditor has been provided hence, respondents ought to
have applied to the liquidator for recovery of the dues pertaining to the
previous owner. The provisions of IBC 2016 have overriding effect over
other laws hence, notwithstanding anything inconsistent contained in any
other law, including the Electricity Act, 2003, the provisions of the Code
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shall prevail. Reliance has been placed on the decision of the Apex Court
in Paschimanchal Vidyut Vitran Nigam Ltd. v. Rarman Ispat Private Limited
and another, (2013) 10 SCC 60 and Southern Power Distribution
Company Of Andhra Pradesh Limited Ltd. v. Gavi Siddeshwara Steels
(India) Pvt. Ltd. and another, Civil Appeal No. 5716-5717 of 2023 decided
on 06.09.2023.
6. Reply has been filed by the respondents and the learned counsel
for the respondents has submitted that under Section 49/50 of the Electricity
Act, 2003 the respondents are entitled for recovery of electricity arrears of
the previous owner from the petitioner. The condition requiring new owner
of the premises to clear electricity arrears of previous owner as a
precondition to availing electricity supply has a statutory character. Since
there are statutory rules, the respondents can certainly demand from
the petitioner the arrears of electricity dues of the previous owner. Reliance
in this regard has been placed on the decision of the Apex Court in Isha
Marbles v. Bihar SEB and another, (1995) 2 SCC 648, Ahmedabad
Electricity Co. Ltd. v. Gujarat Inns (P) Ltd. and others, (2004) 3 SCC 587,
Paschimanchal Vidyut Vitran Nigam Ltd. and others v. DVS Steels and
Alloys (P) Ltd. and others, (2009) 1 SCC 210, Dakshin Haryana Bijli Vitran
Nigam Ltd. v. Paramount Polymers (P) Ltd., (2006) 13 SCC 101, Dakshin
Haryana Bijli Vitran Nigam Ltd. and another v. Excel Buildcon (P) Ltd. and
others, (2008) 10 SCC 720, Haryana SEB v. Hanuman Rice Mills and others
(2010) 9 SCC 145, Hyderabad Vanaspathi Ltd. v. A.P. SEB and others,
(1998) 4 SCC 470, Special Officer, Commerce, North Eastern Electricity
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Company of Orissa (NESCO) & Anr. v. Raghunath Paper Mills (P) Ltd. and
another, (2012) 13 SCC 479 and Telangana State Southern Power
Distribution Co. Ltd. and another v. Srigdhaa Beverages, (2020) 6 SCC
404. It is further submitted that there is efficacious alternate remedy
available to the petitioner which has not been availed of. It is also submitted
that the petition preferred for refund of money from respondents is not
maintainable and only a civil suit would be maintainable. For any claim of
recovery which involves factual adjudication, appropriate remedy is by filing
civil suit. Reliance in this regard has been placed on the decision of the Apex
Court in Sugeanmal v. State of M.P. and others 1964, SCC Online, SC 11,
order dated 11.11.2019 passed in WP No.16273 of 2018 [Ajmera Steel Pvt.
Ltd. v. MPPKVVCL and others] and the order dated 19.05.2023 passed in
Civil Appeal No.2109-2110 of 2004 [KC Ninan v. Kerala State Electricity
Board].
7. I have considered the submission of learned counsel for the
parties and have perused the record.
8. All the judgments which have been relied upon by the learned
counsel for the respondents are of the period prior to the year 2016 up to
when IBC 2016 had not come in force. The IBC 16 has an overriding
provision, namely Section 238, which is as under:
"Section 238. Provisions of this Code to override
other laws. The provisions of this Code 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."
9. The reliance placed by the learned counsel for the respondents
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upon the decision in KC Ninan (supra) is wholly misplaced since in
Southern Power Distribution Company of Andhra Pradesh Ltd. (supra) the
Apex Court has already held that the said judgment does not deal with
the provisions of the IBC 16 hence reliance thereupon is inappropriate. It was
further held therein that in terms of Section 238 of IBC 16, the provisions of
the Code will have an overriding effect. The debt due has to be paid in terms
of Section 53 of the Code.
10. The issue as raised in this petition as to whether in view of IBC
16 the petitioner would be liable to pay the outstanding arrears of electricity
dues of the earlier owner, namely, M/s. Dhanlakshmi Solvex Pvt. Ltd. has
already been answered in Paschimanchal Vidyut Vitran Nigam Ltd.
v. Rarman Ispat Private Limited and another (supra) in which it has been
held as under :
25. Upon initiation of liquidation, a liquidator has to be appointed, to
carry out the liquidation process and manage other affairs of the
corporate debtor. The RP, appointed to conduct the resolution process,
is ordinarily appointed as liquidator. The powers and duties of
liquidator are prescribed by Section 35 ["35. Powers and duties of
liquidator.--(1) Subject to the directions of the adjudicating authority,
the liquidator shall have the following powers and duties, namely:(a) to
verify claims of all the creditors;(b) to take into his custody or control
all the assets, property, effects and actionable claims of the corporate
debtor;***(d) to take such measures to protect and preserve the assets
and properties of the corporate debtor as he considers necessary;(e) to
carry on the business of the corporate debtor for its beneficial
liquidation as he considers
necessary;____________________________(Footnote 21 contd.)(f)
subject to Section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public
auction or private contract, with power to transfer such property to any
person or body corporate, or to sell the same in parcels in such manner
as may be specified:Provided that the liquidator shall not sell the
immovable and movable property or actionable claims of the corporate
debtor in liquidation to any person who is not eligible to be a resolution
applicant;"] IBC. It includes verification of claims of creditors,
evaluation of assets of the corporate debtor, carrying on the business of
the corporate debtor, taking into consideration the assets of the
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corporate debtor, etc. The liquidator has to issue a public
announcement within 5 days from appointment in a prescribed format;
the purpose of public announcement is to call upon creditors and others
persons to submit their claims in relation to the corporate debtor. The
creditors of the corporate debtor have to send their claims within 30
days from the initiation of the liquidation process. After the receipt of
the claims, the liquidator has to verify the claims submitted by the
creditors (Section 39). The liquidator may also ask the creditors to
submit any evidence in relation to their claims for the purpose of
verification.
28. During the insolvency resolution process, a secured creditor is not
permitted to realise its dues by initiating any proceeding. This is by
virtue of Section 14(1)(c) which enables the imposition of a
moratorium period, during which a secured creditor is precluded from
bringing any action to foreclose, recover or enforce any security
interest. Secured creditors' rights are restored only in the event of
failure of the insolvency resolution process, at the stage of liquidation.
B. The "waterfall mechanism"
29. Section 53 IBC, which contains the "waterfall mechanism",
provides for the order of distribution of assets. It states as follows:
"53. Distribution of assets.--(1) Notwithstanding anything to
the contrary contained in any law enacted by Parliament or
any State Legislature for the time being in force, the proceeds
from the sale of the liquidation assets shall be distributed in
the following order of priority and within such period and in
such manner as may be specified, namely:
(a) the insolvency resolution process costs and the liquidation
costs paid in full;
(b) the following debts which shall rank equally between and
among the following--
(i) workmen's dues for the period of twenty-four months
preceding the liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured
creditor has relinquished security in the manner set out in
Section 52;
(c) wages and any unpaid dues owed to employees other than
workmen for the period of twelve months preceding the
liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among
the following:
(i) any amount due to the Central Government and the State
Government including the amount to be received on account
of the Consolidated Fund of India and the Consolidated Fund
of a State, if any, in respect of the whole or any part of the
period of two years preceding the liquidation commencement
date;
(ii) debts owed to a secured creditor for any amount unpaid
following the enforcement of security interest;
(f) any remaining debts and dues;
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(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.
(2) Any contractual arrangements between recipients under
sub-section (1) with equal ranking, if disrupting the order of
priority under that sub-section shall be disregarded by the
liquidator.
(3) The fees payable to the liquidator shall be deducted
proportionately from the proceeds payable to each class of
recipients under sub-section (1), and the proceeds to the
relevant recipient shall be distributed after such deduction.
Explanation.--For the purpose of this section--
(i) it is hereby clarified that at each stage of the distribution of
proceeds in respect of a class of recipients that rank equally,
each of the debts will either be paid in full, or will be paid in
equal proportion within the same class of recipients, if the
proceeds are insufficient to meet the debts in full; and
(ii) the term "workmen's dues" shall have the same meaning
as assigned to it in Section 326 of the Companies Act, 2013
(18 of 2013)."
31. Debts owed to a secured creditor, whenever such secured creditor
"has relinquished security in the manner set out in Section 52" receive
a fairly high priority (immediately after insolvency resolution process
costs), whereas in other cases i.e. when the secured creditor does not
relinquish security, the priority of claim is lower [Section 53(1)(e)(ii)]
in respect of "any amount unpaid following the enforcement of
security interest". Another feature is that amounts due to the
Government (i.e. payable into the Consolidated Fund of India or
Consolidated Fund of a State) are ranked in the same manner as those
of secured creditors who do not relinquish their security interest
[Section 53(1)(e)(ii)].
45. As previously stated above, the corporate debtor entered into an
agreement with PVVNL for supply of electricity on 11-2-2010 which
provided that outstanding electricity dues would constitute a "charge"
on its assets. [ Clause 5 of the agreement, extracted at para 2.] This was
in accordance with Clause 4.3(f)(iv) of the 2005 Code. Clause 8 of the
agreement [ Clause 8 of the agreement read as follows:"This agreement
shall be governed by the Electricity Act, 2003 with all its amendments,
various other laws of India for the time being in force, but not limited
to various regulations of UPERC, as applicable to the State of U.P. and
shall be subject to the jurisdiction of the Court subordinate to the High
Court of Judicature at Allahabad."] also mentioned that the parties
would be governed by the 2003 Act.
46. A recent ruling of this Court in K.C. Ninan v. Kerala SEB [K.C.
Ninan v. Kerala SEB, (2023) 14 SCC 431 : 2023 SCC OnLine SC 663]
examined the circumstances in which such a "charge" could be
constituted in law, and held as follows : (SCC para 107)
"107. Consequently, in general law, a transferee of the premises cannot
be made liable for the outstanding dues of the previous owner since
electricity arrears do not automatically become a charge over the
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premises. Such an action is permissible only where the statutory
conditions of supply authorise the recovery of outstanding electricity
dues from a subsequent purchaser claiming fresh connection of
electricity, or if there is an express provision of law providing for
creation of a statutory charge upon the transferee."
This Court held that the creation of a charge need not necessarily be
based on an express provision of the 2003 Act or plenary legislation,
but could be created by properly framed regulations authorised under
the parent statute. In these circumstances, the argument of PVVNL that
by virtue of Clause 4.3(f)(iv) of the Supply Code, read with the
stipulations in the agreement between the parties, a charge was created
on the assets of the corporate debtor, is merited. A careful reading of
the impugned order [Raman Ispat (P) Ltd. v. Paschimanchal Vidyut
Vitran Nigam Ltd., 2018 SCC OnLine NCLT 25732] of the NCLT also
reveals that this position was accepted. This is evident from the order
of NCLAT which clarified that PVVNL also came under the definition
of "secured operational creditor" as per law. This finding was not
disturbed, but rather affirmed by the impugned order [Paschimanchal
Vidyut Vitran Nigam Ltd. v. Raman Ispat (P) Ltd., 2019 SCC OnLine
NCLAT 883] . In these circumstances, the conclusion that PVVNL is a
secured creditor cannot be disputed.
47. The counsel for the liquidator had submitted that dues owed to
PVVNL were technically owed to the "Government", and thus
occupied a lower position in the order of priority of clearance. The
expression "government dues" is not defined in IBC -- it finds place
only in the Preamble. However, what constitutes such dues is spelt out
in the "waterfall mechanism" under Section 53(1)(e), which inter alia
states that, "Any amount due to the Central Government and the State
Government including the amount to be received on account of the
Consolidated Fund of India and the Consolidated Fund of the State"
ranks lower in priority to the class of creditors described in Clauses (a)
to (d) of Section 53(1). Thus, there exists a separate enumeration or
specification of the Central Government and State Government dues,
as a class apart from other creditors, including creditors who may have
secured interest (in respect of which amounts may be payable to them).
The repeated reference of lowering of priority of debts to the
government, on account of statutory tax, or other dues payable to the
Central Government or the State Government, or amounts payable into
the Consolidated Fund on account of either government, in the various
reports which preceded the enactment of IBC, as well as its Preamble,
means that these dues are distinct and have to be treated as separate
from those owed to secured creditors.
56. The views expressed by the present judgment finds support in the
decision reported as ABG Shipyard Liquidator v. Central Board of
Indirect Taxes & Customs [ABG Shipyard Liquidator v. Central Board
of Indirect Taxes & Customs, (2023) 1 SCC 472 : (2023) 1 SCC (Civ)
251] . In that case, Section 142-A of the Customs Act, 1962 was in
issue -- authorities had submitted that dues payable to it were to be
treated as "first charge" on the property of the assessee concerned. In
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the resolution process, it was argued that the Customs Act, 1962
acquired primacy and had to be given effect to. This Court, after
noticing the overriding effect of Section 238 IBC, held as follows :
(SCC p. 496, paras 56-57)
"56. For the sake of clarity following questions, may be
answered as under:
(a) Whether the provisions of IBC would prevail over the
Customs Act, and if so, to what extent?
56.1. IBC would prevail over the Customs Act, to the extent
that once moratorium is imposed in terms of Sections 14 or
33(5) IBC as the case may be, the respondent authority only
has a limited jurisdiction to assess/determine the quantum of
customs duty and other levies. The respondent authority does
not have the power to initiate recovery of dues by means of
sale/confiscation, as provided under the Customs Act.
(b) Whether the respondent could claim title over the goods
and issue notice to sell the goods in terms of the Customs Act
when the liquidation process has been initiated?
56.2. Answered in the negative.
57. On the basis of the above discussions, following are our
conclusions:
57.1. Once moratorium is imposed in terms of Sections 14 or
33(5) IBC as the case may be, the respondent authority only
has a limited jurisdiction to assess/determine the quantum of
customs duty and other levies. The respondent authority does
not have the power to initiate recovery of dues by means of
sale/confiscation, as provided under the Customs Act.
57.2. After such assessment, the respondent authority has to
submit its claims (concerning customs dues/operational debt)
in terms of the procedure laid down, in strict compliance of
the time periods prescribed under IBC, before the
adjudicating authority.
57.3. In any case, the IRP/RP/liquidator can immediately
secure goods from the respondent authority to be dealt with
appropriately, in terms of IBC."
57. Similarly, in Duncans Industries Ltd. v. AJ Agrochem
[Duncans Industries Ltd. v. AJ Agrochem, (2019) 9 SCC 725
: (2019) 4 SCC (Civ) 669] , Section 16-G of the Tea Act,
1953 which required prior consent of the Central Government
(for initiation of winding-up proceedings) was held to be
overridden by IBC. In a similar manner, it is held that Section
238 IBC overrides the provisions of the Electricity Act, 2003
despite the latter containing two specific provisions which
open with non obstante clauses (i.e. Sections 173 and 174).
The position of law with respect to primacy of IBC, is
identical with the position discussed in ABG Shipyard
Liquidator [ABG Shipyard Liquidator v. Central Board of
Indirect Taxes & Customs, (2023) 1 SCC 472 : (2023) 1 SCC
(Civ) 251] and Duncans Industries [Duncans Industries Ltd.
v. AJ Agrochem, (2019) 9 SCC 725 : (2019) 4 SCC (Civ)
669] [refer also : Innoventive Industries [Innoventive
Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 : (2018) 1
SCC (Civ) 356] , CIT v. Monnet Ispat & Energy Ltd. [CIT v.
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Monnet Ispat & Energy Ltd., (2018) 18 SCC 786 : (2019) 3
SCC (Civ) 252] , Ghanashyam Mishra & Sons (P) Ltd. v.
Edelweiss Asset Reconstruction Co. Ltd. [Ghanashyam
Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction
Co. Ltd., (2021) 9 SCC 657 : (2021) 4 SCC (Civ) 638] , and
Jagmohan Bajaj v. Shivam Fragrances (P) Ltd. [Jagmohan
Bajaj v. Shivam Fragrances (P) Ltd., 2018 SCC OnLine
NCLAT 413] ].
58. In view of the above discussion, it is held that the reliance on
Rainbow Papers [STO v. Rainbow Papers Ltd., (2023) 9 SCC 545] is
of no avail to the appellant. In this Court's view, that judgment has to
be confined to the facts of that case alone.
11. In view of the authoritative pronouncement of the Apex Court
as aforesaid, the respondents cannot insist on payment of arrears which have
to be paid in terms of the waterfall mechanism for grant of an electricity
connection. The remedy of respondents is under Section 53 of the IBC 16. Its
dues have to be paid in the manner prescribed in the Resolution Plan as
approved by the adjudicating authority. The demand made by it from the
petitioner for payment of outstanding dues of the previous owner was hence
wholly unjustified and the amount paid by the petitioner is liable to
be refunded to it.
12. Though it is contended by the learned counsel for the
respondents that the petitioner has alternate remedy against the impugned
order but the said alternate remedy has not been clarified. In any case, since
this is a pure question of law and has already been answered by the Apex
Court, I do not see any justification for relegating the petitioner to avail the
alternate remedy.
13. Though it is further contended that a writ petition for claim
of recovery is not maintainable, but from the facts of the case, it is observed
that the amount in question is not disputed and it is only the entitlement of
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the petitioner for recovering the same from the respondents which is
disputed. This dispute is based purely upon the interpretation of the
provisions of law which upon interpretation as aforesaid have been found in
favour of the petitioner. This contention of the respondents also does not
hold ground.
14. As a result of the aforesaid discussion, the petition deserves to be
and is accordingly allowed. The respondents are directed to refund the
amount of Rs.55,29,000/- to the petitioner and release the bank guarantee of
remaining 50% amount it along with interest at the rate of 6% per annum
with effect from the date of payment by petitioner i.e.27.10.2021 upto the
date of payment to it. In case payment is not made within the aforesaid
period of two months, this amount shall carry interest at the rate of 12%.
No costs.
(PRANAY VERMA)
JUDGE
jyoti
