The Allahabad High Court has held that once a resolution plan is approved under Section 31 of the IBC, all claims pertaining to the pre-CIRP period, including electricity and statutory dues, if not filed during CIRP or not forming part of the approved resolution plan, stand extinguished and cannot thereafter be enforced through demand notices or recovery proceedings.
By virtue of Section 238 of the IBC, the Code overrides the Electricity Act, 2003 and allied state electricity recovery laws to the extent of inconsistency. However, electricity authorities remain at liberty to raise fresh demands in accordance with law for dues pertaining to the post-resolution period, added the Court.
The Division Bench comprising Justice Ajit Kumar and Justice Swarupama Chaturvedi observed that Sections 31 and 238 of the IBC give binding and overriding effect to an approved resolution plan, and therefore all claims, including statutory dues, which do not form part of the approved resolution plan stand extinguished upon its approval. It held that the IBC, being a subsequent and comprehensive legislation, prevails over the Electricity Act, 2003, including Sections 173 and 174 thereof, in case of inconsistency.
The Bench also observed that CIRP proceedings are in rem, public announcement under Section 15 of the IBC is sufficient notice to stakeholders, and individual notice to each creditor is not required; hence statutory authorities cannot later plead ignorance of CIRP to justify non-filing of claims.
The Bench further observed that while respondents cannot enforce extinguished pre-CIRP dues after approval and implementation of the resolution plan, they are not precluded from proceeding in accordance with law for liabilities arising from post-resolution period or continuing/post-resolution consumption. It also noted that even such post-resolution demands must satisfy principles of fairness, transparency, and natural justice, including proper breakup of amount, clarity in computation, and disclosure of the basis of classification or reassessment.
Briefly, the two connected petitions filed by South East U.P. Power Transmission Company Limited and Tata Steel Limited, challenged electricity demand and recovery notices insofar as they related to periods prior to approval of the respective resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). The first petition concerned demand notices aggregating Rs. 2.17 crores for auxiliary power consumption from Oct 02, 2015 to Dec 01, 2022, raised after an inspection on Oct 17, 2022, though the petitioner’s resolution plan had been approved by the NCLT on June 15, 2022 and implemented on Sep 15, 2022.
The second petition concerned a demand of Rs. 1.15 crores arising from inspection of Tata Steel BSL’s stockyard and subsequent notices alleging excess load and wrong tariff category, even though CIRP against the erstwhile Bhushan Steel Limited had been admitted on July 26, 2017 and Tata Steel’s resolution plan had been approved on May 15, 2018. In both cases, the respondents had not filed claims during CIRP, yet later sought to recover dues referable in part to the pre-CIRP/pre-resolution period.
Appearances:
Advocates Shubham Agarwal, Varad Nath, and Pratik J. Nagar, for the Petitioner
Advocates Krishna Agarawal, Narendra Kumar Tiwari, Ravi Anand Agarwal, and Baleshwar Chaturvedi, for the Respondent
