SC Delivers Important Judgment On Electricity Dues After Approval Of Resolution Plan
Bench of Justices Sanjiv Khanna and S.V.N Bhatti emphasised the importance of the 'clean slate principle'
The Supreme Court of India has ruled that once the National Company Law Tribunal (NCLT) approves a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC), the Electricity Department cannot demand payment of overdue arrears from the Successful Resolution Applicant for restoring or granting an electricity connection, even if those arrears were originally owed by the Corporate Debtor.
Bench of Justices Sanjiv Khanna and S.V.N Bhatti emphasised the importance of the 'clean slate principle,' stating that it would be undermined if the Successful Resolution Applicant was compelled to pay the Corporate Debtor's arrears for electricity connection.
In the instant case, Tata Power Western Odisha Distribution Limited (TPWODL) supplied electricity to Jagannath Sponge Pvt. Ltd. (Corporate Debtor), which entered the Corporate Insolvency Resolution Process (CIRP) under the IBC. While some dues from TPWODL remained unpaid, no claims were filed.
After NCLT approved the Resolution Plan in 2021, TPWODL demanded payment of arrears in 2022 when the Successful Resolution Applicant sought electricity connection restoration. The NCLT ruled that such a demand for arrears after plan approval was invalid, leading to TPWODL's appeal to the National Company Law Appellate Tribunal (NCLAT), which upheld the NCLT's decision. TPWODL subsequently appealed to the Supreme Court.
In conclusion, the Supreme Court dismissed the appeal, thereby upholding the NCLT and NCLAT decisions.
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