Other Laws- Electricity Act vs IBC

No pre-CIRP electricity dues can be collected from the Successful Auction Purchaser – RDB Realty & Infrastructure Ltd. Vs. Kanpur Municipal Corporation and Anr. – NCLT Allahabad Bench

Hon’ble NCLT Allahabad Bench held that:

(i) In view of Section 32A of the Code, the actions of the Respondent No. 1 with respect to the Corporate Debtor as per the letter dated 22.02.2023 and 28.10.2023 is in violation and clearly inconsistent with the provisions of the Code.
(ii) Relying on various judicial pronouncements as well as the clearly stated provisions of the Code, the Respondent’s right to recover outstanding dues from the Pre-CIRP period has been extinguished due to the completion of the CIRP process and the liquidation of the Corporate Debtor.

No pre-CIRP electricity dues can be collected from the Successful Auction Purchaser – RDB Realty & Infrastructure Ltd. Vs. Kanpur Municipal Corporation and Anr. – NCLT Allahabad Bench Read Post »

Security Deposit is part of Liquidation Estate in accordance with Section 36 of IBC and it will be distributed as per the provisions outlined in Section 53 and it cannot be adjusted against dues/arrears of electricity in claim – Sandeep Goel Liquidator for Chaudhary Ingots Pvt. Ltd. Vs. Paschimanchal Vidyut Vitran Nigam Ltd. (PVVNL) – NCLT Allahabad Bench

Hon’ble NCLT Allahabad Bench held that:

(i) The rationale that the Hon’ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Private Ltd. and Ors. (2023) ibclaw.in 81 SC reaffirmed in the aforesaid case that the IBC, 2016 is a special statute that accounts for the dues of all creditors to be disbursed as per the waterfall mechanism during CIRP.
(ii) Recently, the Hon’ble Supreme Court in Bharti Airtel Ltd. and Another Vs. Vijaykumar V. Iyer and Others (2024) ibclaw.in 02 SC has dealt with the issue of right of set-off by the creditor in the insolvency proceedings.
(iii) The PVVNL has adjusted the sum of Rs. 1,15,33,600/-. The amount already set off by the PVVNL against anticipated claim cannot be permitted. In view of the fact that entire amount becomes part of the Corporate Debtor, security deposit being an integral part of the payment made by the erstwhile Corporate Debtor would therefore be part of the liquidation estate.

Security Deposit is part of Liquidation Estate in accordance with Section 36 of IBC and it will be distributed as per the provisions outlined in Section 53 and it cannot be adjusted against dues/arrears of electricity in claim – Sandeep Goel Liquidator for Chaudhary Ingots Pvt. Ltd. Vs. Paschimanchal Vidyut Vitran Nigam Ltd. (PVVNL) – NCLT Allahabad Bench Read Post »

Not all dues owed under statute are treated as ‘government dues’ under Section 53 of IBC, Rainbow Papers judgment did not notice the waterfall mechanism – Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. and Ors. – Supreme Court

Hon’ble Supreme Court held that:
(i) On occurrence of any eventuality specified under Section 33, the liquidation process has to begin, as a matter of course – there is no choice in the matter.
(ii) The expression “government dues” is not defined in the IBC – it finds place only in the preamble. 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 State Government, or amounts payable into the Consolidated Fund on account of either government, in the various reports which preceded the enactment of the 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.
(iii) The specific mention of other class of creditors whose dues are statutory, such as dues payable to workmen or employees, “the provident fund, the pension fund, the gratuity fund” under Section 36(4), which excludes these enumerated amounts from the liquidation, especially clarifies that not all dues owed under statute are treated as ‘government’ dues. In other words, dues payable to statutory corporations which do not fall within the description “amounts due to the central or state government” such as for instance amounts payable to corporations created by statutes which have distinct juristic entity but whose dues do not constitute government dues payable or those payable into the respective Consolidated Funds stand on a different footing.
(iv) On the other hand, dues payable or requiring to be credited to the Treasury, such as tax, tariffs, etc. which broadly fall within the ambit of Article 265 of the Constitution are ‘government dues’ and therefore covered by Section 53(1)(f) of the IBC.
(v) Rainbow Papers judgment did not notice the ‘waterfall mechanism’ under Section 53 – the provision had not been adverted to or extracted in the judgment. The dues payable to the government are placed much below those of secured creditors and even unsecured and operational creditors. This design was either not brought to the notice of the court in Rainbow Papers (supra) or was missed altogether. In any event, the judgment has not taken note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than dues payable to Central or State Government.

Not all dues owed under statute are treated as ‘government dues’ under Section 53 of IBC, Rainbow Papers judgment did not notice the waterfall mechanism – Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. and Ors. – Supreme Court Read Post »

Section 238 of the IBC will have overriding effect on all laws which are for the time being in force, including the Electricity Act, 2003 and Rules and Regulations framed thereunder – Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Private Limited & Ors. – NCLAT New Delhi

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Section 238 of the IBC will have overriding effect on all laws which are for the time being in force, including the Electricity Act, 2003 and Rules and Regulations framed thereunder – Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Private Limited & Ors. – NCLAT New Delhi Read Post »

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