New electricity connections couldn’t be refused to a successful applicant when past dues were extinguished

Case Details: NRC Ltd. v. State of Maharashtra - [2022] 144 taxmann.com 72 (HC Bombay)

Judiciary and Counsel Details

• • G.S. Patel & Gauri Godse, JJ.
  • C. Keswani, Akash Manwanai & Tanvi Rana for the Petitioner.
  • Al Patel, Addl. Govt. Pleader, K.S. Thorat, AGP, Ms Deepa Chavan, Kiran Gandhi, Nirav Shah & Ravindra Chile for the Respondent.

Facts of the Case

In the present case, the petitioner was declared sick under the provisions of the erstwhile Sick Industrial Companies (Special Provision) Act 1985. Following this, petitioner’s previous management declared a lockout. This resulted in a complete and immediate cessation of its operations and, consequently, of its earnings.

Later, MSEDCL issued an electricity disconnection notice and then disconnected power entirely. The petitioner Mazdoor Sangh, filed Writ Petition seeking a restoration of the electricity supply. By an interim order, the Court directed the restoration of the electricity supply so that water could be supplied to the workmen living in the NRC colony.

Further, Punjab National Bank (PNB) filed an application under section 7 of the IBC before the NCLT initiating the Corporate Insolvency Resolution Process. The NCLT admitted the Petition triggering a moratorium under section 14 of the IBC. The NCLT appointed an Interim Resolution Professional.

There were outstanding dues to the Electricity Distribution Company (EDC), which had every opportunity to present its claims before IRP within time/extended time. However, EDC did not present its claim before approval of the resolution plan and appointment of a successful resolution applicant. Thereafter, after successful resolution applicant made an application for a new electricity connection at its four premises, which was refused by EDC on the ground that past dues had not been paid.

High Court Held

Hon’ble High Court of Bombay was of view that since claims for past dues of EDC stood extinguished as it had not presented its claims before IRP within time/extended time, it could not have refused new connection/restoration only on basis that its past dues had not been paid. Also, it was held that EDC was to be directed to process successful resolution applicant’s application for new electricity connection at its four premises without insisting on payment of its demand for past arrears.

List of Cases Reviewed

• • Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Assets Reconstruction Company [2021] 126 taxmann.com 132 (SC)/[2020] 8 SCC 531 (para 43) followed.
  • State Tax Officer v. Rainbow Papers Ltd. [2022] 142 taxmann.com 157/[2022] SCC OnLine SC 1162 (para 43) distinguished.

List of Cases Referred to

• • Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL 237/227 Camp. Case 251 (SC)/[2021] 9 SCC 657 (para 33)
  • Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234/[2020] 8 SCC 531 (SC) (para 33)
  • State Tax officer v. Rainbow Papers Ltd. [2022] 142 taxmann.com 157/2022 SCC Online SC 1162 (para 36).