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JC - Legal Updates - Electricity dues pre-CIRP and during CIRP falls under the realm of section 53 of IBC and cannot be claimed from the Successful Auction Purchaser

Legal Updates

22 Jun 2022

Electricity dues pre-CIRP and during CIRP falls under the realm of section 53 of IBC and cannot be claimed from the Successful Auction Purchaser

The National Company Law Appellate Tribunal, New Delhi (“NCLAT”) in the matter of Eastern Power Distribution Company of Andhra Pradesh Limited Vs. Maithan Alloys Limited & Ors. Company Appeal (AT) Insolvency No. 961 of 2021, 26th May 2022 answered that wherein a corporate debtor is sold as a going concern as per Liquidation Process Regulations, 2016 under Insolvency and Bankruptcy Code (“IBC/Code”), the successful auction is not liable to pay electricity dues due on the Corporate Debtor for both period i.e. pre-Corporate Insolvency Resolution Process (“CIRP”) and during the CIRP.

The NCLAT ruled that electricity dues, if any, on the corporate debtor sold as a going concern in liquidation will be paid/dealt only in accordance with Section 53 (1) of the Code.

It was observed by NCLAT that;

1.   The relevant regulation formed under Electricity Act, 2003 fastening liability on the Successful Auction Purchaser to pay electricity dues, whether, pre-CIRP and/or CIRP, will be in conflict with the provision of the IBC.

2.   IBC having been given overriding effect under Section 238 of the Code, any contrary provision in any other statute under Electricity Act, 2003 shall be overridden.

3.   When the claim of all the creditors of a Corporate Debtor which is gone into liquidation are specifically dealt in the Code, the Appellant (i.e. the electricity service provider) cannot be heard to say that it shall realize its pre-CIRP dues and CIRP dues from the Successful Auction Purchaser.

The NCLAT relied on the decision of Damodar Valley Corporation vs. Karthik Alloys Limited & Anr. 2022 SCC OnLine NCLAT 109 to buttress its decision that an electricity provider is entitled to recover the entire pre-CIRP and CIRP dues only in terms of section 53 (1) of the Code.


For any further information, please contact Mr. Shubhabrata Chakraborti (shubhabrata.chakraborti@jclex.com) or Ms. Smriti Jha (smriti.jha@jclex.com).