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The National Company Law Appellate Tribunal recently urged the Government and the Board to find out whether there are any grounds for considering a change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. 

A bench of Chairman, Justice Ashok Bhushan, and Technical Member, Justice Shreesha Merla noted, "As the law stand today, no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the Government and the Board."

The bench was hearing an appeal filed by Damodar Valley Corporation, an operational creditor against the Corporate Debtor, Dimension Steel, and Alloys Private Limited who entered into a Power Purchase Agreement with the appellant for the supply of electricity on the premises of the Corporate Debtor.

The Corporate Debtor committed default in making payment of electricity dues. Hence, disconnection notices were issued by the Damodar Valley Corporation to the Corporate Debtor, whereas, on June 7, 2019 the power supply was disconnected.

In this regard, an application was filed by M/s Carbon Resources Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, and Corporate Insolvency Resolution Process (“CIRP”) was initiated against the Corporate Debtor by the Adjudicating Authority with its order dated October 18, 2019.

The Interim Resolution Professional (IRP) issued a public announcement on October 19, 2019 in pursuance of which, the Appellant submitted its claim of Rs.36,35,64,214 as pre-CIRP electricity dues. Whereas, the Committee of Creditors decided to go for liquidation as they didn't receive any response even after the extension of the date for submission of the Resolution Plan.

However, CP Ispat Private Limited approached the adjudicating authority seeking direction to the Resolution Professional to accept their Resolution Plan, which was accepted on March 16, 2021. In addition to this, the Resolution Plan submitted was approved by CoC on April 22, 202 with 80.93% voting shares.

The appellant had challenged the order of the National Company Law Tribunal allowing the plea filed by Resolution Professional for approval of Resolution Plan, by which order, Resolution Plan submitted by C.P. Ispat Private Limited was approved.

The bench however considered the following questions for deciding the matter:

1. Whether the consideration of Resolution Plan of Respondent No.3 by the CoC after expiry of 330 days, vitiate the approval of the Resolution Plan?
   
   The bench while referring to the Judgment of the Supreme Court in the case of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. opined, "We do not find any error in the extension of 330 days’ time by the Adjudicating Authority, the consideration of the Resolution Plan was also approved by this Tribunal and cannot be permitted to be re-agitated in the instant appeal."
    
2. Whether the Appellant is entitled to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 even after approval of the Plan by order dated 08.10.2021?
3. Whether Resolution Plan violates Section 30, sub-section (2), sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 since it contravenes Regulation 4.6.4 as well as Regulation 4.6.1 of the Statutory Regulations?
   
   Considering Questions 2 & 3 together the bench opined that there is no question of the claim of Appellant still existing pertaining to the pre-CIRP period, which claim was filed before the Resolution Professional, after the approval of the Resolution Plan.
   
   In addition to this, the bench noted, "There can be no quarrel with the Statutory Regulations of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013. In Regulation 4.6.4, it is contemplated that a new service connection can only be provided in the same premises if the outstanding dues against the deemed terminated consumer is cleared, but the said Regulations cannot be pressed in service when the Resolution Plan has been approved in the CIRP under the Code."
   
   However, the Court while referring to the principles laid down by the Apex Court in V. Ramakrishnan’s case held that the argument of Acharya that if any variance in the Resolution Plan is not in conformity with Section 30, sub-section (2) (e), it would be in contravention of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 cannot be accepted.
    
4. Whether the Resolution Plan is in accordance with Section 30, sub-section (2), sub-clause (b) and the distribution to the Appellant–Operational Creditor is fair and equitable?
   
   It was observed that the Resolution Plan indicated that Financial Creditors had been provided a much higher amount as compared to the Operational Creditors. The Operational Creditors (other than workmen and employees) had an admitted claim of Rs.85.33 crores within which they have been provided only 0.17 crores whereas the admitted claim of Financial Creditors was 245.55 and they have been provided 19.03 crores.
   
   Given the above, the Tribunal opined that the question of payment to the creditors and the manner of distribution had come up for consideration, time and again. The Insolvency Law Committee Report 2018 deliberated upon the objection to Section 30, sub-section (2), sub-clause (b), insofar as it provides for the minimum payment of liquidation value.
   
   "We are consistently receiving the Plans, where Operational Creditors either not paid any amount towards their claim or paid negligible amount, sometimes even less than 1%. In the present case, the Operational Creditors have been given only a minuscule of their admitted claim to the extent of only 0.19%. As the law stands today, no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code," the Tribunal added.

However, with regards to this case, the bench noted that they do not find any good ground to interfere with the impugned order approving the Resolution Plan while dismissing the appeal.

Cause Title: Damodar Valley Corporation Vs. Dimension Steel and Alloys Private Limited & Ors.