Clean Slate Principle Stands Negated If Successful Resolution Applicant Asked To Pay Corporate Debtor’s Arrears For Grant Of Electricity Connection In His Name: Meghalaya HC
The Meghalaya High Court reiterated that the clean slate principle will stand negated if the successful resolution applicant is asked to pay the arrears of the Corporate Debtor for the grant of an electricity connection in his/her name.
The Court was dealing with a writ petition preferred by M/s Reliance Infratel Limited against the demand notice issued to it by the Meghalaya Power Distribution Corporation Limited (MPDCL).
A Single Bench of Justice H.S. Thangkhiew said, “Further, the above proposition that is applicable to the instant case, has also been dealt with in the case of Southern Power Distribution Company of Andhra Pradesh Limited vs. Gavi Siddeswara Steels (India) Pvt. Ltd. & Anr. and Tata Power Western Odisha Distribution Limited (TPWODL) & Anr. vs. Jagannath Sponge Private Limited (supra) wherein the Supreme Court has held that the clean slate principle will stand negated if the successful resolution applicant is asked to pay the arrears payable by the Corporate Debtor for the grant of an electricity connection in his/her name. The argument put by the respondent No. 1, by placing reliance on the case of State Tax Officer vs. Rainbow Papers Ltd. (supra) that any resolution plan which overrides statutory dues, is invalid and not binding to the mind of the Court, will have no application in the instant case, as firstly, the respondent No. 2 never filed any claim in accordance with law, and further the said decision was rendered in regular appeals which were preferred under Section 62 of the I&B Code.”
Advocate V.V.V. Sastry represented the petitioners while Advocate General A. Kumar represented the respondents.
In this case, the petitioner company being operating over 43,000 Mobile Towers in India of which 157 are situated in Meghalaya, was admitted to insolvency with effect from May 7, 2019. A resolution plan was then submitted by Reliance Projects and Property Management Solutions Ltd. (RPPMSL), for takeover of the petitioner. The same was approved by the National Company Law Tribunal (NCLT) and Supreme Court. Thereafter, the took over of the petitioner by RPPMSL took place in 2022.
MPDCL vide letter sought recovery of electricity dues from the petitioner for the periods prior to the takeover under the Insolvency and Bankruptcy Code, also from the affiliates of the petitioner by threatening to disconnect the existing electricity connections for the mobile towers. Further, it refused to provide new electricity connections to the petitioner and its affiliates. Being aggrieved, the petitioner filed the writ petition.
The High Court in view of the above facts observed, “As such, the dues not attributable to the petitioner No. 1 after the effective date, and no claim having been made against the Corporate Debtor, and further Section 238 having an overriding effect on all other laws, the stand of the respondent No. 1 that the petitioners are liable to pay in terms of Section 56 of the Electricity Act is therefore, unsustainable.”
The Court further referred to the case of Ghanshyam Mishra v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657 in which it was held that the legislative intent of making the resolution plan binding after approval, was that the successful resolution applicant, should start with a fresh slate on the basis of the said approved resolution plan, and that it not be faced with surprise claims.
“On the other challenge that the writ petition is not maintainable, due to the availability of alternative efficacious remedy, by virtue of Section 60 (5) (c) of the I&B Code, 2016, this argument is not accepted, as the writ petitioner is clearly seeking a mandamus in view of the actions of the respondents Nos. 1 & 2, where in spite of the binding nature of Section 31 of the I&B Code, are denying the writ petitioners electricity connections by making the same contingent upon the recovery of pending dues not attributable to it”, it said.
Accordingly, the High Court allowed the writ petition.
Cause Title- M/s Reliance Infratel Limited & Anr. v. State of Meghalaya & Anr. (Neutral Citation: 2024:MLHC:504)
Appearance:
Petitioners: Advocates V.V.V. Sastry and H. Abraham.
Respondents: AG A. Kumar and GA R. Colney.
