Meghalaya High Court: State Authority Cannot Compel Resolution Applicant To Pay Past Electricity Dues Without Claim Under IBC

Meghalaya High Court: State Authority Cannot Compel Resolution Applicant To Pay Past Electricity Dues Without Claim Under IBC

The Meghalaya High Court has ruled that a state authority cannot enforce a resolution applicant under the Insolvency and Bankruptcy Code, 2016 (IBC) to settle past electricity dues if the state authority hasn't raised any claim for its dues under an approved resolution plan.

Reliance Infratel, the petitioner company, underwent insolvency proceedings, and a resolution plan was sanctioned by the National Company Law Tribunal. Reliance Projects and Property Management Solutions Ltd. (RPPMSL) assumed control of Reliance Infratel on December 22, 2022.

The Meghalaya Power Distribution Corporation Ltd., the respondent corporation, sought to recover electricity dues from Reliance Infratel and its affiliates through a letter or demand notice. The corporation threatened to disconnect existing electricity connections for mobile towers and declined to provide new connections until the dues, even those prior to December 22, 2022, were settled.

Challenging this letter or demand notice, the petitioners argued against its validity.

The corporation cited Section 56 of the Electricity Act, 2003, empowering it to disconnect supply in case of payment default, as the basis for its stance that electricity dues cannot be waived.

Justice H. S. Thangkhiew, noted that the corporation hadn't asserted any claims for recovering its dues, despite Reliance Infratel's public announcements inviting creditors to submit proof of claims. The Court determined that Section 56 of the Electricity Act didn't apply due to Section 238 of the IBC, which states that the IBC prevails over other laws, and Section 31(1) of the IBC, making an approved resolution plan binding on all creditors.

The Court emphasized that the corporation was obligated to engage in the resolution process as per Section 31 of the IBC. Since it didn't participate in the resolution process or assert any claims, the dues claimed by the corporation before December 22, 2022, were deemed extinguished. Additionally, given the overriding effect of Section 238 on other laws, it was deemed that statutory electricity dues under the Electricity Act could be waived.

“As such, the dues not attributable to the petitioner No. 1 after the effective date, 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.”

Therefore, the respondents have no entitlement to collect dues from the petitioner-company prior to December 22, 2022.