Electricity Dues Of Corporate Debtor's Lessor Can't Be Fastened On Successful Resolution Applicant: NCLT Kolkata

The National Company Law Tribunal (NCLT) at Kolkata has held that electricity dues linked to a corporate debtor's lessor cannot be imposed on a successful resolution applicant or used to deny a fresh electricity connection for revival of the corporate debtor.

A bench of Judicial Member Labh Singh and Technical Member Rekha Kantilal Shah observed that once a resolution plan is approved, the corporate debtor is entitled to a clean slate, with only those pre-CIRP claims extinguished that were duly admitted during the insolvency process.

The tribunal said, "Dues registered in the lessor's name do not constitute liability for the Successful Resolution Applicant (SRA) under the Insolvency and Bankruptcy Code, 2016 (IBC), as resolution plans provide a clean slate extinguishing only admitted pre-CIRP claims."

Sarga Hotel Pvt Ltd was admitted into insolvency on February 11, 2022, after Yes Bank moved the tribunal. Its resolution plan, submitted by Shri Ram Multicom Pvt Ltd, was approved on January 4, 2024. With the plan's approval, the successful resolution applicant took over the management and control of the five-star hotel operating under the “Westin” brand at New Town, Kolkata.

In April 2024, Sarga Hotel applied to the West Bengal State Electricity Distribution Company Ltd. for a fresh high-tension electricity connection in its own name. The power utility rejected the request, citing outstanding electricity dues of about Rs 1.97 crore linked to Shristi Infrastructure Development Corporation, the lessor of the land, in whose name the earlier electricity connection existed.

Dealing with this objection, the tribunal noted that no nexus had been established between the lessor's electricity dues and the obligations of the successful resolution applicant. It observed, “Without a proven nexus established via court order linking such dues directly to the SRA's obligations, WBSEDCL cannot lawfully obstruct or deny a fresh electricity connection required for operational revival.”

The tribunal held that electricity suppliers cannot place recovery of legacy dues above the objectives of the Insolvency and Bankruptcy Code and ruled that fresh applications made by successful resolution applicants must be processed independently of lessor-named connections.

WBSEDCL was accordingly directed to grant a new electricity connection to Sarga Hotel to ensure uninterrupted operations and effective implementation of the approved resolution plan.