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IN THE HIGH COURT AT CALCUTTA
Sabyasachi Bhattacharyya, J.
Rashidhan Sales Private Limited & Anr. - Appellants
Versus
Damodar Valley Corporation & Ors. - Respondents
W.P.A. No. 12683 of 2022
Decided On : 17-01-2023
ELECTRICITY - DISCONNECTION - AUCTION SALE - LIABILITY OF AUCTION PURCHASER FOR ELECTRICITY DUES - Regulation 4.6.4 of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 - Held, that the writ petitioner, being an auction purchaser under the IBC, cannot be unfairly classified as 'any consumer' as contemplated in Regulation 4.6.4 on the basis of the fact that the petitioner has purchased the 'same premises' for which the erstwhile company in liquidation was in default.
Fact of the Case:
The petitioner purchased the property in an auction sale on 'as is where is' basis. At the juncture when the sale took place and/or prior thereto, when the default was committed by the borrower, the writ petitioner/auction purchaser has had no possible nexus whatsoever with the defaulting consumer, that is, the borrower-company. Thus, the basic pre-requisite of Regulation 3.4.2, applicable to new and subsequent consumers or intending consumers, that is, nexus, is not established at all.
Finding of the Court:
The argument of the DVC, that the contract had terminated with the borrower and the liquidator had no jurisdiction, does not help the DVC in any manner. When the assets were sold, there was no electricity connection existing at the premises, nor was there any subsisting contract with the DVC. Hence, by the same logic that the liquidator is argued to have had no jurisdiction, the auction purchaser also did not have any liability within the contemplation of the expression 'as is where is'. The principle of caveat emptor cannot be applied in the case of the auction purchaser in an asset sale, because it is not possible for an auction purchaser to have a prior idea of any existing liability which, in any event, was not there.
Issues: Whether the auction purchaser is liable to pay the outstanding dues left by the erstwhile consumer for the purpose of getting a new electricity connection from the DVC.
Ratio Decidendi: The writ petitioner, being an auction purchaser under the IBC, cannot be unfairly classified as 'any consumer' as contemplated in Regulation 4.6.4 on the basis of the fact that the petitioner has purchased the 'same premises' for which the erstwhile company in liquidation was in default. Such an application would be discriminatory, unreasonable and opposed to the equal protection afforded to the petitioner under Article 14 of the Constitution. Regulation 4.6.4 must be read down to hold that it is not applicable to an auction purchaser under the IBC as such a purchaser does not have any nexus with the erstwhile deemed terminated consumer's default.
Final Decision: W.P.A. No.12683 of 2022 is allowed on contest, thereby setting aside the impugned claim of outstanding dues of the DVC from the writ petitioners and directing the DVC to give new electricity service connection to the petitioners in terms of the petitioners' application, subject to compliance of all other formalities by the petitioners but without insisting upon payment of alleged outstanding dues of the borrower company from the petitioner.
JUDGMENT
Sabyasachi Bhattacharyya, J. - One Shri Badrinarayan Alloys & Steels Limited (hereinafter referred to as 'the borrower') was enjoying electricity at its premises from the respondent no. 1, the Damodar Valley Corporation (for short, 'the DVC'). The DVC issued a disconnection notice on August 28, 2018 on the allegation of non-payment of electricity and disconnected the electricity supply of the borrower sometime in the month of September, 2018.
2. On December 5, 2018 a Corporate Insolvency Resolution Proceeding (CIRP) was initiated against the borrower at the behest of the Bank of Baroda. The National Company Law Tribunal (NCLT), by its order dated September 6, 2019, recorded that the resolution process had failed and appointed a liquidator under Section 33 (4) of the Insolvency and Bankruptcy Code, 2016 (in brief, 'the IBC'). On November 21, 2019 the resolution professional moved an application for a direction on the DVC to reconnect electricity supply for the corporate debtor, which was turned down by the NCLT.
3. On December 10, 2020 an order was passed directing the entire land of the borrower's property to be sold. Accordingly, the liquidator published an e-auction notice for sale of certain assets, including the land, of the corporate debtor as identified by the liquidator. A corrigendum was issued subsequently, amending Clause 6 of the terms and conditions of the e-sale notice, excluding any liability of the auction purchaser for the electricity dues.
4. The present petitioner no. 1 purchased the property in the e-auction sale, a letter of intent was issued to the purchaser, who accepted the same. The certificate of sale was duly issued on July 8, 2021.
5. Meanwhile, on June 29, 2021 the petitioner/auction-purchaser made an application to the DVC for a new electricity connection. On July 19, 2021, the DVC wrote back to the petitioner claiming outstanding dues left by the erstwhile owner (borrower) as a pre-condition for giving such new electricity connection in the name of the petitioner.
6. In the month of August, 2021 the writ petitioner applied before the NCLT under Section 60 (5) of the IBC. The NCLT dismissed the said application on February 16, 2022, holding that the same was not maintainable as electricity was disconnected prior to the CIRP and therefore the disconnection was not in relation to insolvency. The NCLT also observed that the said decision is, in any event, amenable to the writ jurisdiction under Article 226 of the Constitution of India.
7. The petitioner filed an appeal against the said order before the NCLAT (appellate tribunal) on March 14, 2022, which is now pending. Thereafter on June 27, 2022 the present writ petition was filed, challenging the decision of the DVC (respondent no. 1) dated July 19, 2021.
8. The learned Senior Advocate appearing for the petitioners argues that the scopes of challenge in the writ petition and the NCLAT appeal are different. The former challenges the arbitrary action of the respondent no. 1/DVC while the action of the liquidator is the subject-matter of challenge before the NCLT and the NCLAT. In the latter, the distribution of the liquidation estate under Section 53 of the IBC is disputed. The writ petition challenges not only the decision of the DVC but also the vires of Regulation 4.6.4 of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 (hereinafter referred to as 'the Supply Code'), for which the appeal is not an alternative efficacious remedy. The NCLT, while rejecting the petitioners' application, had stressed on the point that the company is not a going concern and disconnection of electricity does not make any difference in its status in order to fetch more sale price.
9. The learned Senior Advocate for the petitioner further argues that the DVC's reliance on Regulation 4.6.4 of the Supply Code is arbitrary and unreasonable in the facts of the case, where the petitioner has acquired the premises and the factory as
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