NCLT Orders APDCL to Pay Dues to Corporate Debtor, Rejects Group Company Set-Off Plea

Guwahati , Assam - The National Company Law Tribunal (NCLT), Guwahati Bench, comprising Shri Rammurti Kushawaha (Judicial Member) and Shri Yogendra Kumar Singh (Technical Member), has directed Assam Power Distribution Company Limited (APDCL) to pay Rs. 37,66,906.80 along with interest to the liquidator of Brahmaputra Rolling Mills Pvt. Ltd. The Tribunal, in its order dated May 27, 2025, firmly rejected APDCL's contention to set off this amount against dues purportedly owed by other entities of the BISCON group, reinforcing the principle of separate legal identity in insolvency proceedings and the overriding effect of the Insolvency and Bankruptcy Code, 2016 (IBC).

Background of the Dispute

The case, IA(I.B.C) - 119/2024 in CP(IB)/16/GB/2022, was initiated by Mrs. Meena Sureka , the Liquidator of Brahmaputra Rolling Mills Pvt. Ltd. (Corporate Debtor). The Corporate Debtor had undergone a Corporate Insolvency Resolution Process (CIRP) initiated under Section 10 of the IBC, eventually leading to a liquidation order on October 13, 2023.

The Liquidator discovered that after adjusting outstanding electricity dues against a load security deposit made by the Corporate Debtor, a sum of Rs. 37,66,906.80 was recoverable from APDCL. Despite APDCL admitting this liability in a letter dated February 6, 2024, it sought to set it off against alleged counterclaims of Rs. 8.65 crore (later figures in court varied) purportedly owed by other entities within the larger BISCON group.

Liquidator's Stance: Upholding Separate Entity and IBC Primacy

The Liquidator, represented by Mr. S. Mitra (Adv.) and Mr. Saurav Jain (Adv.), argued that: * The Corporate Debtor is a distinct legal entity, and its assets cannot be used to settle dues of other group companies, many of which were also undergoing separate CIRP or liquidation proceedings and had since been dissolved. * Regulation 29 of the IBBI (Liquidation Process) Regulations, 2016, permits set-off only for "mutual dealings between the corporate debtor and another party," not involving third-party (group company) debts. * Section 238 of the IBC grants the Code an overriding effect over other laws, including the Electricity Act, 2003, relied upon by APDCL. * APDCL's refusal to pay, despite admission, was a mala fide attempt to delay the liquidation process and prejudice stakeholders.

APDCL's Defense: Plea for Group Set-Off and Equitable Treatment

APDCL, represented by Mr. Anshul Malik (Adv.) and Mr. Nalin Kohli (Sr. Adv.), countered that: * The Liquidator, being a common liquidator for several BISCON group entities, was acting with mala fide intent to prejudice APDCL's legitimate claims against the group, which it stated were over Rs. 9 crore. * The "Group of Companies Doctrine" should apply as the BISCON group entities, including the Corporate Debtor, functioned as a single economic unit. * The Liquidator's own conduct, such as using common letterheads and holding joint Stakeholder Consultation Committee (SCC) meetings for group entities, indicated a consolidated treatment. * The doctrine of "approbate and reprobate" should prevent the Liquidator from selectively pursuing recovery while ignoring APDCL's larger claims against the group. * Denying set-off would lead to unjust enrichment of the Corporate Debtor at the expense of public funds managed by APDCL.

NCLT's Rationale and Decision

The NCLT meticulously examined the arguments and evidence, arriving at the following conclusions:

Separate Legal Identity Paramount

The Tribunal emphasized that each company under the IBC, even if part of a group or managed by a common liquidator for convenience, retains its distinct legal identity. > "Such conduct of informal grouping of companies, cannot in itself alter the separate legal identity of each company under the Code...the company does not lose its basic identity in the eyes of law." (Para 4.6)

IBC's Overriding Effect (Section 238)

The NCLT reiterated that Section 238 of the IBC gives its provisions precedence over any inconsistent laws or practices. > "Hence, the reliance by the Respondent Company on informal past practices or the consolidated conduct of the Applicant in dealing with group entities cannot override the clear mandate of law regarding separate treatment of each Corporate Debtor." (Para 4.7)

Narrow Scope of Set-Off (Regulation 29)

The Tribunal clarified that Regulation 29 of the Liquidation Process Regulations strictly limits set-off to mutual dealings between the specific corporate debtor and the claimant. > "The illustration, provided therein, makes it amply clear that set-off is available only in mutual dealings between the Corporate Debtor and the claimant. It has no scope at all to cover any other Corporate Debtor." (Para 4.8)

Doctrine of Approbate and Reprobate Applied to APDCL

The NCLT found that APDCL itself had initially recognized the separate identities of the BISCON entities by filing distinct claims for each during the CIRP. Its later attempt to consolidate these for set-off was deemed inconsistent. > "Therefore, the doctrine of approbate and reprobate squarely applies on the Respondent Company itself and it cannot be permitted to blow hot and blow cold at its convenience." (Para 4.11) The Tribunal noted that APDCL raised bills separately for each BISCON entity and maintained distinct load security deposits.

Group of Companies Doctrine Inapplicable for Set-Off

While acknowledging APDCL's arguments regarding the "Group of Companies Doctrine," the Tribunal found it insufficient to override the clear provisions of the IBC concerning the separate treatment of corporate debtors in liquidation and the specific rules for set-off. The NCLT pointed out that APDCL's admitted claims against other BISCON entities had varying amounts and voting percentages in their respective liquidation processes, further underscoring their separate treatment under the Code.

Final Order and Implications

The NCLT allowed the Liquidator's application, directing APDCL: > "to pay the admitted dues of Rs. 37,66,906.80/- along with applicable interest from 31.12.2014 to the Liquidator of Brahmaputra Rolling Mills Pvt. Ltd." (Para 6)

The Tribunal clarified that APDCL would be entitled to distribution for its admitted claims against other BISCON entities strictly according to Section 53 of the IBC (waterfall mechanism) from their respective liquidation estates. > "Any surplus or deficiency in recovery in one entity cannot be adjusted against the dues of another entity under liquidation. The Respondent Company’s attempt to aggregate dues owed by other group entities and set them off against the Corporate Debtor in this application is thus not legally tenable." (Para 4.15)

This judgment significantly reinforces that the principle of separate legal personality is robustly maintained under the IBC, even in group company scenarios. It curtails attempts to use set-off across different legal entities within a group during liquidation, ensuring that the distribution of assets follows the strict waterfall mechanism prescribed by the Code for each corporate debtor individually.