Rasidhan Sales Private Limited And Anr vs. Damodar Valley Corporation And Ors

Facts

Rashidhan Sales Private Limited (petitioner) purchased property in an e-auction sale from Shri Badrinarayan Alloys & Steels Limited (borrower), which had its electricity supply disconnected by Damodar Valley Corporation (DVC) for non-payment of dues. The borrower underwent Corporate Insolvency Resolution Proceedings (CIRP) which failed, leading to liquidation. The e-auction notice for the borrower's assets, including the property, had a corrigendum excluding liability for electricity dues for the auction purchaser. The petitioner applied to DVC for a new electricity connection, but DVC demanded payment of the erstwhile owner's outstanding dues as a pre-condition. The petitioner's application to the National Company Law Tribunal (NCLT) seeking a direction to DVC to provide the connection without demanding prior dues was dismissed. The NCLT held that the disconnection predated the CIRP and thus was not related to insolvency. The petitioner then filed the present writ petition challenging DVC's demand.

Held

The Court held that the writ petition is maintainable. The issues before the High Court (challenging the vires of a regulation and arbitrary action) are distinct from the issues before the NCLAT (distribution of the liquidation estate under the IBC). The Court found that Regulation 4.6.4 of the Supply Code cannot be applied to the petitioner, an auction purchaser under the IBC. The Court reasoned that the IBC is a later and self-contained code, and its framework for recovery of dues from the liquidation estate should prevail. Furthermore, the Court noted that the auction notice specifically excluded liability for electricity dues. The Court distinguished the present case from precedents cited by the DVC, particularly Shree Ramdoot Rollers, on the grounds that the borrower company was liquidated and its assets sold, not as a going concern. The Court found no nexus between the petitioner and the erstwhile defaulter-consumer, and no statutory provision cast the burden of payment on the auction purchaser. The insistence by DVC for payment of outstanding dues was deemed palpably illegal and de hors the law, violating Article 14 of the Constitution. The Court allowed the writ petition, setting aside the claim for outstanding dues and directing DVC to provide a new electricity connection without insisting on payment of the borrower's arrears, subject to other formalities. DVC was directed to issue a revised quotation and provide the connection within specified timelines.

Key Issues

1. Whether the writ petition is maintainable before this Court, given the pendency of an appeal before the National Company Law Appellate Tribunal (NCLAT) concerning the same underlying transaction. 2. Whether Regulation 4.6.4 of the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013, which allows refusal of supply for non-payment of dues by a previous consumer, is applicable to an auction purchaser under the Insolvency and Bankruptcy Code, 2016 (IBC), especially when the auction notice excluded such liability. 3. Whether the DVC's insistence on payment of outstanding dues from the petitioner for a new electricity connection is arbitrary, unreasonable, discriminatory, and violative of Article 14 of the Constitution of India, particularly in light of the IBC's framework. Petitioner's arguments: The writ petition is maintainable as it challenges the vires of Regulation 4.6.4 and DVC's arbitrary action, which are distinct from the NCLAT appeal focusing on the distribution of the liquidation estate. Regulation 4.6.4 should be read down or held inapplicable to IBC auction purchasers, as they have no nexus with the previous consumer's default. The IBC, being a later and self-contained code, contemplates recovery of dues as a claim from the liquidation estate, and deviation is not permitted. The demand for dues is an attempt to coerce payment and amounts to discrimination under Article 14, citing precedents like Isha Marbles and Shree Balasaria Construction. Revenue/State's arguments: The DVC argued that dues under supply terms are statutory and not purely contractual, citing Telangana State. They also relied on Gujarat Urja and Tata Consultancy regarding the maintainability of parallel remedies and Shree Ramdoot Rollers regarding liability for previous dues. The West Bengal Electricity Regulatory Commission (WBERC) relied on Telangana State, arguing that dues partake the character of statutory dues.